Basic Facts About Health Care Costs in the U.S.
We all know health costs can be expensive. It’s one of the reasons you are here. Trying to navigate your options can be daunting. Here are some basic facts about healthcare costs in the US, before we jump into your various options.
The average monthly cost of health insurance in the United States is $496. Compared to other developed nations, the U.S. spends 2 times as much as the rest. Eighteen percent of our GDP goes each year to support our healthcare and medical systems. The percentage of the U.S. economy spent toward medical care for seniors over 65 is 5%.
As the population continues to age, that proportion is expected to double by 2030 and triple by 2050. Many struggles to afford these soaring costs as they age, at a time when income is shrinking. A recent study from the Employee Benefit Research Institute determined that a couple retiring at 65 would need over $280,000 in savings to cover future medical costs.
There’s no doubt something needs to be fixed, but until that happens, each of us needs to decide on the best option to lower individual out-of-pocket costs, including insurance premiums.
Best Health Insurance Options for Seniors 60-65
If you haven’t reached 65, the options are different. You haven’t gotten to the magic age where you qualify for Medicare, but you still need to manage your healthcare costs.
Employer Health Plans
If you have access to an employer health plan, this will probably be your most affordable option. It doesn’t hurt to shop around and compare, but because of premium matching, most employer benefits are the best value. Sometimes an employer will provide health insurance to an individual but not to their family. If you don’t have insurance through an employer, you do have options. There may also be a Medicare option in the future.
President Trump recently proposed Medicare-At-55, which would open Medicare to those between ages of 55 and 64. There would be cost differences, but it is an idea that is getting traction on both sides of the political aisle. There is some relief for seniors under the Affordable Care Act. Older enrollees cannot be charged more than 3 times the rate that applies to 21-year-olds.
Before ACA, the ratio wasn’t regulated in most states and it was often closer to 5:1. But post-ACA, health insurance premiums are higher than average because insurance companies can’t reject people for pre-existing conditions. That is good news for many seniors because many have pre-existing conditions, which makes finding health insurance difficult. There are premium subsidies that are available if your income doesn’t exceed $49,960 for an individual and $67,640 for a couple (2021 data).
Best Health Insurance Options for Early Retirees
COBRA stands for Consolidated Omnibus Budget Reconciliation Act of 1985. It is a continuation of health coverage if you lose access to an employer-sponsored plan. It can be very expensive but is a good stop-gap measure to cover against catastrophic healthcare issues while you hunt for more affordable coverage.\
– Short-Term Health Plans
Short-term health plans are similar to COBRA, but are expensive. They are available in most states. The Trump administration allows states to offer short-term plans for up to 364 days and in some cases three years, but there can be some coverage limits. These plans are not regulated by the ACA, so they aren’t required to cover pre-existing conditions. They are much less expensive than ACA-compliant plans. Short-term health insurance can be purchased at any time, unlike ACA plans that have annual open enrollment periods.
– Association Health Plans
If you are self-employed but priced out of the individual market, you can explore Association Health Plans. Your industry may have an association that offers these plans.
Most of these plans will not reject applicants based on medical history but will have less coverage than plans in the individual marketplace.
– Private Insurance Market
If you are eligible for the individual markets, there are multiple options in the plans available from different insurance carriers. These are the most common types of plans you might see in the marketplace. If you have had an employer-sponsored plan, you may be familiar with many of these plans.
– HMOs (Health Maintenance Organizations)
HMOs provide insurance coverage for subscribers through a specific network of healthcare providers.
Premiums tend to be lower inside of an HMO because of the tight network of providers. The disadvantage is that you are limited to a specific network of doctors contracted with the HMO.
– PPOs (Preferred Provider Organization)
Similar to an HMO, PPOs offer a network of healthcare professionals who provide services to policyholders at reduced rates. You do have an option of seeing providers outside the network, but the rates for these will be more expensive than in-network providers.
– EPOs (Exclusive Provider Organization)
This is a hybrid between an HMO and PPO. You only receive services from providers in the network. Exceptions are made for emergency care. You may also have two network tiers: a primary tier where costs are less and a secondary tier where copays and costs are slightly higher. You still have the flexibility of going out of network, but may pay slightly more for those doctors.
– HDHP (High Deductible Health Plan)
As the name suggests deductibles in this plan are higher than in other insurance plans. The advantage is that they have much lower monthly premiums than their competing plans. If you don’t have many healthcare needs and medical costs, this can be a good option.
Another feature of these plans is a Health Savings Account, which provides tax advantages to money set aside directly for any healthcare-related expense.
– CDHP (Consumer Drive Health Plan)
This is a type of a high-deductible plan. Some of the services are paid for with pre-tax dollars. Premiums tend to be less because of the higher deductibles.
– POS (Point of Service)
Benefits are coverages in this plan are based on whether you use preferred in-network providers or providers outside the network.
Best Health Insurance Options for Those Over 65
Once you turn 65, you are now eligible for Medicare, which provides health coverage at a much cheaper rate than the private market. Most figure once they are eligible for Medicare, their health insurance choices are over. That is not the case. You still have options to consider. While Medicare is fantastic for seniors, there are still gaps in coverage and hidden expenses that could leave you with many out-of-pocket costs.
There are ways to fill those gaps, and protect your finances by purchasing products that work alongside Medicare. There are two basic ways seniors can enhance their Medicare Coverage: Medicare Supplement policies and Medicare Advantage policies.
What is Medicare Advantage?
To really understand Medicare Advantage, you need to know the basics of Medicare. There are four major parts to Medicare: Part A, B, C, & D. Part A of Medicare covers hospitalization. Part B covers primary care such as doctors and specialists. Part D is prescription drug coverage. Part C is the Medicare Advantage plan.
For more detail, we have other articles detailing the advantages and disadvantages of Medicare Advantage plans.
The best way to think about Medicare Advantage is that it is an “all-in-one plan.” It bundles Medicare Part A, B, and sometimes D into one policy. By choosing a Medicare Advantage plan, you will receive your health insurance coverage through a plan administered by a private health insurance company instead of through the federal government.
There are a variety of options within the plan itself that should look familiar if you had private health insurance before turning 65. The most common types of plans are:
- Health Maintenance Organizations (HMOs)
- Preferred Provider Organizations (PPOs)
- Private Fee-For-Service (PFFS)
You may also see options for:
- Special Needs Plans (SNPs)
- Provider Sponsored Organizations (PSOs)
- Medical Savings Accounts (MSAs)
When you are enrolled in Medicare Advantage, you still receive the same benefits offered by Original Medicare, plus extra coverage. Depending on your geography your plan may differ by rules, costs, and coverages. Care is generally restricted to certain geographies. Make sure you understand your policy and the changes that apply.
Some plans will come with Prescription Drug coverage, but what about dental and vision coverage? These are also often available. You may find that many plans will bundle vision and dental into the prescription drug coverage (Medicare Part D).
What are Medicare Supplements (Medigap)
Once you begin to understand all of the potential out-of-pocket costs with Original Medicare and the limitation on some coverages, you realize you need another option. One of the other options are Medicare Supplement policies, often referred to as Medigap policies. This term is used because it covers gaps in coverage Medicare does not provide.
Like Medicare Advantage, Medigap was created by the federal government to be delivered through private companies to bridge those coverage gaps. Coverages are regulated by the federal government, so regardless of what company you choose, they will be the same. The differences are in premiums, customer service, claims service, and additional benefits.
Basics of Medicare Supplements
There are 10 Medicare Supplement plans on the market and they can vary by availability depending on the insurance company and the state where you reside. All policies are provided through private health insurance companies and work with Medicare under federal guidelines.
The following are the basic plans most customers choose:
– Plan A
Plan A is the most basic plan you can purchase. All other plans build off of the coverage offered by Plan A. Plan A covers Part A Medicare co-insurance, including an extra 365 days of hospital costs. Part B 20% co-insurance is covered, along with three pints of blood and Part A hospice care
– Plan B
Plan B is identical to A except it covers the Part A deductible, which is $1,484 in 2021. Every plan is built off of Plan B and will include Plan A coverages. Just as B covers the Part A Medicare deductible, other plans will add coverage to Plan A.
– Plan C
Plan C adds coverage for the Part A coinsurance for using a skilled nursing facility, and also covers the Part B deductible. With Plan C, you also have coverage for the medical expense of foreign travel emergency medicine. If you travel out of the country, and many seniors do, this is critical coverage.
– Plan D
Plan D modifies Plan C. It includes everything Plan C does except it removes the Part B deductible.
– Plan F
Plan F and Plan G are the most comprehensive Medicare Supplements you can buy. Along with the coverages included in Plan C, you also have coverage for Part B excess charges. Excess charges can be substantial. Under traditional Medicare, doctors are allowed to charge an extra 15% to the patient beyond the portion that Medicare reimburses. Plan F will pick up that extra 15% charge.
Some plans also restrict doctor choice, Plan F allows you to choose any doctor you want. You also don’t need a referral to see a specialist. One thing to remember about Plan F is that availability is restricted. If you are new to Medicare in 2021, you can not purchase this plan. However, if you have been enrolled in Medicare prior to that date it is available to you.
– Plan G
Plan G offers the same coverages as Plan F, EXCEPT it does not cover the Part B deductible. But remember, the Part B deductible is only $203 in 2021. The reason people choose this plan is because they can often save more than $200 in premium cost over Plan F. This more than covers the deductible cost.
A High Deductible Plan G was introduced in 2021. Currently, you need to hit a $2,370 deductible before coverage begins with Plan G. The benefit is that premiums are much lower compared to the original Plan G. If you are a healthy senior with few medical expenses, this may be a plan to consider. You may actually save enough in premiums that cover a portion of the deductible.
The only main benefit missing from this list is the Part B deductible.
– Plan N
Plan N is similar to Plan G except it does not cover Part B excess charges. You may also be required to pay some copayments. The copayments are up to $20 for office visits and $50 for emergency room visits, but they are not always applicable.
Contact One of Our Experts
That was a lot of information, but you should understand the basics of what kind of health insurance coverage is available to you whether you are younger than 65 or 65+. Because of the confusing world of health coverages, we recommend speaking to a professional with years of experience in Medicare.
Our agents can look at your current coverages and also your medical needs and make recommendations on which plans are best for you. If you think a Medicare Supplement will benefit you, we can also shop your coverage among many companies to help you find the best pricing available.
Prefer to chat by phone? Give us a call at 1-888-559-0103.