Solutions for 3 Health-Insurance Challenges

For months, media reports have focused on the troubles with HealthCare.gov and the state insurance exchanges set up under the Affordable Care Act. Now the government is reporting that some eight million people have signed up for health insurance on the exchanges. But that’s not the end of the story.

When people who were previously insured start to use their new policies, they’re likely to be in for some surprises, not all of them pleasant: smaller networks with fewer doctors, higher deductibles that require you to pay more out of pocket, and new pricing rules that could leave you with bigger bills for your medications.

And those trends aren’t limited to policies purchased on the exchanges. They also extend to individual coverage purchased directly from insurers and even to employers’ plans. It’s a whole new world of health insurance, so you need to know how to navigate the pitfalls to get the most from your coverage.

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Problem 1: Higher deductibles

Whether you have insurance through your employer or buy a policy on your own, you’re probably paying more out of pocket than you did in the past.

In an effort to reduce their costs, most employers have been boosting deductibles over the past few years. The Kaiser Family Foundation reports that 38% of covered employees have a deductible of $1,000 or more for single coverage (up from 18% five years ago), and 15% have a deductible of $2,000 or more (up from 5% in 2008).

On the Obamacare exchanges, those numbers have ratcheted up considerably. For the lowest-priced plans on the exchanges (bronze plans), deductibles for individuals averaged $4,343; they were $2,567 for midpriced (silver) plans, according to a study by Avalere Health. Even though the exchanges’ higher-priced gold and platinum policies tended to have lower deductibles, more people chose bronze and silver plans to strike a balance between coverage and costs.

Policies sold off the exchanges follow similar trends. On average, those sold by eHealthInsurance.com during open enrollment that were in compliance with Obamacare rules had a deductible of $4,164 and a monthly premium of $271. That compared with an average deductible of $3,319 and a monthly premium of $197 for plans purchased in February 2013, before the new health care rules took effect.

The fix

If your policy has a deductible of at least $1,250 for individual coverage or $2,500 for families in 2014, you may be eligible to open a health savings account. An HSA lets you set aside tax-deductible money (or pretax money through an employer) that you can use tax-free in any year to pay your deductible and other out-of-pocket medical expenses. There’s no use-it-or-lose-it rule, and any amount left over grows tax-deferred and can be used tax-free in the future to pay for medical expenses.

As long as you have an eligible policy, you can open an HSA whether you have coverage through your employer or on your own. And many employers are pitching in, often contributing about $500 to employee HSAs for single coverage or $1,000 for family coverage, says Jeff Munn, vice-president of benefit policy development for Fidelity, which administers HSAs.

In 2014, you can contribute up to $3,300 to an HSA for individual coverage or up to $6,550 for families (plus $1,000 if you are 55 or older at any time during the year). Most HSA administrators provide debit cards if you want to use the money for medical expenses right away, and some let you invest in mutual funds if you want the money to grow for future expenses. Compare HSA administrators’ investing options and fees at www.hsasearch.com.

Check your paperwork. If you have a high-deductible policy, it’s important to review each explanation of benefits carefully to make sure you’re getting the insurer’s negotiated rate and to check that expenses have been counted toward the deductible. Keep receipts for all your payments to make sure you get credit from your insurer. The receipts also serve as tax records when you make HSA withdrawals.

Once you’ve maxed out your deductible, cluster your family’s medical procedures near the end of the plan year rather than wait till the following year when you’ll have to pay the deductible again.

Shop smart. When the money is coming out of your pocket, it pays to know that the cost of care can vary a lot. For example, the total cost of uncomplicated childbirth (including prenatal and postnatal care) at hospitals in the New York City area ranges from less than $10,000 to more than $29,000, says Victoria Boga­tyrenko, vice-president for innovation at United Healthcare. Getting x-rays at a stand-alone imaging center can also save big money. Within 25 miles of New York City, the cost of an MRI ranges from $238 at a freestanding radiology facility to $2,191 at a local hospital, says Bogatyrenko.

Many insurers offer cost-estimate tools, which use the insurer’s negotiated rates with providers in your area to show how much you’ll pay under your policy. Aetna’s Member Payment Estimator, for example, shows up to ten cost estimates for a procedure in your area, including a variety of options (stand-alone centers, hospitals, convenience-care clinics, ERs).

Problem 2: Shrinking networks

Now that all health policies must meet stricter coverage requirements, insurers have a limited number of ways to keep their costs under control. One option is to offer lower-cost versions of their plans with smaller provider networks on the insurance exchanges. It may come as a shock to discover that doctors in your previous plan are no longer in your network.

What’s more, if you use an out-of-network provider, you could pay dearly. How much depends on whether you have coverage through a preferred provider organization (PPO) or a health maintenance organization (HMO). Almost half of the exchange plans use HMOs, says Karen Pollitz, senior fellow at the Kaiser Family Foundation. HMOs don’t cover out-of-network care except in emergencies. And for costs incurred outside the network, there are no maximums on your out-of-pocket expenses.

PPOs usually permit out-of-network care, but they may ramp up your costs. For instance, your co-payments will be higher—as much as 50% for out-of-network care, compared with 10% for in-network services. And the base price of that care could be different. That’s because the network’s providers agree to the insurer’s negotiated rate, but outside providers can charge more.

In addition, you may have a higher deductible. For example, one plan from Florida Blue has a deductible of $1,300 for in-network care but $2,600 outside the network. The annual limit on your out-of-pocket expenses for things such as deductibles, co-payments and coinsurance may be higher, too. For instance, the Florida Blue plan cited above has a limit of $2,600 for in-network care and $5,200 for care outside the network.

The fix

Before you sign up for any policy, make sure your doctors and other providers are not only in your insurer’s network but also covered by your specific plan. Insurers may offer more-extensive networks in other versions of their policies, especially if you purchase directly from the company instead of on an exchange. In parts of northwest Florida, for example, only one or two companies sell exchange-based policies. However, many more sell off-exchange policies, with different provider networks, says Wayne Sakamoto, a health insurance broker in Naples, Fla. United Healthcare sold policies on only 12 exchanges this year nationwide, but it sold policies off the exchanges in 25 states.

Plans sold off the exchanges have the same open-enrollment period as exchange-sold policies, and they must meet most of the same requirements -- but they’re not eligible for subsidies. If you think you’ll qualify for a subsidy, it generally makes sense to stick with an exchange-based policy. If you’re not eligible for a subsidy, look into buying a plan directly from an insurer, through an agent or on a site such as eHealthInsurance.com.

Check your docs. Before you choose a new doctor or undergo a procedure or test, make sure all of the providers are in your insurer’s network. With a surgical procedure, ask in particular about the anesthesiologist and any other providers who might be involved, not just the surgeon. “If the specialist is out of network, the labs and other providers might be out of network, too,” says Gary Claxton, of the Kaiser Family Foundation.

Certain checkups, tests and preventive care may be provided without a fee, even if you have a high deductible. But you may get a bill if you go out of network or the doctor decides a lab test is needed. For example, “if you’re going in for a regular colonoscopy and they find polyps, that can flip the billing switch,” says Chris Riedl, a director of product strategy for Aetna.

Use the right tools. Most insurers have tools to help you search for in-network providers. Customers of United Healthcare, for example, can call or use the Web site or the Health4Me mobile app to find nearby in-network physicians and facilities. (They can also search for “premium providers,” who have lower co-payments than other network providers.) Always double-check with the provider to find out whether nearby urgent-care centers are also covered so that you can avoid expensive trips to the emergency room.

File an appeal. If you need special care from an out-of-network provider, find out your insurer’s appeals process to obtain coverage. Some insurers cover the cost if you need to see a specialist who’s not in the plan; others may pay only a small amount, says Kirsten Sloan, senior policy director for the American Cancer Society. Your doctor may have to provide evidence that the care can’t be provided in-network. If you have trouble, you may be able to get help from your state insurance department (see www.naic.org for links).

Problem 3: Higher drug costs

Asking whether your medicine is covered by your policy is no longer enough. Insurers have been adding pricing tiers for prescription drugs, and you could end up paying a lot more. Generic drugs have the lowest co-payments (typically $10 to $15), and an insurer may have three or four other tiers, each requiring more cost-sharing. For specialty drugs, you may have to pay 50% of the cost.

The switch from fixed-dollar co-payments to percentage-based coinsurance boosts consumer costs even more. Insurers have also been throwing up more hurdles for you to clear before they’ll cover your drugs -- for example, step therapy (you need to try other medications first, if possible) and prior authorization (a drug is covered only if specific clinical criteria have been met). Even with coverage, paying 50% of the cost for an expensive arthritis medication such as Enbrel could run you $10,000 per year, says rheumatologist Patience White, of the Arthritis Foundation.

Also, your drug may be included in your deductible. Tom Bridenstine, the managed-care ombudsman for the Virginia Bureau of Insurance, helped a patient with cancer who had bought a policy on the state exchange and was surprised to get a bill for the full cost of his chemotherapy drug, which had been covered under his old policy. Bridenstine discovered that the drug was still covered, but it was subject to the policy’s deductible.

The fix

Switching to generics is an easy way to save money on drug costs. Insurers offer tools to help you search for a generic alternative or other therapeutic equivalent that costs less under your policy, but always consult with your doctor.

Go the mail-order route. Sometimes generics aren’t an option. But you may be able to save money by getting medications through the mail rather than at the pharmacy counter. Also check to see whether your plan has preferred pharmacies with lower co-payments.

Appeal a denial. If coverage is denied, find out how your plan’s appeals process works. Your doctor may be able to explain why you need a particular medication.

White recently helped appeal a denial of coverage for a mother whose 16-year-old son has been treated for juvenile arthritis in his hip since he was 11. None of the drugs he tried helped much until he started taking Enbrel, which improved his mobility so much that he started playing rugby. But the insurer denied coverage after about a year, and the family could have been forced to pay more than $1,000 per month rather than an $80 co-pay every 90 days. After two months of exchanging paperwork, including an explanation from White as to why the costlier drug was needed, the denial was reversed.

What to do in special cases

You’re an early retiree. When you retire, you can usually keep health insurance through your employer for up to 18 months through COBRA. That’s the federal law that requires employers with 20 or more employees to let workers stay on their health plan after they leave their jobs. But you’ll have to pay the full cost yourself, and that could be pricey because employers generally pay 70% to 85% of the premiums.

But losing employer coverage (even if you are eligible for COBRA) is one of the “life-changing events” that can allow you to buy health insurance outside of open-enrollment periods, whether you buy a policy on your state exchange or directly from an insurer or agent.

If you buy on the exchange, you may qualify for a premium subsidy even if you earned too much while working. To be eligible for a subsidy, your income in 2014 must be less than $46,680 if you’re single or $62,920 for a couple. That includes the amount you earned while working plus your expected income for the rest of the year. Estimate your income as carefully as you can, and notify the exchange if the amount changes—you could get a bigger credit if your income drops or avoid a surprise tax bill if your income rises (see 4 Smart Moves to Trim Next Year's Tax Bill Now). In addition, if your income is less than 250% of the federal poverty level ($29,175 if single or $39,325 for a couple), you can qualify for a cost-sharing subsidy that reduces co-payments and other out-of-pocket expenses—but only if you buy a silver insurance plan.

Note that converting a traditional IRA to a Roth or taking taxable withdrawals from a traditional IRA or 401(k) boosts your income. However, Roth withdrawals don’t count as income. Contributions to a health savings account reduce your income.

You have a preexisting medical condition. You can no longer be denied coverage or charged a higher premium. But make sure that under the policy you choose, the hospitals, doctors and other providers you use are in the network. Also find out how out-of-network costs are covered if you decide to go elsewhere for special treatment. Research your policy’s appeals process in case your request is denied (your doctor and state insurance department can help; see www.naic.org for links).

Choose the most comprehensive plan you can, with the widest network and lowest out-of-pocket costs. Understand your policy’s out-of-pocket maximums. For any policy, the maximum can’t exceed $6,350 a year, including deductibles and co-pays, for in-network care, but some plans (especially gold and platinum plans) have lower cutoffs. “Many people with greater health care needs will be better off paying a little more per month for a lower out-of-pocket maximum,” says Elizabeth Carpenter, a director of Avalere Health’s health care reform practice.

If you develop a health condition or are prescribed a new drug, compare the cost of policies during open enrollment later this year.