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Health insurance in today’s marketplace doesn’t cover several areas. Out-of-pocket expenses may include premiums, coinsurance, deductibles, copays, and may include some vaccinations, infertility treatments, out-of-network doctors at network hospitals, and, as well as, nursing home care and elective procedures. Some hospital stays also won’t be covered if the insurer policy states you were in the hospital too long.1
The Effects of Gaps in Coverage
Out-of-pocket medical expenses account for a significant share of bad debt and bankruptcies in the United States. Outstanding medical bills account for 52% of collection accounts on credit reports.2
A recent national survey found these statistics3:
- 26% of respondents felt health care costs caused a serious financial problem
- 42% of respondents depleted their savings to cover medical expenses
- 44% of respondents enrolled in a payment plan to make medical bills more manageable
- 39% of respondents were contacted by bill collectors for failure to remit timely payments
- 27% of respondents struggled to cover food, utilities, and housing expenses because of medical bills
- 23% of respondents resorted to credit cards to cover health care costs
- 19% of respondents borrowed funds and foresee difficulty in repaying the balance
- 7% of respondents declared bankruptcy as a result of medical expenses
Out-of-Pocket for Covered Services
Even for those services covered under a health insurance policy, the consumer can be on the hook for significant cash outlays. Costs of covered services include:
- Premiums – The cost of having the health insurance policy. It can be paid fully by the consumer, fully by the consumer’s employer, or shared between the two.
- Deductible – The amount a consumer must spend before receiving any coverage under their policy. For example, if the annual deductible is $1000, the consumer must pay $1000 in medical bills before their insurance company will pay anything toward health care bills.
- Coinsurance – The consumer’s share of a covered service (after meeting the deductible amount). This is usually a percentage of the cost of the service. For example, if the coinsurance is 20%, the consumer must pay 20% of the service, and the insurer pays 80% after the deductible is met by the consumer.
- Copayments – Sometimes rather than paying coinsurance, a consumer must pay a flat fee for a service. For example, if a policy requires a $20 copayment for doctor’s visits, the consumer’s out of pocket cost for the visit is $20.
- Out-of-Pocket Maximum – This is the maximum dollar amount a consumer would be obligated to pay in a calendar year under their insurance policy. This figure includes deductibles, coinsurance, and copayments, but it does not include premiums.4
For more information about out-of-pocket costs, see Rising premiums, deductibles, and the impact on your budget.
ACA (Affordable Care Act) Required Services
Currently, the ACA requires all insurers to cover certain services without limits on the amounts these services cost.5 The services, however, may still be subject to deductibles, coinsurance, or copayments. All health insurance policies must provide for:
- Ambulatory patient services (outpatient services)
- Emergency services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services (those that help patients acquire, maintain, or improve skills necessary for daily functioning) and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
While the list seems comprehensive, there are still coverage limitations even within these mandatory categories. Hospitalization, for instance, may not be covered if the insurer determines that the patient’s condition did not warrant a stay of more than 24 hours. Hospital visits of less than 24 hours are deemed “observation” visits and are not subject to the mandatory coverage rules.6
Finally, there are some services most health insurance won’t cover, even if the consumer has met the deductible and other out-of-pocket costs.
Long-term care is a service that’s not covered by health insurance (including Medicare). Long-term care is “custodial” care, usually provided in a nursing home. The national average cost of such care was $6,844 per month for a semiprivate room in 2016. In some states, yearly nursing home costs well exceed $100,000.7
Likewise, experimental or alternative treatments that have not been approved by the FDA will not be covered. To receive such services, a patient has to be selected as part of a clinical trial, or, in some cases, the physician can petition the insurer to cover the services if they are cheaper than conventional approaches.Additional health expenses not covered by insurers include8:
- Hearing aids
- Infertility treatments, including in vitro fertilization
- LASIK surgery to correct vision
- Drugs that are not on the insurance company’s formulary (a formulary is a list of drugs covered by an insurance company)
- Cosmetic surgery
- Doctors who are out of network, who perform services at an in-network hospital.
What Health Insurance Doesn’t Cover: The Consequences
A wide variety of studies conducted since the Great Depression have reached different conclusions about the number of bankruptcies caused by medical costs. These range from 8% to 62.1%. However, there is consensus that many bankruptcies are caused, at least in part, by medical expenses.9 To avoid a medical-related bankruptcy, make a point to budget for your healthcare costs as much as possible.
1Davis, Elizabeth. December 16, 2018. “Surprising Things Not Covered by Health Insurance.” Verywellhealth.com
2Martin, Alison. October 6, 2018. “When Health Insurance Doesn’t Cover Your Bills.” Investopedia.com
3Martin, Alison. October 6, 2018. “When Health Insurance Doesn’t Cover Your Bills.” Investopedia.com
4Health Markets. September 9, 2018. “Deductible vs. Out-of-Pocket Limits: What’s the Difference?”
5Families USA. February 9, 2018. “10 Essential Benefits Health Insurance Plans Must Cover Under the Affordable Care Act.”
6Davis, Elizabeth. November 23, 2018. “What Is Hospital Observation Status?” Verywellhealth.com
7U.S. Department of Health and Human Services. October 10, 2017. “Costs of Care.” LongTermCare.gov.
8Roos, David. April 19, 2018. “6 Surprising Things Health Insurance Doesn’t Cover in America.” HowStuffWorks.com.
9Amadeo, Kimberly. February 3, 2019. “Medical Bankruptcy and the Economy.” TheBalance.com
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