Helping Patients Understand Health Insurance


A resource for helping patients make health insurance decisions.

The role of the pharmacy in the community is critical. And often, that role encompasses much more than filling prescriptions. As patients navigate the changes in healthcare, more and more pharmacies are finding themselves in a position of helping those patients understand their health insurance coverage. It's in these situations that pharmacies can position themselves as essential destinations for healthcare delivery by guiding patients through their coverage for their health needs. Using the tips included here, the pharmacist can ask the right questions and add value in what might seem to patients to be a complex insurance environment.

Pharmacy Tip Sheet

Getting started: general questions to ask the patient.

  1. Are you a high/low healthcare user in general? This could affect what "metal" tier plan - bronze, silver, gold or platinum - the patient should choose. Low users may want to select a bronze plan that has a lower premium and a higher per-use cost share. High users should look for a plan that may have a higher monthly premium, but offers more generous coverage - both for the benefits they receive and how much they are expected to pay out of pocket.
  2. Are the doctors that you go to currently, or want to go to, part of the network? Patients should check with the physician and the insurer to confirm.
  3. Are the medications you use covered by the plan? Review a plan's formulary to see if the patient's medications are listed, what tier they are on and what the cost sharing is for that tier. Also consider generic usage, as several plans offer no-cost generics.
  4. What is the deductible and out-of-pocket maximum for the plan? Generally, before coverage kicks in, patients will have to cover the costs of the deductible, and then pay up to a defined out-of-pocket maximum amount. The out-of-pocket maximum will help limit how much the patient continues to spend on services that are covered by the plan after the deductible is met. For families, it is important to look at the difference in both the individual and family deductible and out-of-pocket maximums.

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Pharmacists should encourage patients to contact the insurer directly to ask questions about true costs. What is posted on or other state exchange websites may not reflect the exact cost that the patient pays. It is best to shop for plans on those websites, narrow the choices down, and then confirm the costs directly through the insurer.

Consider the cost: educate patients on cost factors.

Cost Factor #1: where you live
Plan availability varies across states and also by region, and each state has broken their plans into "rating regions" that cover specific ZIP codes. The plans in those ZIP codes can vary, and rating regions with a small number of plan offerings will not have as much competition as other regions, so the costs of the plans may not be as competitive. This could be the case in rural areas, in particular, which may offer fewer plans and providers. Costs of plans are inconsistent across states, so it is very hard for somebody in New York, for example, to compare what they are paying with somebody in Oklahoma.

Cost Factor #2: how many providers offer coverage in your state/city
Plan availability affects the cost of a plan, and areas with more competition may be more likely to have lower-cost plans. Some insurers offer the same plan with different networks (some limited, some broad) within certain service areas. Typically, the more participating providers there are in a plan network, the higher the premium. For patients who don't have relationships with a large number of providers, this can keep premiums lower, whereas individuals who want to see specific specialists may opt for a plan that will give them more flexibility in exchange for a more expensive premium. Additionally, many plans will allow patients to see out-of-network providers, but the cost share will be higher than the same services from an in-network provider.

Cost Factor #3: income
If you live in a state that expanded Medicaid, your patients could be eligible to enroll for Medicaid coverage if their income is less than 133 percent of the Federal Poverty Level (FPL). If the patient's income is too high for Medicaid eligibility, and the patient wants to purchase a plan on the health insurance exchanges, he/she may be eligible for financial support (referred to as subsidies) to assist with the costs of premiums and other out-of-pocket expenses. These subsidies vary by income, but generally are available to those with incomes under 400 percent of the FPL (e.g., $46,680 for single-person household in 2014). Otherwise, the cost of the premium or other cost sharing required in a plan is not affected. For example, when purchasing insurance on the exchanges, a person that makes $100,000 per year is not paying less than somebody who makes $500,000 per year, as the plans are not means tested. Patients are either eligible for subsidies or they pay the whole cost.

There are also subsidies that can further reduce costs for healthcare services. These cost share subsidies are applied to deductibles, cost shares and out-of-pocket maximums for eligible people who choose Silver plans. Like the subsidies for premiums, these subsidies are tied to income level.

The original healthcare reform legislation was intended to enroll those with incomes less than 133 percent into Medicaid. Because of this, the law was written to offer exchange subsidies to those above Medicaid eligibility requirements - in other words, those between 133 percent and 400 percent of FPL. For states that decided not to expand Medicaid, this creates a "donut hole," meaning that individuals who would have otherwise been eligible for Medicaid in an expanding state are not eligible for federal assistance (or subsidies) for insurance exchange plans. Some states may be making efforts to assist consumers in this "donut hole" to reduce costs.

Cost Factor #4: plan type
Patients can select plans by metal level - bronze, silver, gold and platinum - and the cost of these incrementally goes up. That means bronze plans generally have lower premiums and higher per-use out-of-pocket costs, while platinum plans have the highest per month cost but generally the lowest per-use out-of-pocket costs. So the metal level is the first thing than can affect cost.

The type of insurance plan selected can also have an affect on cost. Patients wanting a plan that allows them to visit a specialist without having a referral from the primary care physician may want to enroll in a more open plan, such as a Preferred Provider Organization (PPO). PPOs offer a network of doctors and more open access to the providers participating in that network. These types of plans generally cost more than plans that require patients to see a primary care physician for a referral and then see a specialist in-network. These are often called Health Maintenance Organizations (HMOs). HMOs are organized this way in an effort to establish the primary care doctor as the gatekeeper who can often help control unnecessary use of specialist care and potentially reduce overall costs of care. If members are willing to work within the HMO structure, these plans will generally be cheaper than more open-access plans.

The size of the network is also important. If a patient chooses a plan with a limited network of providers, he/she may be able to save money on premiums. A PPO with a smaller network of providers may cost less per month than a PPO with a large network.

Cost Factor #5: lifestyle factors
For health insurance exchange plans, smoking has the largest effect on premiums as it is considered a significant risk factor.

Age and family size also affect the cost of coverage. Exchange premiums increase by age according to set percentages. For example, for all plans, a premium for a 30-year-old is 13.5 percent higher than the premium for a 21-year-old. A company can establish a base premium for a 21-year-old, but they have set guidelines they have to follow beyond that by age. In addition, an individual pays a set premium, a couple pays that premium times two and the premiums for children are additional. A patient with one, two or three children will pay an individual premium for each child; after three children, the total premium does not increase.


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