Are You Paying too Much for Your Health Insurance?

Sep

2010

Are You Paying too Much for Your Health Insurance?

Written by Dana Cutter

Friday, 10 July 2009 13:35

Know Your Out-of-Pocket Cost

The following is an “insiders’ view to selecting the right Medical and Prescription coverage for your retirement. There are a lot of “hidden” costs that make it difficult for retirees to understand the true cost of health insurance. Over the last 10 years health insurance companies have created new ways to push more of the cost of health care onto the consumer. In addition to Monthly Premiums, most insurers now require copayments, deductibles and coinsurances. Prescription Drug copayments alone may represent nearly 60-80% of your annual costs. Getting through the

"Smoke and Mirrors"

is often the most difficult first step towards calculating the true cost of your health insurance.

5 Useful Tips to Save Thousands Each Year

Medicare Sherpa

has compiled

5 valuable tips

and given you access to

two powerful tools

that could save you thousands of dollars each year in medical and prescription drug costs. We’ve partnered with DestinationRx to provide you with:

DestinationRx My Medicine Cabinet Search Engine

– a powerful search engine designed to help you identify the current retail value of your drugs as well as lower costs alternative medications that could save you thousands of dollars each year, and

DestinationRx Medicare Comparison Tool

– a search engine design to help you find a qualified Medicare Plan and estimate your annual medical and prescription drug costs.

Each tool is designed to provide you with the “transparency” necessary to ensure you’ve selected the best value for your health care dollar and more importantly – the best value when you are sick.

Let’s get started.

1. Your Doctor

Start with the relationship that matters to you most. If you primarily see your Specialist on a regular basis and you only have a fleeting relationship with your Primary Care Physician (PCPs), consider changing PCPs. Stick with the doctor who is managing your medical condition. Swithching PCPs is going to provide you the best value for your dollar and more importantly stability. A number of PPOs and PFFS plans are going to terminate their contract with CMS for 2010. Your only option might be an HMO. If you are considering making a change, call the health plan and ask which PCPs work with your Specialists. This change could save you several hundred dollars each year (even more if you are enrolled in a Medicare Supplement.)

2. Your Drugs

Prescription drug plans operate under a simple premise – cost sharing. Your copayment and the cost of the negotiated rate of the drug are deducted from your annual maximum of $2,830 for 2010. So if a generic drug cost $100, you may pay a copayment of $10 for a 90-day supply and the plan pays $90. The combination of the two is deducted from your annual maximum. Your goal is to get the most value out of your annual maximum benefit of $2,830. The following three questions could save you several thousand dollars on your Rx copayments each year.

Which plan covers your drugs? Use our Medicare Comparison Tool (Medicare Plans) or the one provided by CMS Plan Finder (Medicare Plans) to calculate your annual cost. First check and ensure your drugs are covered in one of the two lower tiers – Generic (Tier 1) or Preferred Brand (Tier 2). At minimum, check to see if your drug is covered under Tier 3 – Non Preferred Brand. Watch out for a possible fourth tier called “specialty drugs.” Remember brand name and specialty drugs are not covered once you hit the donut hole. Your goal is to talk to make sure your drug is included on the Insurer's formulary (list of covered drugs).

Which plan has the lowest negotiated rate for your drugs? You will have to do a little homework here. Even if the plan does not cover your drug, you will still benefit from a 10-20% discount over retail. Each plan is required to provide CMS with an electronic file every two weeks with their negotiated rate. The CMS site even includes the retail cost of the drugs for comparison. Your goal is to stretch your prescription drug benefit further by selecting the plan with the lowest negotiated rate for drugs. Remember your copayment and the negotiated rate of the drug are counted against your annual maximum benefit. The plan with the highest discounted rate will save you the most money and prevent you from hitting the donut hole (sometimes called coverage gap).

Are there Lower Cost Alternative drugs that can further reduce my costs? Low Cost Alternatives are the single most important element in reducing your annual costs. These drugs are prescribed to treat the same condition and your doctor simply may not be aware of their existence. You can use our Medicine Cabinet Search Engine to find Lower Cost Alternatives. Your goal is to print this list and have a frank and honest discussion with your doctor about the medications he is prescribing. You both might be surprised to find out how much money you can save.

3. Your Rx Premium, Copayments & Deductibles

Start with the plan with the lowest deductibles and copayments. You are responsible for paying these “additional costs” along with your monthly premium. If the plan you’ve selected:

does not cover your drug,
covers it on Tier 3 or Tier 4 (Specialty Drugs), and/or
the negotiated rate is less than 10% of retail

Find another plan. Any of these issues could bankrupt you at the end of the year. And it will be too late to realize you were getting zero value for your money. Remember your monthly premium and deductible is considered “first dollar coverage” – what you pay before you access care. Your premium should gain you access to a comprehensive list of drugs (formulary); negotiated rates and copayments that are substantially less than retail. There is absolutely no value in choosing a plan that does not cover your drugs or offers copayments equal to or greater than the retail value.

4. Your Medical Premium and Copayments

First, don’t select a plan that has a deductible or coinsurance for Medical and/or Hospital visits. Health insurance is a highly competitive market – make sure you evaluate similar plans (HMOs to HMOs) with similar out-of-pocket medical costs (High vs. Low copayments). If you select a medical plan with a low/no premium you will pay higher copayments. Most health plans offer a basic, value and prime version of their medical plans with progressively lower copayments and higher premiums.

When you add up all the costs – premiums and copayments – is there really any difference when you are sick? The answer may surprise you - YES. Remember your premium is what you pay when you are healthy and your copayments are what you pay when you are sick. Use the CMS Plan Finder to compare medical coverage. Be sure to select “Poor Health”. The CMS calculator will adjust your costs based on your age, the number of office visits with PCPs and Specialists, inpatient and outpatient stays, and more. Some health plans will give you the appearance of value with low premiums, but these lower premium plans may actually cost you more when you are sick. Medicare Sherpa has created a worksheet to help you eveluate Massachusetts' Medicare Plans. You can download a copy and give us some feedback in our Discussion Forum: Low Cost Alternative Drugs.

If you’re healthy, you may want to select a low premium plan now and switch to higher premium if you get sick. Your goal is to keep your costs low and to stretch your retirement savings to last as long as possible. You can always increase or reduce your coverage during Annual Open Enrollment (Nov 15^th – Dec 31^st).

5. Know Your Out-of-Pocket Costs

We’ve covered quite a bit. Too make it easier we’ve attached a Medicare Sherpa Worksheet to help you evaluate your Medicare options. There are a staggering amount of health care choices when you retire. In fact, when you enter you zip code into the CMS Plan Finder you might find upwards of 54 Medicare plans available where you live. Most of those will be Part D Plans with no Medical Coverage. If you are managing a medical condition you may want to eliminate the Part D plans. Medicare Sherpa recommends starting with your local health plans. Generally you will find your local health plans will have the highest customer satisfaction ratings.

Check to see if your Specialist participates (find a PCP who works with him)
Make sure your drugs are covered in the plan formulary
Make sure the Insurer has lowest negotiated rate for covered drugs
Talk about Low Cost Alternative drugs with your doctor
Choose the plan with the lowest out-of-pocket copayments

Finally, consider joining a Medicare HMO. These plans have some of the highest customer satisfaction ratings in the country and the lowest out-of-pocket costs. If you need help paying for prescription drugs call Prescription Advantage. Prescription Advantage is a prescription drug insurance plan available to all Massachusetts residents age 65 and older, as well as younger individuals with disabilities who meet income and employment guidelines. Applying for this coverage might also help reduce your annual costs.

About the Author:

My name is Dana Cutter and I am Founder and Editor of Medicare Sherpa. Our staff spends their days searching the Internet for the best content and advice on retirement. On our site you will find articles on Social Security, Medicare Benefits, Prescription Drug Benefits and more. Please feel fee to send me an email with ideas for content, site improvements or general help launching your online persona. I hope you will consider joining and I am looking forward to reading more about you online.