Sara Evans was recently referred to us by her friend, Susan, who has been a client of ours for years. She heard we were great advocates for our clients and sticklers about explaining the policy to the customer before they spend a penny.

Sara wanted options because she was concerned that her current policy cost too much and covered too little. A case in point was a recent eye exam: She had to pay for the appointment because she hadn’t yet met the $1,000 deductible on her current policy.

The solution

We immediately caught on that Sara did not understand the details of the policy she had purchased. That’s not unusual, but it can prove to be problematic. In fact, we recommend that all of our clients make a list of the medical services they will likely need throughout the year. Before they buy anything, we tell them to read the fine print on the policy’s fine print and ask questions until they are certain they understand what they are paying for – and what will create an additional charge.

Here’s why

An insurance policy’s fine printcan be complex. The bottom line is that if your client purchases a policy with a high deductible, there will be no coverage until the deductible is paid in full. Deductibles apply to all coverage if you purchase an HSA compatible plan – except for preventive services.

And realize this:

  • Deductibles can apply to specific services such as lab work and hospitalization.
  • They also apply to services differently depending on whether they are in or out of network.
  • It’s important to know that deductibles may be cumulative or shared, or based on the calendar year or contract year. Make sure your client knows how it works for the policy their purchase.
  • If the policy is a health savings account (HSA) versus a high-deductible plan, your client will be able to write off the amount placed in the HSA account up to the maximum allowable by the government. The minimum deductibles for HSA plans start at $1,200 for a single and $2,400 for a family.
  • Many after-tax expenditures, such as those included in the FSA Section 213 of the tax code, are not covered under an insurance policy yet can be written off. An HSA’s primary advantage is its ability to cover such expenditures

If we were the health insurance ambassadors

Before any new client signed up for a policy, we’d make sure they were given a short primer course, at the expense of the health insurance company, to help them understand the benefit package they were buying.

We would also have the insured initial a disclaimer stating what is covered, how the deductible works and what it applies to, and what the exposure is based on the out-of-pocket limits. That would alleviate the confusion.

The painful truth

The reality is that when your client buys health insurance, there is a cost to pay. They need to realize that they’ll end up paying out-of-pocket either with a deductible or a premium. Nothing is free.

Note that if an employer – or a parent – is footing the bill for the premium, your client will still be required to pay out-of-pocket costs when they visit a doctor or hospital.

If they are self-employed and are paying both the premium and the deductible, make sure they analyze the cost of having a policy that includes a deductible plus out-of-pocket expenditures and premiums.

Want more? Read Part 1: Maternity Coverage and Part 2: Continuity of Coverage on ASJonline.com.

Stephanie Cohen and Scott Golden are the co-owners of the health care benefits firm Golden & Cohen. Cohen can be reached at stephanie@golden-cohen.com. Golden can be reached at scott@golden-cohen.com.