This article was written by Colin Lalley of PolicyGenius.
Would you consider yourself a gambler?
Even if you don't, you're probably familiar with roulette. You have a 2.6% chance of hitting a number in roulette; that seems small, but anyone who's played knows it isn't all that uncommon. It's a pretty easy way to come home with at least a little change in your pocket.
According to a 2013 study, uninsured people have a 5% chance of incurring healthcare bills exceeding $47,300. Think about that: if you don't have health insurance, you're twice as likely to hit the poor house than you are to hit the jackpot. Add that to the fact that the average American has less than $1,000 in their savings account, it becomes clear that you need health insurance.
But maybe you're not completely convinced. Maybe you like the risk; you're the kind of person who ignores whatever the audience is yelling in The Price is Right. Well, we're here to tell you that health insurance is no game, and the best move you can make is to enroll in a health plan by December 15th.
What's so special about December 15th?
"December 15th? That seems awfully arbitrary," you might be thinking. Well, there's actually a good reason for it, and it comes down to Obamacare.
As you probably know, Obamacare made health insurance mandatory in the US. It also provided some consumer protections, like stopping discrimination against pre-existing conditions. But there's a problem with that: what do you do for people who can't afford health insurance, or are very sick and therefore expensive to cover?
The idea - as it is with all insurance - is that you build a risk pool. Everyone's premiums cover the expenses of those who need to use their insurance, and the cycle continues like the Circle of Life. In order to make the logistics of Obamacare feasible, you can't have people waiting to buy health insurance until they're sick and then dropping it once they're better. You need to rely on them paying premiums.
And so we have Open Enrollment. Open Enrollment runs from November 1st to January 31st and is the only time, barring Special Enrollment Periods, that you can buy health insurance for the upcoming year.
Now you're probably thinking, "Wait, January 31st? I thought you said December 15th?"
There are actually a few deadlines for Obamacare. If you want your health insurance to kick in on January 1st and avoid a lapse in coverage, you have to enroll by December 15th. And who doesn't want to ring in the new year with a new health insurance plan?
The other deadlines are January 15th to have coverage starting February 1st, and January 31st for coverage starting March 1st. You really shouldn't wait that long, though. Think of what can happen over the span of two months. Do you really want to risk not having health insurance for that long? That's a gamble even for the biggest daredevils.
And if you miss every deadline? Well, that's even worse. Not only are you fully on the hook for every healthcare cost, you're also subject to a tax penalty - the individual mandate. That's how Obamacare ensures that health insurance is mandatory. If you don't have health insurance, you have to pay the higher of $695 ($347.50 for minors) or 2.5% of your annual household income. That's not chump change, and you don't even get health insurance for that.
The 4 terms that matter the most that (almost) nobody understands
Why do people put off buying health insurance? It might be because they don't know that much about it and are afraid of taking the next step - or, rather, a misstep.
In PolicyGenius' recent national survey, we found out that 96% of Americans couldn't define:
- Deductible - The amount you pay for covered services before you insurer chips in
- Co-pay - The fixed amount you pay for covered services
- Coinsurance - The percentage of the cost you pay for covered services (after you've reached your deductible)
- Out-of-pocket maximum - The most you'll pay for covered services in a year
Shopping for health insurance can seem scary enough as is; when you don't know basic terms that will determine what you really end up paying for healthcare over the course of the year, it can be downright frightening.
Going back to our gameshow analogy: do you think you would know the terms that almost all of America doesn't? If Alex Trebek were to say, "This is a percentage of the cost of health services that you pay, usually after you've met your deductible," would you know the answer (in the form of a question, obviously)? If you could make it through the entire category, you'd be in Watson's - or at least Ken Jennings' - league compared to the rest of the country.
So how do you cram for the December 15th deadline? It's actually pretty easy.
- Be prepared. The first step is knowing the basics of health insurance. You should know the common terms we discussed above, along with other facts like the ten essential benefits that every health insurance plan covers. This makes shopping a much less daunting task, and you can hit the ground running instead of having to look up a new term at every stage of the shopping process. The PolicyGenius Learning Center is a great place for a health insurance primer.
- Know what you're looking for. It's recommended that you spend 5% of your gross annual budget on health insurance premiums. In order to know whether a high premium or high deductible plan is best for you, look at your past health insurance usage and your future healthcare needs. If you go to the doctor often or predict you'll get pregnant or need to schedule a surgery next year, a high premium plan can help you hit your deductible quicker and have your insurer chip in sooner. If you don't go to the doctor often, you may be able to get away with a high deductible plan, pay less up front in premiums each month, and handle a lot of the usage costs yourself. Also know what's important to you in a plan: what doctors you want in-network, what medications you need covered, and so on. If you know what you need, you know what plans you can get rid of right off the bat.
- Compare plans. Make sure you're performing an apples-to-apples comparison of health insurance plans. This is easy enough if you've done the first two steps. If you know what a deductible is and you know that a high deductible plan won't fit your budget, you know you shouldn't bother comparing them against high premiums plans. Start looking at plans that fit your needs and whittle them down from there based one which ones are better for you and your family.
December 15th might seem like it's right around the corner, but there's no need to panic. Make no mistake: it's important to get health insurance by then, or you risk going at least a month without coverage. But health insurance isn't a black box. Learn what goes into each plan, figure out what your individual needs are, and find the best one for you.
That way, when December 15th does roll around, you'll have a card up your sleeve.
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PolicyGenius is rethinking insurance from the consumer's perspective - because it's about time somebody did. We're making it easy to learn about, shop for and buy insurance. Our digital insurance advisor and online quote engines for life insurance, health insurance, pet insurance, renters insurance and long-term disability insurance will help you to get the coverage you need.