What You Pay

Here we will look at the types of expenses you have to pay if you get employer-sponsored coverage. Then, we’ll look at what factors can make those expenses higher or lower.

Expenses

For employer-sponsored plans:

  • The employer will offer to pay all or part of the monthly premium for the employee, the employee’s children, and the employee’s spouse.
  • The employee may also need to pay part of the monthly premium
  • Everybody covered by the plan will have to pay additional fees when they get certain medical services.

The Monthly Premium

The monthly premium is a set amount of money that has to be paid each month for you to be covered by the plan, regardless of whether you use any health care that month. Generally, the employer will pay a part of the premium and the employee will pay a part.

Employer plans usually offer a coverage option for the employee that costs the employee, for the employee’s premium alone, less than 9.5% of the employee’s family income. That’s the definition of affordable coverage in federal law. This policy must meet bronze level standards.

Example

If you make $2,000 per month at your job and your employer offers coverage, your employer should offer a plan where you do not have to pay more than $190 per month (9.5% of your income) for the premium. If the premium for your coverage costs $300, the employer should contribute at least $110, so that you pay less than $190.

The employer may offer to help pay the premium for other family members covered by the plan or may require the employee to pay the entire premium for other family members.There is no legal limit to how much the employee may have to pay for coverage for family members.

Note: It is possible that coverage for an employee’s family members may be very expensive through an employer-sponsored plan. Even so, family members cannot get government help to pay for individual plans through Healthcare.gov if they could be covered by the employer-sponsored plan.

Example

Eliza’s employer offers health coverage for her and her family. The monthly premium is $200 for her, $200 for her husband, and $100 for her son. Her employer will pay her entire premium, because she is an employee, but will only pay half of the premium for her spouse and her child. So, she has to pay $150 per month to get them covered ($100 for her husband, $50 for her son).

Their family income is low enough that her husband and son would have qualified for government tax subsidies to buy an individual plan on Healthcare.gov with lower monthly premiums than the employer-sponsored coverage. However, they are not allowed to get subsidies for an individual plan because they can get coverage through Eliza’s job.

Additional Fees When You Get Care

Each time you get care, you may need to pay additional fees. Which of these fees you have to pay and how much you have to pay depend on your plan; some plans only have copayments, while others have copayments, co-insurance, and deductibles.

Copayments are a set amount you have to pay for a medical visit or service. The exact amount of the copayment varies depending on the service you get: medications, visits to specialists, lab tests, X-rays, emergency room visits, and other services can all have different copayment amounts.

Example

Under the plan her employer offers, Eliza, her husband, and her son have to pay $40 each time they visit a doctor, $20 for each prescription drug, and $30 for each lab test.

Co-insurance is a set percentage of the cost of a visit or service that you must pay.

Example

Under the plan her employer offers, Eliza, her husband, and her son have to pay 20% of the cost of any surgery. So, if Eliza has surgery costing $5,000, she has to pay $1,000 and her insurance covers the rest.

A deductible is a set amount of money that you pay out of your own pocket each year before the insurance company will begin to pay for certain services, including hospital care, emergency room visits, and brand-name prescription drugs. Once you have paid the deductible, you do not have to pay it again until the next calendar year.

Tip: If you have to pay a deductible before your health plan will pay for your medications, shop around to see where you can get them cheaper. Some stores may have generic medications much cheaper than your usual pharmacy – as low as $5 or less for some medications.

Example

Under the plan her employer offers, Eliza, her husband, and her son have a $2,000 annual family deductible before the plan will pay for their hospital care. If she needs to stay in the hospital for several days to recover from her surgery, she will pay all of the costs herself until she has spent $2,000 on medical expenses. After she has paid that amount, she also has to pay 20% of the rest of the cost. If anybody covered by the plan goes back to the hospital later in the year, they will not have to pay the deductible again.

Maximum Out-of-Pocket Expenses

Each plan has a maximum amount you have to pay each year in fees for medical services (copayments, co-insurance, and deductible). This cap for your out-of-pocket expenses does not include the money you spend on your monthly premiums. The exact amount of your out-of-pocket maximum will depend on your plan and can range from $2,000 up to $7,350 for an individual or $14,700 for a family.

Example

Eliza’s employer-sponsored plan for her, her husband, and her son:

  • Has a $500 per month premium
    • Her employer pays $350 each month
    • She pays $150 each month
  • Requires $40 copayments for visits to the doctor and $20 copayments for generic medications
  • Requires 20% co-insurance for hospital care and outpatient surgery
  • Has a $2,000 family deductible
  • Has a $5,000 family out-of-pocket maximum

When Eliza’s husband has an automobile accident and goes to the emergency room, he has to pay his full $2,000 family deductible, because they hadn’t yet paid it this year. The accident also forces him to have major surgery that costs $15,000. They’ve already paid the annual deductible, so now they just have to pay the 20% co-insurance, which means they pay $3,000 for the operation and the employer-sponsored insurance plan covers the rest. Between the $2,000 they paid for the emergency visit and the $3,000 they paid for the operation, they have spent the entire $5,000 family out-of-pocket maximum for the year.

Her husband has to stay in the hospital for 3 days as he recovers from his operation, and he also needs to take a number of medications to help the recovery and prevent infection. Usually the family would have to pay 20% co-insurance for the hospital stay and a $20 copayment for each medication; but because they already spent the out-of-pocket maximum this year, they don’t have to pay anything — the insurance plan will cover it all. In fact, other than continuing to pay $150 each month for the premium (while Eliza’s employer keeps paying $350 per month), Eliza’s family will not have to pay anything for any of their health care for the rest of the year.

What Affects How Much You Pay

The amount you pay for these expenses if you get an employer-sponsored plan depends on 4 main factors:

  • How much of the premium the employer offers to pay
  • The plans offered by the employer and the one you choose
  • The age of the people covered by the plan, and
  • Whether you use tobacco.

How Much Your Employer Offers to Pay

We already discussed how much the employer may offer to pay each month for the premium for an employee’s and the employee’s family members. Usually, the employer will offer to pay most or all of the employee’s premium, while paying part of the premium for family members.

The Plans Offered by the Employer

The employer gets to decide which health plans employees and their families can sign up for. Some employers only offer one option, while other employers offer many options. The monthly premiums for plans may depend on where your employer is located; the plans an employer offers in one place could be more expensive than what employers offer in other places.

Usually, an employer will offer to pay a certain amount for the premium of its employees and their families. If an employer offers more than one option and an employee chooses a plan with a higher monthly premium, the employee is responsible for paying the additional amount each month.

Example

Ashley’s employer offers to pay $200 for her premium each month. The cheapest plan offered by her employer costs $200 per month, so if Ashley chooses it, she will not have to pay anything for her own premium. However, she decides that she wants a plan that has lower copayments when she visits the doctor. The plan she likes costs $250 per month. Her employer will still pay $200 per month for the premium, while Ashley will pay $50 per month.

The Plan You Choose

If your employer offers more than one plan, you will be able to make some trade-offs between the cost of the premium and the plan you get.

Generally speaking, there are 2 decisions you can make that will impact what your employer-sponsored plan’s monthly premium will cost you:

  1. The cost of other fees. If you choose a plan with a higher premium, its copayments, co-insurance, deductible, and out-of-pocket maximum will be lower when you need medical services.
  2. The type of plan you get. There are 3 main possibilities, with HMOs and EPOs typically less expensive and PPOs more expensive:
    • Health Maintenance Organizations (HMOs):
      • Have a specific network of health care providers, including doctors, hospitals, labs, and pharmacies and you can’t get treatment from others except in an emergency.
      • You have a primary care provider (PCP) and may need to see your PCP for a referral before getting specialist treatment.
    • Preferred Provider Organizations (PPOs):
      • Have a network of doctors and you can see any of them, including specialists, without a referral.
      • You can get health care outside the network, but it is more expensive.
    • Exclusive Provider Organizations (EPOs):
      • Have a specific network of health care providers, including doctors, hospitals, labs, and pharmacies, and you can’t get treatment from others except in an emergency.
      • You do not need a referral from a PCP to see specialists.

Your Age

Depending on your employer, the plan premiums may be higher the older you are. While the amount the employee has to pay for the employee’s own coverage is limited by law to 9.5% of the employee’s family income, there is no limit on how much the employee may have to spend to have his spouse or child covered.

Whether You Use Tobacco

If you use tobacco, you will pay a premium that is up to 50% more than what non-tobacco users pay.

Things to Think About

Here are some questions to think about as you compare plans:

  • How high a premium can you afford to pay each month?
  • How often do you visit the doctor or need other medical services? Try and add up the copayments you would need to pay for those appointments each month. Can you afford those?
  • Do you like your current doctors? Which types of health coverage do they accept? Are you willing to switch doctors to save money?
  • Are you okay with having a primary care physician who refers you to specialists when you need them? Or do you prefer being able to set up appointments with specialists on your own?
  • Are you comfortable with having a deductible for hospital care, outpatient surgery, and emergency room services?

Each family has a different situation, and the right answers for you will depend on your specific needs. For example, if you know you will have to go to the doctor a lot, you may want to make sure that you don’t have high copayments. Or, if you hardly ever go to the doctor, you may prefer to have a lower premium.

Tax-Free Ways to Save Up Money for Medical Expenses

There are a couple of ways you can save up money for your medical expenses. The big advantage of these is that they let you save the money tax-free. The higher the rate of taxes you pay on your earnings, the more these savings plans will help you. If you don’t pay a high income tax rate, they probably aren’t going to help you much.

Health Savings Accounts (HSAs)

Some health plans let you to create Health Savings Accounts (HSAs) to set money aside to help you pay for certain approved medical expenses. For example, you could use the money in this account to pay for expenses, like doctor’s visits or prescriptions, that aren’t paid for by your insurance before you meet your deductible.

You decide how much money to put into the account, up to a certain limit, and you don’t have to pay taxes on the money you put into the account. You can get a health plan with an HSA if your employer offers plans with them.

To learn more about HSAs, visit the U.S. Department of the Treasury’s website.

Flexible Spending Arrangements (FSAs)

A Flexible Spending Arrangement (FSA) is a type of account that can only be set up as a benefit through your employer. You can contribute money to your FSA through automatic payroll deductions and you don’t have to pay any taxes on the money you put into this account. Your employer can choose to make contributions to your account too.

The money from this account is used to reimburse you for qualified medical expenses that you have to pay for that aren’t covered by your insurance. You can decide how much money you want to put into the account, but usually you have to use all of the money in the account by the end of the year, or you lose it.

If you choose to do an FSA, make sure you calculate the amount of money you will actually use, keep track of your expenses, and pay for them using the FSA.

For more information and to find out whether your employer offers an FSA, talk to your employer’s human resources department.