Deductibles, copayments, HMOs, PPOs, OON, HSA/FSA, out-of-pocket costs, premiums – what do they all mean? If you aren’t familiar with the lingo, the world of mental healthcare costs can be a confusing whirlwind of long words and acronyms. When it comes to your healthcare costs, you undoubtedly want to know what exactly it is you’re paying for before choosing an insurance or signing the check. At Prairie Health, we are committed to providing you with this transparency. This article will help you make sense of some of the common terms you’ll come across when financing your mental healthcare.

Common Insurance Plans: HMOs and PPOs

Before we get to the actual expenses that you’ll encounter, it’s helpful to first set the context by defining some common types of insurance plans. When you’re looking for an insurance plan, you’ll likely come across two primary options: Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). Depending on your situation one type can be a better choice than the other.

HMO

A Health Maintenance Organization plan, or HMO, requires you to always see your designated primary care provider for any non-life-threatening health issues prior to seeing a specialist. If your primary care doctor cannot treat or diagnose you themselves, then they will refer you to a specialist within your network.

In an HMO plan, you are restricted to the provider network that your insurer establishes. If you receive care from a provider outside of your care network (an “out of network” provider), your insurance plan will not typically cover the costs. Because of this restriction, HMO plan premiums often cost less than PPO plans. Kaiser is the largest HMO provider in the country, and operates throughout California.

PPO

A Preferred Provider Organization plan, or PPO, offers more flexibility in that you can typically make appointments with specialists directly rather than going through your primary care provider first. Furthermore, with a PPO plan, your insurer doesn’t restrict you to only seeing providers within the established network. The network of coverage still exists, but if you were to receive care from a provider outside of your network, you would just have to pay a bit more out of pocket. Anthem Blue Cross is the largest provider of PPO coverage to Californians.

Pre-tax Insurance Options: FSAs and HSAs

Two additional options for health insurance that you may come across are Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA). Both can be good pre-tax options to reduce your taxable income and help you save money on qualifying healthcare costs. Prairie Health can accept both of these options.

FSA

A Flexible Spending Account is a tax-advantaged account that your employer creates and owns. This type of account enables you to put money aside at the beginning of the year for healthcare expenses for yourself, your dependents, and/or your spouse. You can contribute up to $2850 to your FSA in 2022, and your employer also can also contribute for you, although they aren’t required to.

Once you enroll in your FSA and decide how much money you want to enter monthly, you have access right away to all of the funds in the account for the year. For example, if you choose to contribute $100 monthly, for a yearly total of $1200, you’ll have access to all $1200 right when you enroll, rather than being restricted to how much money is actually in your account at the time you need to make your payment.

The major drawbacks of FSA accounts are that the funds in your account don’t roll over to the following year. Plus, if you leave your employer, you lose the funds that were in your account. This can be an important consideration when choosing between an FSA and an HSA. The “use it or lose it” nature of Flexible Spending Accounts may not be ideal for your situation, especially if you aren’t sure about what your medical expenses are going to look like over the year.

HSA

A Health Savings Account is similar in principle to a Flexible Spending Account. It allows you to put away money for healthcare expenses for the year. However, there are some key differences.

First of all, you own the account, not your employer. As a result, your funds roll over from year to year. You can also choose to invest your HSA funds. Additionally, there are certain qualifications you must meet to be eligible for a HSA: you can’t be claimed as a dependent on another person’s tax return, you cannot be eligible for Medicare, and you must be enrolled in an HSA-eligible High Deductible Health Plan (HDHP). In 2022, a HDHP is a plan with a deductible higher than $1400 for an individual, or $2800 for a family. We define what a deductible is in the next section of this article.

Furthermore, if you elect to use any HSA funds for non-medical expenses, you’ll pay income tax on these funds. If you don’t use funds in your HSA, they will incur an additional 20% tax. In 2022, the contribution limit for an HSA is $3650 for an individual and $7300 for a family.

Now for some common terms you’ll hear, regardless of what type of plan you choose.

Deductibles

Most health insurance plans will have something called a deductible. The deductible is one of the more important considerations when deciding what insurance plan you want to commit to.

What is a deductible?

A deductible is the total amount that you will have to pay out-of-pocket in a year for health services before your insurance kicks in and starts to help you cover the costs of care. This amount can range from hundreds to thousands of dollars, depending on your plan. For example, if your insurance plan has a deductible of $1000, then you will have to pay for the first $1000 worth of covered services for the year on your own. After this, your insurer will start to cover a percentage of your costs for the rest of the year.

If you don’t reach your deductible in a year, then you will have just paid out-of-pocket for whatever health services you did receive in that year.

Mental healthcare and deductibles

Prior to the Mental Health Parity Act in 2008, some insurers had a separate, often higher deductible for mental healthcare. This resulted in mental health treatment being less accessible. However, under the Mental Health Parity Act, you cannot be subject to two separate deductibles. Any out-of-pocket costs you spend on mental healthcare will count towards your plan’s deductible, as long as your plan covers mental health services.

Before choosing an insurance, check to see that your insurer covers mental healthcare costs. The Parity Act does not require this coverage, but rather just requires that if mental healthcare costs are covered, the coverage must be equal to or better than that for physical and other medical services.

Why choose a plan with a higher deductible?

Having a plan with a lower deductible, or even a no-deductible plan, may seem like it’s always advantageous, as it means that your insurance kicks in faster. This isn’t necessarily true though, and the better option for you depends on your personal circumstances. A lower deductible usually corresponds with a higher premium (the monthly rate that you pay your insurer for coverage). So while your insurance may kick in a little quicker, you’d be paying a higher amount monthly. This is an important trade-off to consider.

Generally, if you expect to accrue a high amount of healthcare costs in a year, due to a known health condition you have or a medication you need to buy frequently, then choosing a lower deductible health insurance plan makes sense. You will likely reach your deductible quickly and receive more help from your insurance over the course of the year.

However, if you are generally healthy, a higher deductible plan with a lower monthly premium may be a smarter option. Your premium will go down, and since you don’t expect to seek care often, out-of-pocket costs will likely be low.

Another benefit of a high deductible plan is that it may make you eligible for a Health Savings Account (HSA).

Copayments

Once you meet your deductible, your insurance will start to cover some of the costs of your care. However, you will still likely have to pay something called a copayment each time you receive care.

What is a copayment?

A copayment is a fixed amount that you are responsible for paying each time you receive care that your insurance covers. This amount can vary based on what service you receive, but is defined and determined by your insurer beforehand. For example, if the cost of your general check-up is $90, but your insurance has a $20 copay for general visits, then you’d only have to pay $20 out-of-pocket when you go in for your appointment, assuming you’ve met your deductible already. The copay for visiting a specialist might be slightly higher than for visiting a general doctor.

Out-of-pocket costs

We’ve used the term “out-of-pocket costs” a few times, so it might be helpful to explicitly define this term. An out-of-pocket cost is any cost that you are responsible for paying with your own money, not covered by insurance, at any point during your care. This can include copayments, pre-deductible costs of care, or additional costs of care for seeing an external specialist.

Just know that when you sign up for an insurance plan, this doesn’t mean you will no longer need to pay any fees directly to your providers. Your insurer will cover a lot, but not quite everything. Most insurances set an out-of-pocket maximum, or a total max amount that a customer can pay out-of-pocket in a year. Once a customer has reached the out-of-pocket maximum, insurance will completely take over and cover further costs of care.

It may be worth choosing a plan with a lower out-of-pocket maximum if you expect to need a lot of healthcare services in a given year. That way, your insurance will fully take over sooner.

Insurance at Prairie Health

At Prairie Health, our goal is to make the highest quality care you need available at the lowest cost possible. In our pursuit of making mental healthcare affordable and accessible to all, we’ve been working hard to add several insurers, and are planning to add more.

Currently, our psychiatrists accept plans offered by Anthem Blue Cross (including UCSHIP), Cigna, Blue Shield of California and Medicare. Visit our Insurance and Pricing for full details, and check with your insurer to confirm whether or not our services are covered for you. Typically there is a number on the back of your insurance card that you can call to contact your insurance provider. They can help you determine what your insurance covers and how much you owe. If you still have questions, our Care Coordinators are here to help! You can schedule a free consultation with them before signing up for Prairie.

How it works

If your insurance isn’t covered by our providers, that’s okay! We have transparent costs, and you may still be able to receive significant reimbursements if you have a PPO plan. If we don’t support your insurance, we are an out-of-network (OON) provider for you. However, you can claim your OON benefits from your insurer – we’ll help you make that process seamless. We charge you the full amount upfront, then we bill your insurance for you. If your benefits apply, you’ll receive a reimbursement check in the mail. Many members with PPO plans receive a 60-80% reimbursement of the cost of care.

If your insurance is supported by Prairie, you’ll likely pay just a fraction of the out-of-pocket cost of care. Consult your plan’s benefits to get a sense for what your copay will be. If you’ve met your deductible, then we will charge you your copay upon booking your appointment with us. You also may be able to use your insurance to cover your medication copay, if applicable, if you choose to opt out of medication delivery.

We hope this guide was helpful! At Prairie Health, our goal is to enable everyone to seek quality mental healthcare. We know that providing the right resources and accurate information is essential to this goal.

Ready to start with Prairie? Book an appointment today, or schedule a free consultation with one of our Care Coordinators for more information!