To help all of the State employees of North Carolina figure out which version of the State Health Plan would be best for them during the upcoming year, I thought we would attempt to review the differences between the three options – CDHP (85/15), Enhanced 80/20, and Traditional 70/30. The State has developed a very informative site with lots of details and specifics for the State Health Plan, so I won’t repeat anything you can find there. The goal of this post is to compare, line by line, what the numbers associated with each plan mean and which types of medical situations end up being the preferred option financially for each person once all expenses have been considered.
All State Employees should have received a “Decision Guide for Open Enrollment” packet from their insurer for the 2017 benefit period sometime in the past few weeks. You can use the “2017 State Health Plan Comparison” table on Page 8 in this booklet, or you can click on this link to get the PDF online. Here we go!
2017 North Carolina State Health Plan Comparison
HRA Starting Balance: You’ll notice that the CDHP plan is the only option with an Health Reimbursement Account (HRA). An HRA is basically a fund that your employer sets aside to pay for your qualifying medical expenses. With the CDHP plan, an individual has their first $600 in health expenses paid through their employer’s HRA. This is basically free money, as long as you need it and use it for things that are approved by your plan (eg. doctor’s visits, most prescriptions). Effectively, this splits the CDHP’s $1,500 deductible into two different periods, where you end up only having to pay once you hit $601 in expenses each year.
One thing to consider is that you actually need to use $600 in health expenses for this aspect of the plan to help. If you don’t use it, the $600 set aside for you in your employer’s account usually resets and lets the employer keep any unused funds to help reduce expenses the following year. While $600 is the same to anyone, this is an especially nice feature for people who expect their total health expenses to be less than $600 per year because they’ll never have to pay anything except their premiums.
Annual Deductible: A deductible is the amount of money you will have to pay out-of-pocket for non-preventive services before the actual benefits on your insurance plan will start to take effect. Of the three options available, the 70/30 has the lowest deductible, but that doesn’t mean it is the best plan. This means that the plan’s benefits kick in earlier, but the 70/30 plan also has greater expenses after the deductible and a much higher out-of-pocket maximum than the other plans. Other than just the dollar amount, there are two distinct differences in how these deductibles are applied:
- The CDHP plan applies all medical expenses to the deductible. Your sick visits, specialist appointments, prescriptions – everything goes towards your initial $1,500 deductible. Other than the covered ACA Preventive Services, this plan doesn’t pay any of your health care expenses until after you have met the deductible.
- The 80/20 and 70/30 plan have co-payments for PCP visits, urgent cares, and prescriptions so the deductible only applies to things like surgeries, labs, and hospital visits. While the deductibles are lower, they are also less likely to be met because they only apply to certain things.
Co-Insurance: You might notice that the co-insurance rate is also indicative of the name of the plan – eg. the 80/20 plan features a 20% co-insurance. The co-insurance is a percentage that requires the patient to pay a certain portion of approved medical services once their deductibles have been met. Basically, as a reward for paying 100% of everything out-of-pocket before you met the deductible, your insurance will now start helping pay your health expenses by reducing your portion to either 15%, 20%, or 30%, depending on the plan. Once you have met your deductible, this is the percentage of your health expenses you will be required to pay until you have met your co-insurance maximum.
Medical Co-Insurance Maximum: The 70/30 plan is the only one that has a medical co-insurance maximum. The other plans have their own maximums, so while this seems like a small bit of semantics, but it actually makes a pretty big difference in your possible expenses. The CDHP only has a combined out-of-pocket maximum that includes co-insurance and pharmacy benefits, while the 80/20 plan skips the co-insurance maximum and separates the out-of-pocket maximums between medical and pharmacy. By calling it a “co-insurance maximum” and not a “out-of-pocket maximum,” this number does not include the annual deductible that has already been paid.
This graphic does not include the separate prescription deductibles associated with the 80/20 and 70/30 plans.
Because the $4,350 out-of-pocket maximum in the 80/20 plan includes the $1,250 deductible, the 80/20 plan’s effective “co-insurance maximum” is really only $3,100. With the 70/30 plan, you’ll be paying the $1,080 deductible PLUS $4,388 more. A small difference, but one that costs over $1,200 if it actually comes into play. Also, it is important to remember that the 80/20 and 70/30 plans have separate deductibles for prescriptions, which we will get into soon.
Medical Out-of Pocket Maximum: As mentioned in the previous paragraph, the medical out-of-pocket maximum includes all out-of-pocket expenses a person would have to pay for medical services each year. This includes co-payments, co-insurances, and deductibles. For the 80/20 plan, this means you’ll have a cap on your medical expenses each year of $4,350. Because this number includes the deductible, you’ll basically be paying a $1,250 deductible, and then +20% of the next $15,500 in health expenses you incur (for a total of $4,350). This number puts a cap on your total annual medical expenses, so you can consider this the limit of a “worst case” scenario (not including prescription coverage).
Pharmacy Out-of Pocket Maximum: This is just like the medical out-of-pocket maximum described above, but only for prescriptions. The 80/20 plan and 70/30 plan both have separate deductibles for prescriptions, while the CDHP plan assigns both medical and pharmacy claims towards the same deductible. This makes it seem like the CDHP plan has better prescription coverage than the 80/20 or 70/30 plan, but those two only apply their deductibles to high tiered prescriptions that aren’t used by very many people. With the 80/20 and 70/30 plans, most of your prescriptions will be a set price for a 30- or 90-day supply, so most people will never really get close to meeting their limits with simple $5 and $30 co-payments per month.
Out-of-Pocket Maximum (Combined Medical and Pharmacy): The basic concept was covered in the previous two sections, but this number represents the “worst case scenario” for all of your out-of-pocket health expenses combined. There is no scenario where an individual will have to pay more than $3,500 on the CDHP plan, $6,850 on the 80/20 plan, or $8,828 on the 70/30 plan. This is a helpful number to know if you’re going to need a major surgery or hospitalization. These numbers are relatively low compared to today’s health insurance environment, where standard maximums are usually around $10,000 or $15,000 annually, so this is a one of the best aspects of the State Health Plan and a major selling point for most people.
ACA Preventive Services: These are the rates for certain services that have been categorized as “preventive” by stipulations in the Affordable Care Act, which has been adopted by the State Health Plan. You can check out the details of what is considered a preventive service on the State’s website – this includes things like your annual wellness exam, most vaccinations, and standard age-based guidelines and screenings. Preventive medicine has been proven to keep people healthier, so insurer’s are making a big push to ensure all of their members get these basic, cost-effective primary care services now so they can avoid having to pay for complicated, expensive hospital visits later. Because the services are preventive, and not urgent, the insurance penalizes you significantly for receiving these services out-of-network, so make sure the provider you see accepts your insurance if you want to receive these benefits.
Office Visits: So far, everything has basically seemed most favorable to the CDHP 85/15 plan. The next few topics are where the real benefits of the 80/20 and 70/30 plans come in, since they have co-payments for most medical services, instead of a deductible. While their deductible may be higher, it also applies to fewer things that you are likely to need. This is also the part of your benefits that applies to appointments at Family Care, if you were wondering.
For example, consider a single primary care visit for the flu – to make it easy, we’ll say its your first visit of the year.
- With the CDHP plan, you are paying 100% of the cost of the visit because you haven’t met your deductible yet. This includes the doctor’s visit, flu testing, lab work, prescriptions, and any other services you may need. However, if the visit falls within the first $600 of your annual health expenses, the charges would be paid by your HRA account and you would not owe anything out-of-pocket. You would also get $25 added to your HRA, so you can think of that like a cash-back rebate towards your health expenses for using an in-network provider. After your HRA has been exhausted for the year, you will owe 100% of every office visit you have for the next $900, and 15% after that until you reach your maximum.
- With the 80/20 plan, you would only pay a $25 co-payment for a doctor’s office visit, rather than having the charges applied to your deductible and owing 100%. Basically, you would save about $75 every time you went to a PCP and $215 every time you went to a specialist. If you had any testing or additional services (eg. flu test, breathing treatment, etc.), your deductible would apply in addition to your co-payment. This makes things relatively simple and helps people budget costs once they expect to have several office visits each year.
- The 70/30 plan has the highest co-payments, but they are still not too far off from the 80/20 plan and the deductible applies to PCP visits the same way. You will have a higher co-payment, but still pay the same rates for additional services towards your deductible.
Urgent Care: Just like the section on Office Visits, but in an Urgent Care setting. There isn’t too much different about the basic process from office visits, so the main thing to notice is how much higher your expenses will be at an urgent care vs. your primary care provider. Whenever possible, you should always try to visit your primary care provider before attempting to go to an urgent care. For example, at this great independent primary care facility known as Family Care, we can guarantee either same-day or next-day appointments, so we can help you avoid the higher costs and lower quality of service that you’re bound to experience at an urgent care facility.
The nice thing is that the benefits for urgent care visits are identical at both in-network and out-of-network providers. Because the problem you are experiencing is obviously “urgent” if you are visiting an urgent care, your insurance company won’t care about the network and allow you to get treated wherever is most convenient. They charge a steep fee for this convenience, but it is still nice to know you won’t be charged more because of the network.
Emergency Room: Again, the CDHP plan applies charges to a deductible, while the 80/20 and 70/30 plan have co-payments associated with the visits. Depending on the significance of your reason for visiting the ER and how close you are to meeting your deductible, either one might be considered the best option for your situation. The one, and probably only, benefit to an ER visit is that you’ll likely go well beyond your entire out-of-pocket in just a few hours, so your healthcare will basically be “free” for the rest of the year. Yay for you!
Inpatient Hospital: This is reserved for actual hospital stays where the patient is admitted and kept in the hospital for some period of time. With all of the plans, you’ll only end up receiving the benefits in this row if you visit the ER and are then later admitted to the hospital. The insurance does not try to charge you twice after an admission, so the bump from an ER visit to an admission is not too drastic. The CDHP and 80/20 plans have an option to either get money back or have their co-payments waived if you visit a Blue Options Designated Hospital, so you should try to visit a preferred hospital whenever possible.
Prescription Coverage: The concept of tiers is pretty complicated, so I will go over this part in a separate post. However, the basics are still pretty much as the regular medical benefits the same across the three options. The CDHP has prescriptions applied to the same deductible as everything else, while the 80/20 and 70/30 plans have co-payments associated with different tiers of drugs. If you aren’t sure what these terms really mean, here is a good 2.5 minute video on what a drug formulary is and why your insurance has grouped different drugs into tiers.
For the State Health Plan, specifically, here are the links to the specific formulary for each plan. You should look up the medications you take to determine what tier they are classified under so you can get a good idea of your expected costs for that drug. The formulary changes all the time and the difference between a Tier 1 drug and a Tier 2 drug could be hundreds of dollars per year, so this helps keep you from being surprised when you show up at the pharmacy.
Which plan should I choose?
In my opinion, the State Health Plan is the best health insurance to have in North Carolina. Each plan has their specific benefits and drawbacks, but they are all significantly better insurance plans than the plans you’re likely to find available on Healthcare.gov. The problem is finding the plan that makes the most sense for how it will actually be used by you and your family. Every medical situation is unique, but here are some of the pros and cons of each plan to might help you make your final decision.
- Pros: Potential for $0 premium and includes the lowest cost to add children and/or spouse. If you spend under $600 per person, your out-of-pocket expenses will be paid entirely by your HRA. This plan has the lowest out-of-pocket maximum, so this plan has the best “worst case scenario.”
- Cons: You are required to pay for 100% of your expenses between $600 and $1,500 each year. You’ll have to pay for prescriptions under the same deductible as medical expenses. You’ll need to take additional steps to set up your HRA with your employer.
- Pros: Lowest co-payments for PCP and Urgent Care visits, as well as most prescriptions. Pharmacy deductible is only $2,500, so meeting that deductible could help reduce overall costs if prescriptions make up a large percentage of your medical expenses.
- Cons: Requires at least $15 per month, minimum, in premiums and has the highest premium cost to add family members. Potentially has the highest cost in a situation where multiple family members need extensive care and prescription coverage.
- Pros: Has a lower premium than the 80/20, but still maintains a similar structure for PCP and urgent care visits. Has co-payments for Tier 3 medications, so certain medications might be cheaper than the other plans. One prescription deductible applies to the entire family.
- Cons: Has the worst coverage after the deductible has been met of the three plans. Because the premium is similar to the CDHP, while the coverage is similar to the 80/20 plan, the segment of people that would have the best coverage for their unique situations is fairly narrow. Most people would be better off getting the CDHP or 80/20, but there is a definite middle group where this plan makes the most sense.
I hope this was a helpful breakdown of the major components of these three plans. For more details on how you should think about this information, in general, be sure to check out our recent post on the 3 things you should consider when signing up for health insurance.
If you have any questions, please submit them in the comments and I’ll be sure to reply. Thanks for reading!