Deductibles, Copayments, and Coinsurance in the FEHB Program
You can use cost sharing details to assist you in choosing a plan by pinpointing strengths and weaknesses for cost items of particular concern to you. If you are especially concerned about a broad area of coverage, such as reimbursement for prescription drugs, copayment information can identify plans that are most acceptable to you for that feature, and be used together with the cost rankings to narrow your choice. Our comparisons of deductibles, coinsurance, and copays display many—but by no means all—of the cost sharing provisions taken into account in our overall cost comparisons.
In recent years prescription drug copayments have become increasingly complex. Plans require you to pay more for "name brand" drugs than for "generic" drugs. Name brand drugs, once past their patent protection period, are usually met with competition from generic drugs that the Food and Drug Administration has determined to be therapeutically identical. As a result, generic drugs tend to be much less expensive, and it is in the financial interest of both you and the plan that you select them. Most plans now use at least a six-tier reimbursement structure for prescription drugs: generic, preferred name brand, and non-formulary name brand at the local pharmacy for a one-month supply; and the same three categories for a three-month supply by mail order (multi-thousand dollar "specialty drugs" are often yet another tier). Our overall cost comparisons reflect these differences, but if you have unusually high (or low) name brand drug costs, you can use our cost sharing tables to identify plans most likely to match your needs.
You should not rely primarily on cost sharing information to select a plan. Choosing a plan with the best rate for a particular benefit without taking into account its premium and all its other benefits would be a mistake. You could try to compare key factors two or three at a time, but this approach either omits other key factors or requires so many oversimplified comparisons as to become meaningless. For example, whether or not and how much a separate hospital deductible matters compared to premium dollars depends on a key unknown: your likelihood of one or more hospital stays. With few exceptions (e.g., routine visits and maintenance prescription drugs, and some planned operations if you avoid complications that lead to readmissions) you cannot forecast just what medical expenses of each type you will incur next year, and even if you could it is very complex to make all the interactive calculations involved. Furthermore, cost sharing can be and often is expressed in annual, monthly, biweekly, per dollar spent, and per service unit for different benefits in the same plan. It can be expressed as the dollar amount you pay, the dollar amount the plan pays, the percent you pay, or the percent the plan pays. Converting all these disparate measures to the common metric of annual cost is essential to making comparisons. Otherwise, you are comparing apples to oranges—how much biweekly premium equals how many annual physician visit copayments or what coinsurance percent for name brand prescriptions? We not only handle these messy computations for you, but also use actuarial information on the probability of different kinds and amounts of costs. Most importantly, you cannot sensibly compare plans based only or primarily on expenses you already expect—that misses the main purpose of insurance: to protect you against unknown and potentially devastating future expenses.
The Guide shows the dollar copayment or coinsurance percentage you must pay for bills of each type. In some cases a plan uses both methods of payment for the same benefit, or a different amount depending on which type of provider or prescription drug is involved. These amounts and percentages do not take into account deductibles, and can be very misleading. A plan that pays all expenses in excess of a deductible of $300 pays none of your bills in a year when your costs are less than $300, and only half in a year in which your costs reach $600.
In most cases, our entries are the same as those given in the plan brochures. Unfortunately, the reimbursement structure for many plans is so complicated that there is no simple way to present or compare these payments, even organized by type of expense. For example, some plans vary your hospital copayment based on how many days you stay as a patient, and while some use dollar copayments others use percentage coinsurance. Therefore, unless you are quite confident as to a high level of spending in a particular category, and are willing to compare several plan brochures carefully, do not rely on cost sharing details to inform your decision.
The High Deductible and Consumer-Driven plans' copayments are particularly subject to confusion because they change by expenditure level. You start the year with a savings account you can use for any physician, dental, drug, or other expense. In addition, just as in all other plans you get complete coverage of a physical exam that will cost hundreds of dollars. Your copayment for these expenses is zero. If and when you exhaust the savings account, you pay a substantial deductible. After that, you pay a small proportion of hospital and physician costs until you reach the catastrophic limit. So your coinsurance ranges from zero, to 100 percent, to 10 or 15 percent and, once you reach the catastrophic limit, back to zero. The purpose of this is to give you incentives for careful decisions on medical spending. However, these plans' designs make it very difficult to estimate your costs.
We recommend great caution in comparing the details of these plans’ deductibles with each other or with traditional insurance plans. HDHP plans show as a deductible the entire amount that must be spent before regular insurance cost sharing kicks in, regardless of whether the enrollee chooses to spend the Health Savings Account, since whether that Account is spent is an enrollee decision. In contrast, CDHP plans require that their accounts be spent on medical expense and used up before the deductible starts, and show as a deductible the amount between that spending level and where insurance cost sharing kicks in. As a result, a CDHP plan will invariably show a much smaller deductible than an HDHP plan even if the spending level at which the insurance coverage kicks in is the same. Our estimates of out-of-pocket costs take these variations into account, but the calculations can be complex.