Did you know that four percent of the US population signed up for or were re-enrolled in Medicare? That may not sound like a lot, but it’s actually 13.8 million people.
If you are one of those 13.8 million people, you’ve probably heard of the 80/20 rule in medical insurance. If you don’t know what it is, then you don’t need to worry- this article will explain everything.
What is the 80/20 rule for medical insurance?
A common misconception says that the 80/20 rule states that 80% of healthcare costs are spent on 20% of people. Likewise, health insurance spends 20% of healthcare costs on 80% of people.
This is not true.
The Obama Administration put the 80/20 insurance policy into place in 2011, when the Affordable Care Act first launched.
To put it in simple terms, it states that health insurance companies are supposed to spend at least eighty percent of their annually collected premiums on actual healthcare. It’s supposed to govern the MLR, or Medical Loss Ratio.
The goal of this rule was to put a limit on how much insurance could charge for premiums, helping to make your healthcare costs lower.
Does the 80/20 rule apply to me?
There are many types of health insurance policies out there. You may have Medicare, you may have short term insurance, or you may be covered through an employer.
Regardless of what type of health insurance you have, there’s a strong chance that the 80/20 insurance policy applies to you.
Most insurances run off of something called “coinsurance”. This means that they pay a large portion of the costs, and you pay the rest. In keeping with the 80/20 insurance policy, this often means they pay 80% and you pay 20% of the costs.
Unless you have an insurance where your costs are completely covered, the 80/20 rule does apply to you.
Is the 80/20 rule a good thing?
When people think about the 80/20 insurance policy, it’s easy to get a little confused as to what the benefits are.
This health insurance policy was put into place to help slow the rapid growth of health insurance premiums. In addition, there is a policy called the rate revision policy that actively prevents insurance companies from raising premiums for the sake of profit.
As a result, companies don’t charge you more and more per year just to have health insurance.
Plus, once you meet your deductible, co-insurance is very good for minimizing health costs.
Still confused? Contact us!
Health insurance is complicated, and the 80/20 rule in medical insurance can be even harder to understand. If you need more clarification, that’s okay.
Get in touch with us! FutureWise Insurance works to help you find the best health insurance policy for your budget.
There will be plenty of options for you to choose from for coverage- and not just for health insurance. We also work to help you find the best dental, vision, and life insurance you can.
Insurance may seem complex, but you aren’t alone. FutureWise Insurance can help you understand your current coverage, as well as determine if it’s still the best insurance for you.