It’s that time of year – Open Enrollment! Your HR department has probably started to talk about your benefit options for next year. Some companies offer several plan choices; some only have one plan you can choose. Or your company may no longer offer health insurance. Instead, you may receive an allowance to go to the public or private exchange to purchase insurance yourself. Either way, signing up for your benefits can be confusing.
The exchanges, or health insurance marketplaces, open on Oct. 1. The marketplaces will allow you to shop for plans and compare, so it’s important to understand what to consider when buying insurance.
Comparing Insurance Plans
When comparing plans, consider the total medical cost for yourself and your family. This is the amount of money you will spend if you use all of your benefits.
Total Medical Cost = cost of the premium + deductible + copays + coinsurance
You want to consider the highest amount you will have to pay in case someone in your family needs a lot of care. In addition, ask the following questions:
- Does the plan cover drugs or is it only medical coverage?
- What does my network look like? Do I have a lot of choices or is it narrow? (Usually, the smaller the network, the better the discounts.)
- Is there an out-of-network benefit in case I need a specialist not contracted in my network?
- Do I usually hit my deductible each year because I or someone in my family needs health services? Are you able to save enough to pay your deductible if you are sick?
- Is there a travel benefit or national network I can use when I travel?
- Are there additional benefit features such an HSA, HRA, FSA that can save me money?
- Does the plan offer benefit enhancements, such as HooPayz, to help reduce your out-of-pocket costs by allowing you to shop for care online?
Check out a blog we did a while back that explains how all of your healthcare costs stack up.
Cost of the Premium
The premium is the amount of money you pay your health insurance company to have their health insurance coverage. The premium is the amount the insurer thinks will cover their portion of expenses for your care (paying doctors and hospitals, administration to process medical bills, utilization and case management, etc.) You’ll usually pay this fee every month, either directly to the insurer or as a deduction from each paycheck if you get insurance through your employer. Even if you don’t receive any healthcare during the year, you still pay your premiums.
Typically, premiums and deductibles work like a see saw – higher premiums means a lower deductible; lower premiums means a higher deductible.
What Does this Mean for You?
There are a few ways to think about this. If you want to pay less each month, choose a plan with a lower premium. But these will generally have higher deductibles. Don’t forget, if you choose a plan with a high deductible, you’ll pay the full cost of your care up-front before your insurance kicks in. Either way, you’re paying both your premium and deductible.
Tip: If you have a large deductible and a lower premium, it’s a good idea to set aside some money to cover any healthcare expenses you’ll have during the year. Also, keep track of how much of your deductible you’ve spent so you don’t end up paying twice.
High or Low Deductible
On top of premiums, most plans usually have a deductible. This works just like your car insurance deductible. It’s the amount of money you have to pay out-of-pocket before your health insurance kicks in.
High deductible plans are becoming very popular. In fact, in 2006, only 10% of health insurance plans had a deductible of $1000 or greater. Today, over 66% of plans have a deductible greater than $1000.
What Does this Mean for You?
High deductible plans can be good because they can save you money on your premium. What many people don’t realize is that just like car insurance, your whole health insurance deductible has to be paid before your insurance kicks in. Get tips about what to do if you have to pay a large deductible up front.
Deductible Limits under the Affordable Care Act
The Affordable Care Act put limits on how high deductibles and other out-of-pocket expenses can be to still be considered affordable, but this part of the law has been delayed until 2015. Read more about this Obamacare delay on Forbes.
If you often travel domestically, make sure you choose a plan that will cover you if you need healthcare coverage in another state or region (think, sprained ankle on a vacation, or strep throat on a business trip). Since your plan has networks, you may not be covered if you travel to another state and need care. Emergency care is always covered anywhere in the US. Read more about out-of-network care.
Foreign travel (outside of the US) is never covered; you would have to get that through a separate Travel Insurance policy that offers health coverage.
Like we touched on a little bit earlier, every health insurance plan has a network. A network is simply a group of hospitals, doctors, pharmacies, MRI centers, etc. that your insurance company has contracted with to provide you care. If you go out of network for care, you’re going to pay a lot more!
If you like your doctors, or moms, maybe you always deliver your babies at a specific hospital – check to make sure the plans you’re looking at have a network that includes these doctors or hospitals.
PPO vs HMO
We can’t talk about networks without briefly talking about HMOs and PPOs. These two different types of health insurance plans – HMO (Health Maintenance Organizations) and PPO (Preferred Provider Organizations) – have very different rules about networks.
You can read all about PPOs and more about HMOs, but to give it to you briefly, HMOs tend to have a narrower network (meaning you have fewer choices) and PPOs have a larger network (meaning you have more choices).
Other Benefit Features
When you’re looking at health insurance plans, you may have noticed they offer things like an FSA, HSA, or HRA. These can all be great tools to help you manage your healthcare costs. Last November, we wrote an entire blog topic on the difference between HRAs, HSAs, and FSAs if you’re interested in reading more.
For now, here’s a summary of each:
- FSA (Flexible Spending Account): A healthcare spending account that you put money into before taxes are taken out of your paycheck. You determine your set amount for the year and make deductions throughout the year.
- Health Reimbursement Account (HRA): An account that your employer funds on your behalf to pay for medical expenses. They will determine how much they will contribute and put funds in as you need medical care.
- Health Savings Account (HSA): A savings account that you, a family member, or your employer put money into to pay for eligible healthcare expenses. This money is not taxed when you deposit it and can be carried over to the next year if you don’t use it, unlike an FSA.
We tried to cover the main areas to consider when choosing a health insurance plan, but there are hundreds of different plan options and combinations and it can get overwhelming, to say the least.
If you have a question we didn’t answer above, please comment below and we’ll try to help!