Health insurance is complicated. Annual open enrollment can cause anxiety and confusion as you select a plan that’s best for your situation. See below for our top tips when selecting health insurance coverage.
1) Know the Lingo
Having the knowledge of health insurance terms can help ensure you choose a plan that adequately protects you, your family, and your assets. Here are some of the key terms to be clear on:
- Premium: The monthly payment you pay for health insurance coverage.
- Deductible: The annual amount you pay before the plan begins to share the cost.
- Coinsurance: The portion of the medical cost you pay AFTER you have met your deductible. (i.e. you pay 20%, the insurance company pays 80% until you hit your out-of-packet max.)
- Out-of-Pocket-Max: The max you pay for covered medical expenses in a year.
- Copay (not always applicable): A flat fee you pay for outpatient visits and prescriptions. This usually does not count towards your deductible.
- Network Discount: When you use a network provider, you get a discount even before you meet your deductible.
Common mistake: confusing the deductible with the out-of-pocket max. Just because you have met your deductible doesn’t mean you have met the max you will pay for care in a year.
2) Know when to select a high vs. low deductible plan
A high deductible plan means you pay less in your monthly premium but you pay more towards your deductible before coinsurance kicks-in. This plan is ideal for those who are generally healthy and don’t foresee large medical expenses in the upcoming year. Most of these plans allow a Health Savings Account (HSA). Low deductible plans do not offer HSAs.
Common mistake: not understanding the value of a HSA. This is a rare instance where you have a triple tax advantaged savings account. Deposits are made pre-tax*, withdrawals for medical/dental/vision expenses are tax-free, and the value in the account grows tax-free. Think of it like a medical IRA. HSAs are popular in the physician community. The unused funds in the account carry over year-to-year. Many find this allows to save for medical expenses in retirement.
A low deductible plan means you pay more in your monthly premium but you pay less towards your deductible before coinsurance kicks-in. This plan is ideal for those expecting significant medical expenses in the upcoming year. This could include those expecting a child, with chronic health issues, scheduling reparative surgery, or who have a family member playing a high injury sport.
It’s best to compare the annual premium and the deductible/out-of-pocket max to determine which option (given your specific scenario) will likely result in paying less through the year.
3) Recognize the differences of HMO vs. PPO vs. EPO
HMO plans typically cost less but they are more restrictive on how you get your care. You are required to have a PCP, the physician network is smaller, you must get referrals to see specialists, and you can only go to out-of-network facilities if it is an emergency.
PPO plans cost more but don’t require a PCP or referrals to see specialists. The network is usually larger and you can choose facilities that are out-of-network (you will just pay more).
EMO plans are newer. They are similar to HMO plans but they don’t require referrals to see a specialist.
4) Understand the plan options for you & your family
Common mistake: worrying about not getting coverage because of pre-existing conditions. Both group AND individual ACA compliant plans do not penalize you for pre-existing conditions.
If you are a W2 employee, your company may offer a group plan you can join. Work with your HR department to make sure you are clear on the differences of the available plans. Then select a plan based on what kind of expenses you are expecting for the year. Keep in mind you can choose a different plan in the next open enrollment period for the following year should your situation change.
If you are an independent contractor, you will need to secure an individual plan. The rates vary based on age, geography and number of family members on the plan. To search the plans available in your area you can go to:
- Individual carriers (i.e. Cigna, Blue Cross of Blue Shield, etc.)
- A broker
Common mistake: assuming there is a fee associated with consulting with a broker. It shouldn’t cost you any more money to work with a broker than it would if you went the DIY route.
Need someone to help evaluating your health insurance coverage options? We can help. At FDI, we never charge for education and second opinions. Call any time or make an appointment.
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*In 2020 single individuals can contribute up to $3,550 annually, $7,100 for families, and an additional $1,000 for those age 55 and older.