[Video] Open Enrollment- Deciding between Medical Insurance Plans
It’s open Enrollment season again and time for those big bundles of paperwork with pages and terms that confuse more than they clarify. Now I am a financial nerd and I love going through information, but I recognize that not everyone does. That said, I do think it’s important that we touch on and review these benefits available to you specifically today. We are going to be talking about health insurance because making the right choice here could save you tens of thousands of dollars for you and your family. As we are going through health insurance, here are five things I want you to be mindful of when reviewing your employer health options.
The premium is really what you are going to be paying for this coverage. Now it may be expressed in the benefit booklet as a monthly or even an annual amount. Typically you are going to have to do some math to work out and see what this is going to cost you on a per pay period basis. All that to say, this is an amount that you are going to have to pay each and every month regardless of whether you go to the doctor or not.
The second thing we want to discuss is your deductible. Your deductible is how much you have to pay before the insurance company starts kicking in their share. Typically this deductible can range from a couple hundred dollars to a few thousand. While you may have a high deductible plan this does not necessarily mean you have a bad plan, typically the higher your deductible is the lower your premium will be as well. They are inversely related. Now if you have a low deductible it’s very common you have a high premium as well. Again not always but it’s typically what we see.
This is when we are start to get “cozy”, pardon the joke, with the insurance company. Every medical expense that we have after our deductible we have to start paying alongside the insurance company. Whether that’s going to the doctor and we have a copay of $20 or $50 for that visit or we have a co-insurance amount where we are responsible for 20% of that visit and the insurance company is going to cover the other 80%. Either way this copay or coinsurance is laid out in the benefit booklet and it’s important to know what both you and the insurance company are paying. Then you will know how much of every expense you are going to be responsible for.
4. Out-of-Pocket Maximums
Out-of-Pocket maximums are essentially how much you would be responsible for if you have a really catastrophic event or a series of medical expenses throughout the year, excluding the premium amount above. This out-of-pocket typically does include your deductibles, copays, and coinsurance. As an example: if your out-of-pocket maximum is $10,000 and you have medical expenses that cost $15,000 the most you would pay throughout the year would be that $10,000. Think of your out-of-pocket maximum as a ceiling for how much you can pay throughout the year.
5. Accounts and Assistance
With each of your health plans you typically have available some benefit whether a health saving account, maybe a deductible reimbursement account, or maybe a flexible savings account for healthcare. It’s important to know which plans offer which accounts, because coordinating the benefits and coordinating your contribution to those accounts is really important to make sure you’re getting the best bang for your buck in selecting your plan.
When we talk about assistance, typically we see assistance come in with higher deductible health plans that coordinate with a health savings account (HSA). Keep this in mind because if you are in a higher deductible health plan you are taking on more of the risk as the insured, even if the premium is going to be less. Since your employer is saving on that premium (remember they pay a portion of that premium as well) they are willing to kick in some money for you into maybe an HSA so that you can actually start saving up and building up a nest egg for your future health expenses.
We like to see clients using HSAs more than we do FSAs because HSAs allow you to carry over funds from year to year for future medical expenses as they arise. FSAs are more restricted because you do need to make sure you are using those funds within a short time frame. In the past you only had a year, but some of the restrictions have been stretched out further. We still do encourage you to use an HSA account when they are available.
Each of these variables is a lever that can influence which plan would be the best plan for you. We typically walk through with clients all the available plans their employer offers and go through each of these variables to determine if you expect X number of medical expenses throughout the year or you have a catastrophic year where something significant happens. It’s important to understand your potential liability from a medical cost standpoint on all of those plans and make a determination of which plan is best. If you would like some help going through your choices and what is best for you, let us know we would be happy to help!