Health Insurance Enrollment: Take It Seriously

If the thought of attending your company’s annual benefits renewal meeting makes you contemplate catching a nap during the inevitable slideshow or skipping it entirely, do yourself a favor and reconsider. Tempting as these choices may be in the short-term, they could cost you thousands of dollars and endless hours of work and worry.

If you are fortunate enough to have company sponsored health insurance, walk into your open enrollment meeting armed with as much knowledge as possible so you are well-equipped to make good decisions. A basic understanding of the most common types of health insurance and their various advantages and disadvantages will help you make smart choices for your unique personal situation. With very limited exceptions, open enrollment is the only occasion you’ll have to change your health care coverage, so it’s important to get it right.

Terminology

First, let’s start with some terms that are common to many - but not all - health insurance plans:

Deductible: The portion of any charges you pay before the insurance company begins to pay. The deductible can range from zero dollars to several thousand dollars. Many plans waive the deductible for office visits and charge office visit copays instead.

Copay: A set amount you pay each time you use the insurance plan. Typically, there are different copay amounts for hospital visits and physician office visits (in the case of HMOs, there may be different copays for visits to your primary care physician versus a specialist).

Coinsurance: After you meet the deductible, you enter into a period of coinsurance where both you and your health plan share costs up to a specific dollar limit.

Network: A group of doctors, hospitals, laboratories and other health care providers that have a relationship with the insurance company and established pricing for their services. This pricing structure enables the insurance company to manage costs. For example, when you use an in-network provider, you may pay 20% of the costs and your insurance pays the remaining 80%, whereas you may be responsible for 40% of the costs and your insurance pays just 60% when you use a non-network provider.

Alphabet soup: HMO, PPO, HSA

Following is a brief overview of the five main types of health insurance. Bear in mind that the size and financial situation of each employer largely determine what types of insurance it can offer. Bigger companies often are able to offer more choices than smaller companies. Within that framework, companies generally work closely with an insurance broker to determine the copays, deductibles and coinsurance levels that meet their needs. In addition, more forward-thinking companies are making health insurance benefits available to same-sex partners, so be sure to check to see if that is an option.

HMOs (Health Maintenance Organizations) are usually the least expensive health insurance option, offering broad coverage with the lowest out-of-pocket costs. However, they are also the least flexible plans, requiring you to use the providers within the plan network for nearly all of your covered medical services. Additionally, you must see your in-network primary care physician for each referral to a specialist. Possible exceptions may be emergency treatment when you are out of the coverage area and some procedures that are not offered by the network providers. Because your choices in providers are limited, check to see if your favorite doctors are part of the plan.

PPOs (Preferred Provider Organizations) offer a great deal of choice in selecting physicians and hospitals. Like HMOs, PPOs contain a network of providers, but you also have the option to use any provider you wish. Because of this wide flexibility, a PPO can be an excellent choice if you frequently need the care of a medical specialist. The advantage to using the “preferred provider” network is cost-savings to both you and to the health plan. Costs for non-network providers are higher than for network providers. Because the plan has agreed-upon pricing within its network, it passes along some of the cost-savings to you. Even if you stay within the network, though, you will likely encounter deductibles, coinsurance and copays.

HSAs (Health Savings Accounts), relative newcomers to the health insurance market, are a Congressionally mandated response to the annual double-digit increases in health care premium costs repeatedly seen over the last decade. HSAs are intended to make people more responsible for their health care costs - to make wiser choices in when, where and who to see for their medical care. With an HSA, your pre-tax dollars go into a special account ear-marked for medical and related expenses. You typically can pay into the account each year an amount equal to your deductible. One advantage of these accounts is that the funds can be used for medical services that may not be covered by normal health insurance. HSAs are typically tied to a high-deductible indemnity plan (see below) in which coverage remains the same for any doctor you see. Because the insurance company does not negotiate cost-savings with the providers, charges can be significantly higher. These plans can work well for disciplined savers; the downside is that if you don’t save enough money in your account to fund the higher deductible, you will have to come up with the difference. Your HSA contributions belong to you: after retirement, you can take out unused dollars without paying a tax penalty.

Indemnity plans were the original type of health insurance offered. There are only deductibles and coinsurance involved with an indemnity plan; networks and copays don’t apply. Thus, if you have a $250 deductible with a 70/30 split and a cap of $2000, you pay the first $250 in expenses and then enter the coinsurance period where you pay 30% of the charges until you reach $2000. After that, the insurance company pays all charges up to the limit of the policy. Again, the disadvantage of an indemnity plan is that no services costs are negotiated by the insurance company, so charges can be much higher than with health plans involving a network of providers.

POS (Point of Service) plans are essentially a combination of an HMO and a PPO. Like an HMO, you designate a primary care provider but you can also use non-network providers if you choose. However, unless your primary care doctor refers you to a specific non-network provider, you will pay most of the cost of the non-network services.

Since no single health plan is right for everyone, doing your homework upfront when selecting your health insurance coverage pays off.

For tips on how to pick the right plan based on your priorities, visit www.planforyourhealth.com.

Put Your Pre-Tax Dollars to Work With an FSA

Even if your company doesn’t have a great benefits package, most companies offer the opportunity to put pre-tax dollars into a flexible spending account (FSA). Consider making at least some contribution every paycheck, which can help cover out-of-pocket medical costs such as prescriptions, co-pays and deductibles, as well as services like eyeglasses/contacts and visits to alternative medicine practitioners. (FSA dollars can also be used for dependent-care expenses.) Be sure to check the details of your specific plan and remember that any unused dollars are forfeited at the end of the plan year.

Gary Bucher, MD is the founder and medical director of Radius Health, a personalized men's health medical practice in Chicago. A board-certified physician, Gary has special interests in the prevention and treatment of heart disease, cholesterol problems, diabetes, HIV/AIDS, hormone replacement, weight issues, nutrition and exercise. Formerly the medical director at a Phoenix-based wellness company, he also holds fellowship degrees from the American Academy of Family Physicians and the American College of Nutrition. He is a member of medical societies and organizations at the local, state and national levels. He can be e-mailed at GaryBucherMD@RadiusHealth.net.