When you’re company offers multiple benefit options, you’re sure to ask which one is the best for you. It can be difficult to figure out exactly which plan is the best for your individual situation since you probably don’t know what your needs will be over the next year. However, in general there are some main things that you should look for with every plan when making a decision.
The Type of Plan
The first thing that you should consider is the type of plan available. The main decision to make is usually between an HMO and a PPO. One is not considered better than the other, but they do have their individual pros and cons, as you can see below. You’ll want to pick the type of plan the best suits your preferences. HMOs are typically great because they are very structured and require very little work on your part in terms of making sure that you stay in network or in choosing doctors. PPOs are great choices because they are flexible and allow you to manage your care and if you are very cost sensitive, you are able to find way to lower your out of pocket costs by comparing facilities. However, it again comes down to personal preference. If you have the ability to choose one or the other, consider if you’d prefer a PPO or HMO style plan.
The second decision you may need to make is whether or not to choose a HSA or HRA eligible, High Deductible Health Plan (HDHP). These plans offer an HSA or HRA bank account to assist with the costs since they have a higher deductible than most other plans. An HRA account is funded by your employer so they are essentially providing you with extra money to be used towards your health care. At the end of the plan year, any unused dollars are given back to your employer and they contribute a new amount at the beginning of the new plan year. Your account essentially resets itself. An HSA account can be funded by you and/or your employer, depending on how they have it set up. Either way, HSA money is all pre-tax and isn’t taxed when you use it to buy qualified medical expenses, so it’s a beneficial account to have.
HRA and HSA account sound great, right? So why would you want or not want one of these plans? HRA and HSAs are only tied to HDHPs. These are plans that have higher than normal deductibles. That means that if you have a lot of medical expenses (ie: if you have a recurring health condition and have to visit the doctor regularly), you’ll have a much higher deductible to pay before your copay kicks in. If you have an HRA, that may work for you if your employer is fully funding the account. Your employer would be paying for the bill instead of you, making this a great option. However, if you have an HSA and you are funding the account out of your own pocket, a HDHP may not be the best option for you.
On the other hand, if you have minimal need to see a doctor and your costs are very low, a HDHP with an HRA may not be the best choice for you. Since the funds don’t roll over year over year, you wouldn’t be taking full advantage of the HRA plan. If you have a HDHP tied to an HSA account and you don’t have a lot of medical expenses, that’s another story. The money that your employer contributes to your HSA is yours and remains in that account until you use it. That means that if your employer is contributing $2000/year to your HSA, and you spend $0, you keep that $2000 when the plan year ends and when they put in another $2000, you then have $4000 in your account to use for your future health care. Now, these funds can only be used for medical expenses, but the older you get or if you plan to have children, these funds become more and more valuable to you.
If you’ve decided which type of plan you’re going to be on or your company only has one type of plan to choose from, the next thing you need to consider are the plan details. There are a few key sections that you can compare side by side to help you decide on the best plan for you.
Cost/Premium - The first thing that you need to consider is “how much will this cost me per paycheck?” Some of the options may be too expensive for you to consider, so you can cross these off your list immediately. Many people choose their plan based solely off of this, which I don’t recommend. You get what you pay for, so the lower the cost of the plan the more it will cost you if you need medical care. The more you pay for your premium, the less you’ll pay for your medical care. However, some of the Platinum and other high level plans can simply be too expensive so consider this option first.
Deductible - If you are comparing plan deductibles, you want one with the lowest deductible possible. This is the second thing that we recommend that you look at since it’s the amount that you pay out of your pocket before your plan starts to pay for your care. For example, if you have a plan with a $2000 deductible, you have to pay 100% of your medical bill until you’ve spent $2000 in a single calendar year. After that, your coinsurance or copay kicks in. Keep in mind that the only way this does not apply is if in the plan information it says “deductible waived.” This means that the deductible does not apply to that particular service and is usually the case for services like PCP office visits.
Out of Pocket Max - This is the maximum that you will spend out of your pocket on health care in a single calendar year. This means that you want the lowest out of pocket maximum that you can. The reason this is important is because it’s your safety net. Hopefully you won’t reach this amount, but if something terrible happens like you get in a car accident and are in the hospital for 2 weeks, the most you will pay for your care is this amount. The money that you pay for your deductible usually goes towards your out of pocket max as well, so if you reach your $2000 deductible and your max is $5000, you should only pay $3000 more for that year. After you reach that amount, the plan pays 100% for all of your care.
Inpatient & Outpatient - Inpatient is any procedure that requires you to spend the night while outpatient means that you are able to leave afterwards. For example, a knee surgery that starts at 9 am and allows you to leave that afternoon would be outpatient while a back surgery that requires you to spend multiple nights in the facility is considered to be inpatient. If you have a surgery coming up, you’ll want to pay attention to how much inpatient or outpatient procedures are covered. You’ll also want to consider whether or not it requires you to meet the deductible or if the deductible is waived.
Emergency Room - Since your insurance is your safety net, it’s good to know how much the ER would cost you if something happened. Some plans list it as a coinsurance percentage (ie: 20%) whereas some are a flat dollar amount copay (ie: $200) and some are a mix of the two (ie: $150 copay per admission + 20%). The ER can get very expensive and it’s important to know that if you go in at 11:30 pm and are released at 12:05, you do get charged for an overnight visit, which is FAR more expensive. To help with this cost, I also encourage you to look for the urgent care costs. Those are typically less expensive and a good option if your visit isn’t considered a risk to “Life or Limb.”
Making Your Decision
Choosing a plan can be difficult, especially if there are a lot of options. To make things simple, try making a chart. List the plan name, the cost to you per paycheck, and any important details (like the deductible) in a spreadsheet so that you can compare them side by side. See the image below to see an example. From there, you will be able to really see what will fit your lifestyle better. If you have already done this and still feel lost, you can always contact your broker or HR team for additional questions.