Choosing the Best Type of Health Plan for Your Budget
Nationwide, many businesses are heading into their fall health plan enrollment period, when employees have the opportunity to choose a new health insurance plan for the coming year. But many people still find themselves confused when it comes to the nitty-gritty of choosing the best health coverage.
"Health insurance is a hot-button issue because of the rising costs, the personal impact health has on our quality of life and the confusing alphabet soup of acronyms the industry uses," says Brad Stroh, co-CEO of Bills.com. "These three factors make it stressful for most of us to try to make decisions about our health insurance. Because of its impact, it is especially important for people to educate themselves about health care and make good choices for their well-being."
According to the Urban Institute, low-income adults who have employer-sponsored insurance but have high health costs spend 10 percent of their income on health costs above and beyond premiums. People without a group insurance policy spend twice as much.
Stroh offers the following 6 tips to select the right health insurance:
1. Do your homework.
Learn about different types of health insurance plans to find out what kind of coverage is best for you and your family. Ask your employer's human resources office for information, and search online – a good starting place is Bills.com's dedicated health insurance page.
2. Get with the plan.
About 60 percent of Americans are covered by employer-sponsored health plans. If you can join a group plan through your employer or your spouse's, you'll usually find it more affordable and easier than purchasing individual insurance. For some small companies, however, their groups become too expensive – for example, if several members have high-risk births or expensive treatments like cancer or transplants – and the employers turn to individual coverage. Still others don't qualify for group insurance and must choose individual insurance. Review all your options to find the best one.
3. Learn your ABCs.
There are four basic types of health insurance plans. In simple terms, this is what they are:
- HMO: The health maintenance organization, or HMO, usually charges lower monthly premiums in exchange for making a restricted network of providers available. In most communities, the networks include many of the physicians and hospitals you might choose anyway. These plans also cover preventive care such as annual checkups. If you go outside the network, though, you won't be covered.
- PPO: The preferred provider network, or PPO, also uses a network approach to limit costs – but out-of-network expenses are covered, albeit at a lower rate. Premiums are slightly higher than with an HMO, and preventive care might not be covered.
- FFS: Fee-for-service (FFS) coverage refers to "old-fashioned" health insurance where the doctor bills for individual services and the health insurance pays for services it has specified, at a pre-determined rate. You might have to pay out of pocket and be reimbursed. Some services will be covered, and others not at all, depending on the contract.
- HSA/MSA: Health savings accounts (HSAs) or medical savings accounts (MSAs) are newer options that accompany high-deductible plans. Patients pay lower premiums in exchange for higher deductibles. What services are covered will depend on the plan, but members will pay more out of pocket up to a point. Members can, however, save pre-tax dollars in an HSA, from which they can pay medical bills as they arise – or save the money for later if it's not needed.
4. Crunch the numbers.
Try to compare options, apples to apples, to understand what your costs could be. A pricier HMO plan that combines low co-payments, covered treatment for a child – from wellness to winter colds – and covered prescriptions might pay off. A high-deductible plan's lower premiums look good, but does your cash flow allow enough flexibility to pay for a $500 procedure if needed during the year? Estimate your anticipated costs over a full year with each health insurance option, including premiums, doctor's office visit co-payments, prescription costs, alternative care such as massage and chiropractic and other care, such as mental health care, that one plan might cover while another does not.
5. Consider quality.
Review health plan materials to see how many providers are board-certified and how many participating facilities are highly rated. Ask friends and family about their experiences with the insurer and its providers. If you have favorite physicians, make sure they are part of the health plan network. You can even call your physician's billing office and ask them which plans are known to be good about paying claims promptly – a trait that will help your bottom line and keep you in the billing office's good graces.
6. Take a psych test.
Consider how each plan will work with your own personality. Do you have the self-discipline to put funds in your HSA? If not, you might find yourself saddled with unanticipated bills for medical care. Would you feel more comfortable knowing everything is covered? Then you might be happy with a restricted network in exchange for the security of an HMO. Understanding your comfort level will help you make the right choice.