If your employer is offering you healthcare, congratulations!  Hopefully that means they’re also sharing some of the cost.  If they’re not sharing some of the cost, consider the plans they’re offering in conjunction with plans offered on Healthcare.gov.  Here, you might be able to find the same or better plans for cheaper as you might also qualify for a tax credit.  For a guide to buying healthcare as an individual check out our guide here.

Employee Healthcare Guide

In this article we’re going to tackle how to choose between the plans offered by your employer.

Step 1: Determine Your Healthcare Needs

Before you can compare plans’ benefits and cost, you need to know how you’ll be using the healthcare coverage you buy.  Are you relatively healthy, going to the doctor once a year for a physical or pap smear?  Or do you or a family member have a condition that needs active medical management?

To get an idea of your health needs, think back to the medical services you and your family have used in the last two years.  Then consider any life changes you’ve had recently or changes you anticipate in the next year, e.g. a pregnancy or childbirth, or a procedure you need or would like to have.

Then determine your budget.  If your employer is only covering part of your monthly premium, as opposed to the entire cost, you’ll also need to know what can you afford to pay each month.

Step 2: Research Your Options

Now that you have an idea of what you need, research your options.  The five most common types of plans are HMO, PPO, EPO, POS and HDHPs.

• HMO (Health Maintenance Organization) is a health insurance plan that requires you only see doctors employed within its organization. You must have a referral from a primary care provider in order to see a specialist or have a procedure and that primary care doctor manages your care. You can only see a doctor outside the HMO in the event of an emergency.  The out-of-pocket costs are typically lower with an HMO than other types of plans, but your choices are limited.

• PPO (Preferred Provider Organization) is a health insurance plan that allows you to see any doctor you’d like as long as they accept your insurance. You don’t need a referral to see a specialist or to have a procedure.  You will typically pay more for this type of insurance, but you have greater freedom of choice.

• EPO (Exclusive Provider Organization) is a health insurance plan that requires you to see in-network healthcare providers, except in the case of an emergency, but does not require referrals for specialists or procedures. These plans typically have lower out-of-pocket costs but less choice in terms of the doctors you can see.

• POS (Point of Service Plan) is a healthcare plan that doesn’t require in-network care but care outside its network is typically more expensive and requires a referral. As with an HMO, your primary care doctor with a POS plan manages your healthcare.

• HDHP with HSA (High Deductible Health Plan with Health Savings Account) is a plan that typically has the lowest monthly premium but the highest total out-of-pocket costs of any of the health plans. To offset the high deductible, you can simultaneously sign up for an HSA.  An HSA is a pre-tax savings account you can use on all health-related costs including co-pays, prescription drugs and surgery.

Compare the benefits covered by each plan and the total costs (premiums, co-pays, prescriptions, deductibles, etc.).  Pay attention to how your medical needs are covered within each plan.  One plan might look cheaper at first-glance, but when you consider what it covers, and how it covers those benefits, you might be better off choosing a plan with a higher premium and more comprehensive coverage.

Step 3: Choose a Plan

You want to choose a health plan you can afford and one that covers you and your family’s medical needs.  Your plan must also fit within your lifestyle.  If you can’t handle managing you and your family’s medical care, having a primary care provider do that for you might be the best option.  If choice is paramount, then you might want to choose a PPO.

Healthcare is one of the most personal choices you can make.  So do your research, be honest about your needs and your means to pay for those needs, and then choose the plan that will best serve you.