Health insurance is the most valued of employee benefits. Studies find we will even consider switching jobs for better coverage. But despite our priority on health insurance, do we really understand what we are buying? Generally, no.
Health Insurance Selection
Health insurance selection may be one of the most expensive, confusing benefit decisions we make, and one of the most important. Employers increasingly support open enrollment periods with materials and decision tools, yet by design are only solving today’s problem. With limited information and a narrow mandate, employers cannot take the broader, longer view to encompass employee health, wealth and goals.
In this post we’ll tell you what to look for when selecting health insurance, as well as how to consider today’s health plan options with more in mind.
What to look for:
- In/Out of Network Coverage. Which doctors, hospital networks and other service providers are provided by your plan? Do you have out of network options? Do your current providers participate in the plan you are considering? Health care providers periodically reassess insurance participation by carrier and plan, so you may need to call your provider directly to find out whether they do and will continue to participate. Be sure to confirm the providers you want participate with next year’s options.
- No cost services. Many health plans offer free access to preventative care like annual wellness visits, immunizations, screening services and more. The specific options may vary year to year, so consider reviewing even if you intend to keep your current option. And for goodness sakes, use the “free” services. You are (indirectly) paying for them.
- Prescription drug plans. Of all the recent cost increases in health care, prescription drugs receive perhaps the most attention. Health insurance providers and employers are understandably seeking to limit double-digit inflation in drug costs. As a result, if you are on long-term medications make sure your particular drug is included in the coverage list, called the drug formulary. Depending on your plan specifics you may unknowingly be adding costs to next year’s total health care bill.
- Monthly premiums, deductibles, co-pays. Most of us focus on monthly premiums, but this can be deceiving. Actual costs will depend on a number of variables, including frequency and types of usage. Fortunately, many employers offer decision calculators to help explain some of these details, and provide examples. Even so, estimating future health care costs is an inexact science. Use these calculators for guidance, but as they say in advertisements, “actual results may vary.”
- Access to HSAs, including employer incentive contributions. While nearly all plans have similar sounding features, one of the biggest variables nowadays is whether the plan is an “HSA-qualified” High Deductible Health Plan (HDHP). The health insurance industry has improved nomenclature in the last few years, so identifying which options qualify for access to an HSA is easier. Even still, be sure to confirm with your HR department which plan enables HSA contributions. Furthermore, many employers will make contributions to plans as well to entice employee participation. Ask your employer if they offer incentives.
What to consider:
- Your personal health history. Only you will know what combination of health care providers and networks work best for your situation. You may have a trusted relationship you wish to maintain, in which case that may be a priority over costs. Others may want a certain medication and prescription drug brand to be covered. Most of us, however, tend to use the health care system inconsistently and not retain our records when we do. As a result we have less “data” to guide our decisions.
- Expected future costs, short-term and long-term. Similar to your history, do you expect significant costs next year or perhaps five years down the road? Family planning and elective surgeries can heavily influence the choice of plan. If you are uncertain and generally use the system infrequently, then you should consider less expensive monthly premiums of HSA-qualified plans, while redirecting a portion of the monthly savings into the HSA. HSAs will enable you to save for healthcare expenses from year to year, as well as far off into the future, and can be part of a broader financial plan.
- Total asset picture. An accident or illness could generate thousands of dollars in expenses. Do you have other financial assets? Do you have an emergency savings fund established? Most health insurance plans have maximum out-of-pocket costs that will cap your total liability for unseen expenses, you will want to review other sources of cash, like a checking account, emergency savings accounts, investment brokerage accounts or other funds for these unplanned events. When it comes to insurance of all types (home, auto, life, health, etc.), a higher total asset base provides flexibility in choosing a higher deductible/lower premium plan to save on premiums.
- Spouse coverage options. Look at other options available to you through your spouse or significant other. Often family plans cost less than two individual plans. Many employers make individual plans free but charge for individual plus spouse, or otherwise assess a fee if the spouse is eligible for coverage through their employer. Check plan details and coverage options. You may collectively decide one has better plan options and is worth the additional expense.
- Healthcare engagement. How much do you like to shop around? Are you open to new providers and experiences in your health care network? Is “becoming healthy” on your prospective New Year’s resolution list? Some plans and networks are better suited to “consumerism” than others. In addition, while the costs of healthcare continue to skyrocket, other consumer choices have emerged, like direct purchasing of X-rays, MRIs and blood testing, often times from the same labs contracted by your health insurance provider. These consumer-friendly prices may even be better than what is available in network, in which case you should take that into consideration when looking at the total costs.
While the healthcare system can feel confusing, open enrollment can be a perfect time to reflect on what health care insurance products you are purchasing and why. The path to becoming a better health care consumer is knowledge. Be sure to take that first step.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.