It’s September and in the benefits world, this is known as AE or Annual Enrollment. To roll with the theme, today, we will talk about health insurance and how to choose what’s right for you. If you have multiple plans to choose from, putting some thought into potentially changing your health insurance for 2018 is time well spent. When I got my job at Cal State, I was presented with 12 health plans to choose from. No one needs 12 options, I promise you. But I take these things seriously, so 10 hours later, I was still choosing my plan. How do you make your choice?
The major plans are HMOs, PPOs and HDHPs. How is that for acronyms? What is the difference? Pretty much what doctor you can see and how/how much you pay for it. Here is a great primer video to get you the basics if you are not 100% sure how the types of plans differ: https://www.youtube.com/watch?v=coSyGQI28eM
This is not easy stuff so here are my top 5 things to think about when you are selecting your employer health insurance for the upcoming year.
- Consider how often you go to the doctor. And how about those prescriptions you need?
If your doctor interactions are infrequent, you don’t have little kids who require lots of visits, and are overall young and healthy, a high deductible plan may be just what you need. If you go a lot, a less expensive plan might be a better match. In the end, you do not want to think twice about going to the doctor when you are in pain for an illness you have because it may cost you $300 just to see a physician.
In addition to your doctor and medical needs, think about the prescriptions you need and check the costs of those. If your blood pressure medication is a must and one plan covers it while another one does not… you know where this is going.
- Do you have one doctor you absolutey must see?
I love my Kaiser HMO and I don’t care that I need to go there for everything because there is one major hospital right across the street from my house. My attitude towards doctors also runs along the lines of: these people are professionals, they went to medical school and I did not, they know more than me so I am going to trust them and go with the most convenient one. This is not optimal if you live really far away from the HMO facility, can’t find a doctor you like, or just don’t like restrictions. In that case, a PPO might work much better.
A friend of mine needs to go to a specific doctor because she is diabetic (and not the type of diabetes you can control) so to her, a PPO where she can see a specific doctor is a nonnegotiable. If you are in a more restrictive situation, you would want to call the doctor’s office and run the plan you are considering by that doctor to see if it is accepted. You do not want to find out after you switched.
- What is your cash access/availability in case of a big thing happening?
I love HDHP plans for many reasons but if something happened and you had to come up with $10k out of pocket (or whatever the max is) could you do that? Those plans are cheap and very functional if you don’t go to the doctor much. They are intended to protect you from going into bankruptcy when something like a heart attack happens. But those plans are not ideal for broken legs or appendicitis. If you can’t come up with what you would owe out of pocket and there is no way you could access the cash, a high deductible plan is probably not something you want to get into.
However, if you can cover the worst case possible scenario, these plans are great for young and healthy people. There is a Health Savings Account (HSA) attached to them and any money you do not use for medical expenses this year rolls into next year. If you end up being healthy your whole life, you also end up with a big pile of extra money for your retirement that was stashed away tax free.
- What is your cash flow on a monthly basis?
The premiums will differ based on the coverage. The more coverage and the lower your costs when you use the doctor, the more you have to pay on a monthly basis. You might have a plan that is amazing and covers everything but it is $800 per month. If that’s going to stop you from paying your mortgage or accomplishing other goals, maybe it is not the best for you. An alternative that costs $300 per month and puts you in charge of 30% of your costs might be a better match.
- Do you have anything major that will come up in the next year you know about?
It is OK to change plans. It is not a once in a lifetime decision. Yes, it is a pain as you might have to change doctors but it may be worth it. No one knows when they have an accident but there are things you could be planning for. For example, let’s say you want to have a baby. Looking into the costs and options for labor and delivery should be high on your priority list because the plan you choose may make a $3-5k difference in how much you end up paying for that baby. Checking the infertility treatment options also goes hand in hand with that. You do not want to be in a plan that coves 0% if there is another one that covers 50%. If you are planning on major surgery, pregnancy, or big procedures in the upcoming year, check what is covered for that specific thing.
In addition to the factors mentioned above, here are three other things I would like you to consider.
How about that spouse and his/her plan, assuming you have one and they have options too? I would treat this as an extension of your plan. Put your spouse’s/partner’s options right next to yours and look at all of them at once. There are situations where it makes sense to go with one partner over the other and there are situations where you might be better off on separate plans. I had a client who had great medical options and so did his wife. They decided to go with their separate plans instead of consolidating. A look at their plans and some changes moved them all to her plan, got him $250 per month in cash from the employer (for bypassing the insurance) and preserved all their benefits and doctors at no additional cost. If you can do better by comparing all the plans, do it.
I am actually thinking of changing my job, anything else you have to add? In addition to everything I mentioned above, also think about the monthly premiums. Sometimes we get so excited about the salary increase, we do not look at the benefits but an increase of $5k per year is a bad deal if you need to pay an extra $500 per month in medical benefits for your family. The benefits are an extension of your salary and should be treated as such.
Do you know what your plan’s life events are? You can change your medical plan when you have a qualified life event. Do you know what those are for you? If not, call HR and ask for a list. Having a baby and getting married or divorced are typical but you could also have lesser known ones like moving. Knowing in advance when you can change your plan if needed could save you so much money when you are stuck mid-year with a plan that no longer works for you.
Finally, here is a blog post Matt Becker wrote about his own situation a few years ago which is great if you need to see a detailed case study: https://momanddadmoney.com/choosing-a-health-insurance-plan/
And remember, just do your best. There is always next year or some life event and you can change your plan again. However, I would encourage you to spend some time on the plan rather than ask your coworker what she signed up for. Her needs might be very different from yours and you do not want Lizzy, your cubicle mate, to decide your medical costs.