The most common question that I receive during open enrollment from employees or new hires is: “Which health plan do you recommend”? That is not an easy question to answer. It all depends on the needs of that individual.
The ability to choose from a variety of health plans is important. The three popular types are Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), and High Deductible Health Plans (HDHP). Most employers offer two to three medical coverage options.
Traditionally HMO plans are the more affordable option since they are in-network-only plans. Most HMO plans are now Open Access (OA), allowing the member to seek services directly from any in-network provider without a referral. Depending on your plan however, you may need to select a primary care physician (PCP). These plans also protect the member from balance billing and usually offer set co-payments for services. HMO networks have changed tremendously – since their reintroduction in the 70s and the mass adoption in the 90s – they are very comprehensive. If you find your providers are in the network, these plans offer the best value. Typically, HMO premiums are lower than PPO premiums.
Irrespective of your plan selection, the first step is to always verify that your providers are in-network since this will protect you with pre-negotiated fees and lower costs.
Most providers will list which insurance plans they accept on their website, if they don’t, you can always call them, or search for providers on the carrier website portal under “search for provider”. This will offer the most reliable and current information. It is highly advisable to check with your providers before making any decisions.
PPO plans offer more extensive national networks at a higher cost. The higher price, however, doesn’t always mean better benefits. With a PPO, you usually have more choices of doctors and hospitals than with an HMO. It is said that less than 5% of the population with a PPO use the out-of-network benefits because of the higher out-of-pocket cost. Insurers and plans differ in their network coverage, so it is recommended that you research each plan’s network before deciding.
HDHP offers lower premiums and tax-free advantages. On these plans, you must first meet your deductible before the benefit applies. However, you would be paying the negotiated contracted rate until you meet your deductible if you use in-network providers. As you use your plan, your deductible is reduced. These types of plans allow you to open a Health Savings Account (HSA). An HSA is a type of savings account that lets you set aside money pre-tax to pay for qualified medical expenses. You do not lose the money in your HSA or the interest it accumulates. It is your money, even if you separate from your employer. You can contribute up to $3,650 for an individual or $7,300 for family coverage. However, if you take money out for other purposes, you will have to pay income taxes on the withdrawal plus a 20% penalty.
If you are currently shopping for insurance, consider these factors:
- Annual Deductible – The amount you pay for covered healthcare services before your insurance plan starts to pay. The deductible is not applicable for services with co-payments. For services where the deductible applies, you will pay the pre-negotiated amount for the service. The amount you pay will reduce your deductible and get added to your Out-of-Pocket bucket. Many plans have two deductibles, a single and a family deductible. The single deductible is embedded in the family one, so no one family member can contribute more than the single amount toward the family deductible. Once a family member meets their deductible, they will start to receive after-deductible benefits.
- Out-Of-Pocket Maximum – The highest amount paid for covered services during a benefit period of one year. This includes deductibles, co-payments, and co-insurance. Since plans are unlimited, this amount is your maximum financial exposure on any given year, regardless of your medical expenses.
- Co-insurance – The percentage of costs for a covered service that you pay after you’ve met your deductible. It is the splitting of the payment between the insured and the insurance carrier.
It is essential to evaluate and consider your specific needs and any upcoming procedures to determine the plan that is best suited for you. Make sure you don’t judge a plan by its price. There are many factors for cost, and the most common is the network, not necessarily the plan itself. Choosing between an HMO, PPO, or HDHP plan is not about which is better, but which is right for you!
By Ileana Miranda, Employee Benefits Consultant, Sapoznik Insurance, a World Company