The right health insurance plan can both save you thousands of dollars and keep you from having to skimp on care when you're sick. Most employees can sign up for health insurance through work. Those who don't have an employer-based option can find plans through affinity groups like unions and membership associations for artists or the self-employed for example or choose to purchase an individual or family health plan. Here's how to compare your options.
Find your health care style. Choosing between three major types of health plans comes down to personal preferences, and choosing a plan accordingly can be cheaper in the long run. To help choose what level of coverage you need, see what you might spend on various health procedures using LIFE Foundation's health care cost estimator.
- Go HMO. Health Maintenance Organization (HMO) plans require patients to choose an in-network primary care physician and cover the care that doctor recommends. HMOs also have low co-pays and fewer bills later. But seeing a specialist requires a referral, which can take time.
- Go PPO. Preferred Provider Organization (PPO) plans cover some of the costs for seeing out-of-network doctors. Experts say that consumers choose this plan for the added flexibility of seeing a variety of specialists, but may also face paperwork and unreimbursed charges when venturing out of the network. Health plan web sites often host tools to help you find doctors within the network.
- Go POS. Think of a Point of Service (POS) health plan as a hybrid of an HMO and PPO. Inside the network, you'll get the highly managed HMO care you'll designate a primary care physician, get referrals to see other doctors and enjoy simplicity and less paperwork. But you'll also have the freedom to see doctors outside the network as you would with a PPO. Of course, your premiums will be somewhere between the other plans' costs.
Consider when and how much you want to pay. The more you pay in premiums, the less you'll pay in co-pays and vice versa.
- Compare the deductible options. Pay attention to the deductible, the amount you'll be responsible for paying before the plan will cover costs. Even if your premiums are low, high deductibles of several thousand dollars can be difficult to manage in the event you require a lot of unexpected care.
- High deductible plans. High-deductible, high-co-pay plans siphon less from your paycheck each month, but also require higher payments when you visit the doctor. Experts recommend finding a balance on the edge of your comfort level; patients with serious health conditions and frequent doctor's visits might be better off in a plan with higher monthly premiums, and less per-visit fees. Use SmartMoney's health plan worksheet to figure out which plan will save you more.
Make it back in taxes. Specialty providers like psychotherapists and chiropractors aren't usually covered and can be expensive, but you may be able to offset the cost with tax savings.
- Flexible Spending Account. You can contribute parts of your pre-tax paycheck to a Flexible Spending Account, or FSA, which can then be used to cover additional unreimbursed care costs. The money you contribute to this fund expires at the end of the year, so you'll forfeit the income if you don't spend it on care. Estimate your potential tax savings from your FSA contributions with the savings calculator on FSAFeds.com.
- Health Savings Account. Similar to an FSA, a Health Savings Account (HSA) will allow you to deposit a certain amount of pre-tax income into a fund that you can spend on health care costs. The account doesn't expire, so you can roll over your savings year after year and use the money when you retire. HSAs are designed for healthy people who want to save money by paying lower premiums and banking what they don't spend on medical services, but you can only enroll in a HSA if your regular health plan has a high deductible (over $1200 for individuals and $2400 for families) and meets other criteria. Find out if your health plan meets the criteria for aHSA at the IRS.
What not to do. Enrolling in a plan without fully understanding your options can cost you.
- Beware of going out of network. Before signing up for a plan, figure out whether your doctors are in your network. Even PPO plans cover less of the expenses of seeing out-of-network doctors. Many health plans cover even less than consumers expect, leaving them with sticker shock.
- Don't gamble with your health. Don't pay a high monthly premium if you're healthy and confident that you'll stay that way, but don't choose a deductible that is so high you couldn't afford to pay it in a worst-case scenario.
- Don't coast on the same plan. Health advisors say it's important to reevaluate your healthcare plan frequently. People's needs and health risks change as they age; a plan that requires you to pay more when you see doctors often might no longer be appropriate as people require more care. On the other hand, an extensive plan that covers your children, even when they go out-of-state for college, might be more than you need.