Adulting 203: Choosing the Health Insurance Plan That is Right for You
Open enrollment is the set timeframe each year that an employer allows employees to change their benefits package. One of the biggest decisions of the whole process is choosing your health insurance plan.
Factors to Consider When Choosing a Health Insurance Plan
There are four main types of health insurance plans that employers offer in today’s market. Every person should consider their own circumstances when it comes time to choose which plan to select for the upcoming year. Employers may offer multiple options, a couple, or just one. Within each plan there are several things to consider, including:
1) What are your normal healthcare costs in a given year?
- Are you generally a healthy person who rarely goes to the doctor?
- Do you have a pre-existing condition that requires a monthly prescription or visit to a specialist?
2) What are the health components of each plan offered by your employer?
- What are the premiums, deductibles, co-pays, co-insurance percentages, and out-of-pocket maximums on each plan?
- Do the plans have a maximum number of visits to a physician or specialist?
3) Are your current physicians and specialists considered in-network on the plans offered?
- If not, are there other comparable options available in your area?
HSAs, FSAs and HRAs
Many employers now also offer Health Saving Accounts (HSAs), Flexible Spending Accounts (FSAs) and Health Reimbursement Accounts (HRAs) as tools that can be used alongside your health plan.
For many that are healthy and rarely visit the doctor, choosing a High Deductible Health Plan with an HSA is a great option. HSAs allow you to save tax-free dollars into a plan for future medical costs and many employers will also contribute money to employees’ plans. You will save on premiums each month with a higher deductible while being able to save for future medical costs such as having a baby, major surgery or even medical expenses in retirement.
If you do visit the doctor frequently or have a pre-existing condition, choosing a plan with a lower deductible and an FSA might make more sense. FSAs allow you to save tax-free dollars like an HSA but you must use the money within the year saved. You cannot accumulate savings year-over-year like an HSA. This makes an FSA a great option if you have recurring expenses every month or year that you can plan and save up for.
HRAs are plans that reimburse a portion of your deductible and can be used with any type of deductible plan. If you have a deductible of $3,000 with an HRA of $1,000, your “true” deductible is only $2,000.
Each person should weigh the cost of premiums of a plan with potential health care expenses to determine which plan is best for their situation. Although no one likes paying more than is necessary for insurance, having proper and adequate health insurance will save you thousands of dollars in the event of a catastrophe – which is the whole reason behind insurance: to protect us financially in the event of an emergency.
Learn more in our health insurance blog series:
Adulting 200: Understanding Your Health Insurance Coverage
Adulting 201: Understanding Your Healthcare Provider and Plan Options
Adulting 202: Understanding Your EOB and Medical Bill
This post is part of our Adulting blog series. Contact your employer for questions specific to your health insurance coverage.