Every year from November to December my job allows employees to change their health insurance plan for any reason. I use this time to review my own health plan and determine if it’s still working for me and my family. In my review, I compare how much we spent over the past year to what the insurance company paid. I also take into consideration any medical claims I had difficulty getting the insurance company to cover and why. One year I actually changed insurance companies because the hassle I went through to get medical expenses paid was more headache than the money I was saving on the cheaper plan.
For most people who are starting a new job or comparing healthcare plans, everything can seem like alphabet soup. There are several different options, and for some people it’s cheaper to skip a plan altogether and pay for medical costs as they come up or choose a high-deductible option. Below is an overview of the types of health insurance plans available so you can you choose the best plan for you.
Types of Health Insurance Plans
Most major health insurance companies provide a version of the plans below, but there may be slight differences depending on where you live and your company.
An HMO is a network of health care providers and facilities that provide medical care to HMO members. In exchange for this care, you pay a set annual or monthly rate. For some, the ease of having a one-stop shop for all things medical is comforting and much easier to manage. However, under an HMO you do not have the freedom to see any doctor you want, whenever you want.
First, you choose a primary care physician from the network. It’s typically required that you visit this doctor to request referrals or to see specialists. One downside to HMOs is that if you visit a doctor outside of your network, you could be responsible for the whole bill. The upside is when you visit doctors in your network there is little to no paperwork to fill out and they tend to be the cheapest option available to you.
The PPO insurance plan is sometimes seen as the opposite to an HMO. Under a PPO, you can go to any doctor and do not require a referral to see specialists. However, a PPO plan is still a network and the insurance company has a list of preferred doctors it wants you to see. In fact, the plan pays more of your costs if you go to a doctor in network versus outside of the network. Going outside of your PPO network could cost you upfront. If you visit a doctor that is outside the network, you may have to pay the bill and then seek reimbursement from your insurance company. Insurance companies are only going to cover the amount they would have paid to a doctor in the network, and then you are responsible for the rest.
An EPO is a cost-driven insurance plan. Your premiums are lower because the EPO covers preventative care and only medically necessary treatments. However, you are exclusively limited to the EPO network’s providers. Under an EPO you have the freedom to choose your doctors and you don’t need referrals to see specialists. However, if you go outside of the EPO network you are responsible for 100 percent of the costs. The only exception is when the care was provided for an emergency or if the EPO does not have a doctor that can provide the specialized care you need. Most expensive treatments require pre-authorization and most elective medical procedures are not covered.
A POS is a combination of the HMO and PPO plans, but it’s not as well known in the market. Under a POS insurance plan you have a primary care physician who coordinates your care and refers you to specialists. Coverage is provided when you go outside of the network, but the insurance company pays less than it would have if you went to a doctor in network.
Catastrophic plans sound scary, but these insurance plans have lower monthly costs and very high deductibles. You pay for most of your medical expenses out of pocket, but some preventative care is covered. These plans are for those who want the worst case medical scenario covered, but are willing to first pay for any other medical bills. In fact, you might have to see the doctor three times before the deductible applies. One catch though: you have to be under the age of 30 to purchase a catastrophic health plan.
A catastrophic health plan has a deductible of $7,900 in 2019. After you have paid this much for your medical expenses, then the plan will pay 100 percent of your medical costs for covered benefits. Under these plans, you really have to weigh the low costs against the high deductible.
A high-deductible health plan may have a low monthly cost but a very high deductible. The IRS considers a deductible to be high if an individual pays $1,350 or more, or a family pays $2,700 or more. You have to reach your plan’s maximum out-of-pocket expenses before your insurance company will cover 100 percent of your medical costs. Under an HDHP you still have to choose a health plan but you can select an HMO, PPO, EPO or POS. If you have an HDHP you can also contribute to a health savings account (HSA). With an HSA, you set aside pre-tax dollars. When you have medical expenses, you can use your HSA funds to cover the costs.
Out-of-pocket expenses for an HDHP must not exceed $6,750 for an individual and $13,500 for a family in 2019. Like with all plans, your preventive care is free even if you haven’t met the deductible. The amount you can put into a HSA is limited to $3,500 for individuals and $7,000 for families in 2019.
How to Choose The Right Health Insurance Plan
For my family, I chose my job’s PPO plan. I picked this plan because most of the doctors in the Washington, D.C. area accept this insurance. Another benefit is we have the flexibility to see specialists without preauthorization from a primary care doctor. With the cost of medical care continuing to rise, insurance is essential. Without insurance, I don’t know how I would be able to afford some of the medical treatment and prescriptions my family needs.
Health insurance plans help a lot of people afford health care. So when choosing your health insurance plan, think about your family’s medical conditions and how often you will visit the doctor. If you only visit the doctor for your annual physical and rarely get sick, an EPO may be best for you. If you have a lot of doctors, consider a PPO so you can skip the trip to your primary care physician when you need to see a specialist. In general, the EPO is the least expensive health insurance plan, and the PPO is the most expensive.
If you decide to get a high deductible health plan, make sure you have significant savings or an emergency fund that can cover at least your deductible if the worst happens. Then, use your HSA funds on qualified medical expenses to pay yourself back some of your costs.
Most importantly, do your research. If you select an HMO, make sure you have doctors or HMO facilities in your city. Most insurance companies have websites where they list the in-network doctors, so you can learn if you’ll have access to doctors you want or need. If you are considering changing insurance plans but have a list of doctors you love, make sure your doctors accept the new insurance you are considering.
What are some of your tips for choosing health care plans? We would love for you to leave a comment and share your tips with our community.
Acquania Escarne is the creator of The Purpose of Money, a community of women building generational wealth for their families one dollar at a time. As an entrepreneur, real estate investor, and licensed insurance agent, Acquania has always been passionate about financial literacy. On her website, Acquania blogs about ways to help you improve your money habits, create wealth, and invest in real estate. Follow Acquania on social media for daily tips.