Understanding Healthcare Benefits

There are a few universal truths to understand before open enrollment season is upon us. For starters, not all health insurance plans are created equal. As is the case with so many things in life, you often get what you pay for.

It stands to reason that selecting a health insurance plan for the coming year typically means striking a balance between the care you and your family need and how much you can afford. Generally, a policy with higher monthly premiums will offer a larger selection of benefits, such as preventive care with no copay, and lower out-of-pocket expenses. A health insurance policy with lower premiums often comes with fewer benefits, a higher deductible, and a smaller list of healthcare providers to choose from. That high deductible policy, however, may offer you the opportunity to contribute to a health savings account which comes with its tax advantages.

Before deciding on a health insurance plan for the upcoming year, consider the following:

• Will your preferred healthcare providers be in your network?

• How much will prescription medications cost for those on your plan?

• Do you anticipate any major life changes or medical events next year? (Marriage, fertility treatments, adoption, surgeries, or expensive procedures?)

Here are some of the most popular health insurance plan types:

• EPO – An Exclusive Provider Organization, or EPO, is a managed care plan available on the health insurance marketplace where services are covered (except in an emergency) only if you use healthcare providers and specialists, or hospitals and other medical facilities, in the plan’s specified network, notes HealthCare.gov.
• HDHP – A High-Deductible Health Plan, or HDHP, can work with an HMO or PPO but generally comes with a greater out-of-pocket cost before benefits begin. Because of that, the premiums are typically lower. For 2023, an HDHP is considered any plan with a deductible of at least $1,500 for an individual or $3,000 for a family. The maximum out-of-pocket expenses are $7,500 for a single person and $15,000 for a family. One of the perks of a high-deductible plan is the ability to contribute to a health savings account.
• HMO – A Health Maintenance Organization, or HMO, offers a network of healthcare providers and medical facilities you can use that an insurer will help cover the costs for. That means if you see an out-of-network provider, your bills may not be covered or only partially covered, except in the case of an emergency. With most HMOs, you select a primary care provider (PCP) and often need a referral from that PCP to see a specialist.
• POS – Point of Service, or POS, is a type of plan where you pay less if you use healthcare providers, hospitals, and other healthcare members that belong to the plan’s network, according to HealthCare.gov. These plans also require users to get a referral from a primary care provider to see a specialist such as a cardiologist or endocrinologist.
• PPO – A Preferred Provider Organization, or PPO, offers more choices. You may or may not need to choose a PCP, and you typically don’t need a referral to see a specialist. That means if you have yearly sinus infections, you won’t need permission to see your ENT. Also, if you see an out-of-network provider, a portion of your services will often be covered, though you could pay a higher portion of those bills.

Savings accounts for supplemental healthcare costs include the following:

• HSA – A Health Savings Account, or HSA. Those who qualify (and sign up for) one of the HDHPs mentioned above will be eligible to open a Health Savings Account (HSA) that allows you to pay for medical expenses with pre-tax dollars. That’s important because it effectively gives you a discount on all your medical care. Sometimes, HDHP plans through an employer provide contributions to your HSA – which can make this insurance even more appealing.
• FSA – A Flexible Spending Account, or FSA, is a special account where you deposit pre-tax money from your paycheck that can be used to pay for certain out-of-pocket health care costs for you and anyone on your plan. Because you don’t pay taxes on the money, notes HealthCare.gov, you can save an amount equal to the taxes you would pay on the funds being set aside. In 2023, the maximum amount allowed to be saved in an FSA is $3,050, according to the IRS. You can ask your HR department about how to use your specific FSA. It’s important to note that these are mostly use-it-or-lose-it funds (with limited carry-over amounts) that often can’t be carried over from year to year. That means you don’t want to save more in the account than you think you will spend. And note: You can’t use both an HSA and an FSA simultaneously.

Pre-season Action Items

For those with health coverage through an employer, mark the company’s open enrollment dates on your calendar. They don’t always fall during the same time period and you want to give yourself enough time to thoroughly evaluate any new options. Those still enjoying the work-from-home life should keep an eye out for mail (or email) from your company’s HR office. When the details arrive, take some time to compare the plans being offered. Specifically, you’re looking to see how much it costs for a plan for the whole year AND how much it costs when you see a healthcare provider. Don’t forget to check out how much an emergency room visit will cost in network and outside of your network. Those prices can vary drastically.

For those selecting a plan in the marketplace, don’t assume the health insurance you paid for last year will still be the best option in 2024. If you’ve had a life change — or anticipate one next year — it pays to shop around and see what’s available. If you qualified for a subsidy last year, log on to your account on the exchange and make sure you still qualify next year. For more information about coverage through the U.S. health insurance marketplace visit HealthCare.gov or call the marketplace call center at 1-800-318-2596.