Health Insurance: Dizzying Choices

Just in time for the upcoming benefit enrollment period, the Kaiser Family Foundation is out with its annual survey of employer health plans, which cover over half of the non-elderly population, or 147 million people. Costs are up a seemingly small 4 percent in 2015 from a year ago, but that is still twice the pace of inflation and more than the average wage gains for most families. A family plan now costs $17,545, of which workers pay $4,955. That’s up by 83 percent over the past decade and by 24 percent since 2010. Deductibles are also higher—on average now $1,077 per individual, up 67 percent from just five years ago and 255 percent over the past decade!

With more of the burden shifting to consumers, it is imperative that you take control of your health care decisions. Start by choosing the right plan for you. Know what each plan covers, how much it costs (premiums plus out of pocket costs for deductibles, coinsurance and co-pays) and whether your doctors are in the network.

The most widely used plans are Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). In an HMO, you select a primary care physician, who directs your health care decisions and makes any necessary referrals. In most cases, the plan will not cover care outside of the network. A PPO provides more flexibility, because you can see any health care professional without a referral, either inside or outside of your network. The enhanced choice comes with a heftier price tag.

Many large employers are offering high-deductible health plans (HDHP), which offer lower premiums. These plans are usually paired with Health Savings Accounts (HSA), which allow you to set aside pre-tax money to pay for unreimbursed costs. If you're generally healthy and want to save for future health care expenses, this may be an attractive choice. But if you think you might need expensive medical care in the next year and would find it hard to meet a high deductible, it might not be your best option.

You should also consider using Uncle Sam to help you pay for health care costs, by taking advantage of flexible spending care accounts. FSAs allow you to use pre-tax dollars to pay for unreimbursed medical expenses or dependent care up to $2,500. You can carryover up to $500 of unused balances to the following year.

Although most health care providers are mindful about limiting patient costs, it doesn’t hurt to ask whether a generic/cheaper version of a prescription drug exists and whether the test/procedure/prescription is really necessary. And of course, it is important to check every medical bill for coding errors.

I should also mention Medicare Open Enrollment begins October 15 and runs through December 7. This is the only opportunity for people currently on Medicare Advantage and Prescription Drug Plans to switch to a new plan for the following year.

While most medigap supplement policies can be switched throughout the year, financial planner Greg Hammer notes, “your initial enrollment is the one opportunity to enroll on a guaranteed basis. If you want to enroll into a traditional medigap policy later, in the year, you will be subject to medical questions and your medical history could prevent you from qualifying for the traditional plan.”

And just like employees who need to read the fine print, so to do retirees who are selecting prescription drug plans. Hammer advises, “Your decision should not be driven by premium alone. Because of the differences in formularies and Tier Coverage, you need to look at your out of pocket cost. A lower premium doesn't always result in the lowest out of pocket cost.” He recommends that before making the decision, participants should use medicare.gov, where you can enter your prescriptions and zip code, and the site will guide to the best program for your needs.