Choosing a health care plan is a highly personalized decision. It often comes down to how often you seek medical assistance. We don’t like giving blanket statements over here because it takes the humanity out of decision-making. But we will walk you through the choices you’ll have to make in an effort to leave you question-less and decision-made by the end.
Let’s start with how often you seek medical help: If you almost never go to the doctor, then you’d want to consider a plan with the lowest monthly payment. Unfortunately, this means it likely has a high deductible. A high deductible means you’d pay out-of-pocket up to a certain amount before the insurance kicks in to cover the rest. The mindset of someone choosing a low monthly payment/high deductible coverage is to protect you in the event you were seriously injured or very sick, but not paying more than necessary because of your rare visits to the doctor.
On the flip side, if want a second set of eyes in the form of a licensed professional every time you get a cold, or you have a pre-existing condition that requires more routine medical visits, then you’d want a higher coverage plan. This typically has a lower deductible, meaning you pay less out-of-pocket before insurance kicks in. However, you pay more per month to make up for it.
We’ve provided a framework for evaluating which plan is right for you below. And in case we haven’t covered everything, we also have a blog post breaking down Open Enrollment and all of the jargon surrounding it. Check up on it:
Two Main Plans
The most common health care plans are HMOs (Health Maintenance Organization) and PPOs (Preferred Provider Organization). They deal specifically with in-network vs out-of-network coverage. Typically, an HMO plan only allows you to go to doctors who are part of the plan’s network of providers. If your favorite doctor is not part of the HMO, then your visits will not be covered or will likely be billed at a much higher rate. In contrast, while typically more expensive, a PPO provides more flexibility with which doctors you see. Is your favorite dermatologist not covered by the HMO plan offered? You’ve learned the hard way you can’t live without them, and you’re not so sure you trust anyone else with your money maker. They might just make the cost of a PPO plan worth it.
Once you decide if an HMO or PPO is right for you, the next step is drilling down the specific things your plan will (or will not) cover. For example, do you frequent a physical therapist or chiropractor for an old injury? Are you considering family planning (anything from egg freezing to delivery costs)? Is mental health a priority? Some plans provide full coverage, while some provide no assistance. Thinking about the year ahead, make sure you have the best coverage for your life’s plan.
What does max out-of-pocket mean?
Max out-of-pocket is the most you’d be on the hook to pay for covered medical costs in a given year. After you’ve spent this money on deductibles and copayments, your insurance will typically cover 100% of the rest. This is an easy question to ask with a pretty straightforward answer (as long as you get someone from your insurance provider or HR department on the phone.)
Should you deny medical coverage? Or get a catastrophic plan?
Sometimes, you can’t afford traditional insurance and you might use catastrophe insurance to cover expenses in the event something, let’s say, catastrophic, happens. If you can manage paying for routine medical costs from savings, then you just need to cover yourself for a worst-case situation. Keep in mind, you’ll want to make sure you have an Emergency Fund and the ability to cover routine medical visits (dental cleanings, annual physical, etc.) with your income as well.
Should you be putting money into a FSA?
If you anticipate a lot of out-of-pocket medical expenses, then yes, contributing to a FSA may save you money as you get to use pre-tax dollars for medical expenses (we even wrote an article about all the things you could use the money in your FSA for.) If you feel you have out-of-pocket medical costs that aren’t covered by insurance, putting some money away tax-free in an FSA is a smart idea. However, if you don’t use this money for medical expenses by the end of the year, you lose the funds. If you are the type of person who rarely has medical expenses or barely goes to the doctor, then you probably shouldn’t put money into an FSA.
Deductibles, co-pays, and a handful of acronyms later, you should feel ready to make the best decision for this year’s healthcare coverage.