3 Step To Pick The Best Healthcare Benefits
How do I pick the best benefit?
For me, choosing healthcare benefits during the open enrollment season defies logic. I can happily talk about finances all day long, but when my husband puts his employer's open enrollment booklet in front of me, I’ll shove it to the side until the last minute. After a few minutes of distracting myself with videos of laughing babies, the ghosts of financial statistics creep up, and I'll start reviewing our families' benefits.
The financial statistic that haunts me the most is that health-related financial hardship is one of the top reasons for bankruptcy filings. For this reason, choosing your healthcare benefits is essential to your family's financial security. Your healthcare benefits choice can potentially make or break your family's financial security.
Pick the best healthcare benefits for your family using the following 3 steps.
Prioritize the healthcare benefits that are most important to you and your family
Review your company's healthcare plan options
Choose a medical savings plan.
1. Prioritize the healthcare benefits that are most important to you and your family
I know the alphabet soup of healthcare benefits acronyms can drive people to alcohol (or, in my case, chocolate). Hang in there, it's easier than you think. You can drill down most company's healthcare plans to the following options:
The ability to see a doctor with or without having to get a primary care physician’s referral.
Having insurance coverage for only in-network providers or having coverage for in and out-of-network providers.
How much or how little you'll pay for coverage? This includes premiums, deductibles, co-pays, prescriptions, etc.
Use the list above as a guide to prioritize the healthcare benefits that are important to you and your family. Prioritizing the importance of the options will help make picking a benefit a lot easier.
2. Review your employer’s overall healthcare plan options.
I lined up the healthcare plan options based on what’s typically the overall least expensive option (premiums, deductibles, co-pays, etc.) to, on average, the most costly option.
HMO (Health Maintenance Organizations):
PCP (Primary care physician) referrals to see doctors
Typically no coverage for out-of-network care (emergencies are exceptions)
On average, the lower premiums, deductibles, and copays are the least expensive.
Possible fit: Someone with ongoing medical needs who is cost-conscious.
EPO (Exclusive Provider Organizations):
PCP referrals are generally not required to see doctors
Typically EPOs have a more extensive network of providers than HMOs; In most cases, no coverage for out-of-network care (emergencies are an exception)
Typically slightly more expensive than an HMO
Possible fit: If you do not want to get a PCP referral every time you want to see your medical specialist or you want access to a more extensive network of doctors.
POS (Point of Service):
Requires primary care physician referrals.
The plan offers limited out-of-network coverage.
On average, more expensive due to the flexibility of coverage
Possible Fit: Someone who wants the flexibility of seeing an out-of-network provider and a doctor but doesn't mind needing a PCP referral.
PPO (Preferred Provider Organization):
No PCP referrals are required
Limited out-of-network coverage
Typically higher premiums
Possible Fit: If you desire the flexibility to see a doctor without a PCP referral, get care from an out-of-network provider.
HDHP (High deductible Health Plan):
Can have rules similar to an HMO, PPO, POS, or EPO
Typically low premium but high deductible, often linked to an HSA
Possible fit: Someone with no chronic illnesses, healthy family who only sees a doctor for annual checkups. For others, it may be a consideration so they can use the HSA tax-saving benefits for future medical costs, especially if their employer contributes to their employees HSA accounts.
As you start to finalize your choice, review the following:
Look for changes to your existing healthcare plan’s prescription coverage.
Check for updates, changes to your spouse’s or kids' healthcare plan coverage; changes to your employer’s coverage for spouses.
Your healthcare provider’s list of healthcare insurance they accept. Medical providers drop and add insurance carriers often.
Incentives to lower your healthcare costs. Ask about discounts for completing surveys, wearing a fitness tracker, making an appointment with a coach, etc.
New medical services like physical therapy, acupuncture, massage, etc.
Pro Tip: If you are thinking of changing your healthcare plan, call your medical provider’s billing office and ask if your current provider accepts your possible new insurance AND if they’ve experienced problems with your potential new insurance carrier. Your medical billing representative is a medical insurance expert and can offer you invaluable insight.
3. Choose a Medical Savings Plan
Medical savings plans are typically tax-advantaged accounts used to save money for medical expenses. Most medical savings contributions are tax-free, and withdrawals for qualified medical expenses are also tax-free. There are four main differences between the plans:
Who can contribute to the plan: the employee, the employer, or both?
The amount you can contribute to the plan.
The funds roll over annually or have a deadline to use the funds or lose the funds.
The ability to keep the plan if you change your healthcare plan or your job.
Most employers offer one or a combination of the following Medical Savings plans:
H.R.A. (Health Reimbursement Arrangement)
Typically an employer-only funded plan that reimburses employees’ eligible out-of-pocket expenses is generally tax-free.
Employers give each eligible employee a specific dollar amount. Employees submit qualified reimbursable expenses to their HRA administrator for reimbursement.
The amount you get rolls over annually
You may lose the plan if you change your job or possibly your healthcare plan (check with your employer).
Pro Tip: Your employer may use a different name for the benefit, but a telltale sign that it’s an HRA is that it is employer-funded only, and the plan only reimburses qualified medical expenses. If you have an HRA, contact your human resources department to find out your reimbursable amount and read about eligible reimbursable expenses.
H.S.A. (Health Savings Account):
Employees and as well as employers can contribute to the plan. Pre-tax savings account for those with a qualified High Deductible Health Plan. HSAs can be used to pay for qualified medical expenses.
In 2021 the IRS contribution limits are $3,600 for self-only; $7,200 for families, 55 catch-up $1,000). For 2022 the contribution limit went up slightly to $3,650 for self, only $7,300 for family coverage. 55 catchup remains unchanged.
The amount in your H.S.A rolls over annually, so you do not lose your contributions.
Your H.S.A. account is yours even if you change plans, retire or change jobs.
Pro Tip: Your H.S.A. can pay for the expenses of your spouse and dependents, even if they are covered by another plan or if they have no coverage. If you are claiming unemployment benefits or paying for continuation coverage, you may be able to use your H.S.A. to pay for healthcare premiums.
F.S.A. (Flexible Spending Account):
Similar to an HSA, employees and as well as employers can contribute to the plan. An FSA pays for qualified medical expenses.
The amount is limited to $2,750 annually for 2021 and $2,850 for 2022. FSA rollover rules have changed. Typically depending on your employer, you may be able to roll over $550 ($570 for 2022) or have a grace period of 2 1/2 months to spend the FSA funds. Now, your employer may allow you to roll over any unused funds from the plan year 2021 to 2022 or extend the grace period from 2 1/2 months to 12 months.
Like an HRA, if you leave your job, you lose the plan
Pro Tip: Your options will vary depending on your employer. Contribution limits can change, so contact your benefits department for the most up-to-date information about your employer's FSA benefits.
Regardless of your account type, take advantage of the ability to pay for qualified medical expenses tax-free.
Next Steps
Use this blog as a guide to help you pick the best healthcare benefits for your family. After reading, do the following:
Prioritize the healthcare options that are most important to you
Go online or read your booklet to review your healthcare options
Choose which medical savings you'll use.
Your healthcare benefits act as a safety net to protect you financially security from unexpected medical expenses, so you don't become broke or bankrupt. I know it can be a headache, but taking these steps can go a long way to protecting your financial security.
