November is here, the leaves are falling, flu season is approaching and it’s time for open enrollment. If you’re like me, you want to pick the best insurance coverage and the best plan at the best price. You do some research online, see some familiar words that you aren’t 100% sure of what they really mean. Things like deductible, co-pay, and buy-up plan.
You may even wonder what it really means to be in-network. You get a little overwhelmed and are not really sure what to select for your health insurance plan.
That’s where Investor Mama comes in. I’m writing this post to help guide you through your decision making process and what questions you should answer to help you be thoughtful in your insurance selection.
The focus of this post is for those with W2 income who receive benefits from their employer. Before I walk you through step by step on how to pick your insurance company and plan, let’s go through some important key terms.
- Coinsurance is the percentage of costs of a covered health care service you pay after you’ve paid your deductible[i]. For example, if your coinsurance is 20% and you’ve met your deductible, then you will still pay $20 for a $100 office visit. It’s important to find out if your plan includes co-insurance so that you don’t have any unexpected payments past meeting your deductible.
- Co-pay is a fixed amount that you are required to pay for covered services such as doctor visit or prescription drugs[ii]. You can find this amount on your insurance card.
- Deductible is the amount a policy holder (you or whoever owns the policy) pays before the insurance company[iii]. For instance, if you have $1000 deductible, you will be responsible for paying $1k in medical expenses before your insurance pays for anything.
- Health Savings Account (HSA) is a type of investment account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses.[iv] For 2020, you contribute up to $3,550 for self-only coverage and up to $7,100 for family coverage.
- In-Network doctors or providers are those who have a contract with your insurance company making these providers cheaper to visit than out of network doctors[v]. If a doctor is out-of-network, you can submit a claim to your insurance company and they may cover some of the bill. However, be certain before seeing an out of network doctor. If you are pregnant or have another medical condition that requires hospitalization, find out if your hospital is in-network. If not, you may not be covered for your admittance unless it’s an emergency.
- Insurance premium is the amount of money you pay for your insurance[vi]. Usually your employer pays part of it but it depends on your company.
- Referral-some insurance companies require that you receive a referral from your primary care (usually you have to declare a primary care doctor on your insurance’s website or complete a form but check with them first) before seeing a specialist. Many primary care providers will require that you visit them first be they are willing to submit a referral to a specialist. This can be frustrating if your doctor is booked up and unable to see you to make the referral in a timely manner. If you do not receive the referral, the insurance company may not cover the medical expense. It’s really important that you understand what your insurance company expects before you see a specialist if they require a referral. You don’t want to get stuck with an unexpected bill.
Step 1: Identify your needs and current doctors
Before picking an insurance plan, I’d recommend calling your current doctors and ask them if they are in-network on the plans you are considering. Make sure you specifically ask them if they are in-network; not if they take your insurance. I learned this the hard way when I asked a physical therapist if they took my insurance. They said yes, but I didn’t realize just because they take it doesn’t mean they are in-network. A few hundred dollars later and I now know to always ask if a doctor or specialist to be certain. You can also, check your insurance company’s website to see what doctors are in-network.
Questions to consider for Step 1
- Will our current doctor’s be considered in-network?
- Do I have any life changing plans this year that would make our insurance change? (I.e. new of job, moving, giving birth etc.)
- If yes, who will our new doctors be and will they be in-network?
Step 2: Review plan options
Usually, insurance companies offer a base plan and a buy-up plan. The base plan is typically cheaper per month but will have a higher deductible but may not be as favorable as a buy-up plan depending on your circumstances. With a buy-up plan, it could be cheaper to see an out-of-network specialist but cost more in premiums per month.
Another option which can be highly favorable is a HSA account. This is a magical tax sheltered account because the money goes in tax free, grows tax free, and comes out tax free as long as it’s spent towards medical expenses. This account is the Holy Grail for tax optimization. For my husband’s HSA he even has any employer contribution. That is free money for us on top of the tax savings! However, there are a few downsides.
- If you have an HSA and you don’t want to use it for medical expenses now, you can invest the money and use this account to cover medical expenses later on after it grows tax free and comes out tax free. You can also use it later in life on non health related items but then you will need to create a system for saving your medial receipts over the years. For as many paid receipts you have, that’s how much money you can use from your HSA account to purchase anything. We take a photo of the receipt with our phone and just save it on the computer with the date the bill was paid, who and what it was for.
- Typically, these accounts have high deductibles and insurance won’t cover until you reach that deductible. If you are someone who sees a lot of doctors, this plan may not be ideal.
Questions to consider for step 2
- Do I have any medical conditions that require an out-of network doctor?
- If yes, am I willing to switch to an in-network doctor?
- Will I need a referral to see a specialist?
- What is the plan’s prescription drug coverage and does it meet my needs?
Step 3: Compare costs
Once you complete steps 1 and 2, it’s now time to compare costs. This is important because you want to make sure your family is adequately covered but you also want to be fiscally smart. Carefully analyze your situation to weigh the costs and the pros and cons of each plan.
Questions to consider for Step 3
- How much are the monthly premiums as a single and as a family? If you have a partner or spouse, see if it’s better to be on one plan to be on your individual employer’s. Some employer’s charge a spousal surcharge.
- What will the deductible be?
- What will the co-pays be?
- How much are hospitalizations?
- How much are out-of network doctors?
Choosing a health insurance plan doesn’t have to be intimidating. I encourage you to get educated, follow the three steps outlined, and make sure your get answers to all of your questions. This will arm you with confidence to know what plan is right for you. Happy selecting!
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