In the past several years, we’ve seen health care coverage in the headlines, between the enactment of the Affordable Care Act and then the Tax Cuts and Jobs Act repealing the individual mandate that all Americans obtain health insurance. Of course, all of this was of little consequence to you if you were covered by a group health plan at work or if you were under the age of 26 when you could remain on your parents’ insurance plan.
Recent graduates who are accepting jobs might think that they’ve got an easy ride since their new employer offers a group health plan. However, truth is, navigating group health plans can be complicated. Employers have a wide variety of the types of plans they can offer to employees. Employers may also offer more than one option for employees to choose from.
Fee-for-service plans generally allow you to see any doctor or specialist you choose. You are billed for the services and reimbursed by the insurance company for claims you submit. Like most policies, you first must satisfy the deductible, or the amount you must pay before your insurance plan kicks in. Later claims are then reimbursed at a specified percentage, for example, the plan may reimburse your costs up to 80%.
Managed care plans contract with a network of health care professionals. These are then divided into health maintenance organizations (HMOs), preferred provider organizations (PPOs) and point-of-service plans (POS). With all three, you may pay monthly through a payroll deduction for coverage, or if you’re fortunate, some employers may help defray the premium cost. You’ll generally pay a co-payment when you visit a physician. With HMOs, you are limited to doctors and pharmacies contracted by the plan. It may also be more difficult to get access to a specialist, as your primary care physician must be the one to refer you for care.
Preferred provider organizations usually have a larger network of doctors and specialists and services are billed at a contracted “discounted rate” that the insurance company has negotiated, based on actuarial tables of “reasonable and customary fees.” Because you have more flexibility in your choice of professionals, your out-of-pocket costs may be higher. Point-of-service plans combine features of HMOs and PPOs.
With these types of managed care plans, an employer may offer a flexible spending account (FSA), which allows employees to save money pre-tax to pay for medical expenses throughout the year. The benefit is that flex spending accounts are often front-loaded in that an employee has access to the elected deferral amount, despite that contributions are made via payroll deduction throughout the year. The drawback to FSAs is that money contributed is use-it-or-lose-it on an annual basis.
High deductible health plans (HDHPs) have just that—significantly higher annual deductibles and out-of-pocket limits. HDHPs usually mean lower premiums for the employer, and can be a good option if the demographic of the company includes many single-coverage employees. Once the high deductible is met, these plans can pay 80% to 100% of medical costs. These plans are often combined with a health savings account, that allows employees to save money pre-tax for future health care expenses. Accounts build up over time, much like a retirement plan contribution, and the money is yours forever.
Deductibles and out-of-pocket maximums will vary by the plan your employer chose. You’ll want to carefully evaluate these costs compared to your access to the medical professionals of your choice. Financially, we generally recommend selecting the plan with the highest deductible you can comfortably afford, your health and well-being should truly weigh on your decision.
If you have questions regarding your insurance coverage, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166.
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