It’s open enrollment season and many of you will be making the choice between different types of health insurance plans. Earlier this year, I turned the big 26, which means as of the end of my birthday month I could no longer be covered under my parent’s health insurance. I had to secure my own for the first time through my employer, which can be confusing and scary. So first, here’s some clarification on some terminology.
- Premium – the amount that gets deducted from your paycheck for health coverage
- Deductible – the amount you must pay out of pocket before the health insurance company starts to pay for your care
- Co-payment – the amount you must pay to your provider before the insurance company will cover the visit/service
- Coinsurance – percentage of the total cost that you must pay (typically after your deductible is met)
- Out-of-pocket maxima – the maximum amount you have to pay before all services are covered by your insurance company (with no co-pay or coinsurance)
- Explanation of Benefits (EOB) – a document from your insurance company detailing the service your received from your health care provider, how much was charged for the service, and how much you are responsible for
My company offers two different types of plans – a traditional PPO and a high deductible health plan. The main difference between the two is that when you’re enrolled in a high deductible plan, you pay all costs until your reach your deductible, and only then will your insurance company start paying some of your medical costs.
I made the choice to have a high deductible plan instead of a PPO. Here’s why…
- It’s cheaper. My premiums throughout the year are lower. Being young and relatively healthy means that I don’t have to visit the doctor often. Preventative services are covered in full, even with the high deductible plan; so annual visits require no out-of-pocket expenses.
- The out-of-pocket max is manageable. Once you hit your out-of-pocket max, the health insurance company will cover all of your costs. That means in case of a major accident or illness, once I pay $2,250 – my insurance will cover the rest. That’s doable for me.
- You still get discounted care. Viewing my explanation of benefits documents show that even though you are responsible for all costs, just being part of a health provider’s plan gets you a discount on those services.
- It allows me to contribute to an HSA. This gives me another tax deferred/tax free account, minimizing the amount I pay in taxes. Also, contributions made directly from your paycheck avoid FICA taxes. My company contributes $400 per year to an HSA for singles, and $600 per year for those on a family plan, making the high deductible plan even more attractive. (Yay, free money!)
- An HSA allows you to contribute pre-tax money to pay for health expenses. As long as the funds are used for health expenses, they are never taxable. Some, like myself, plan on using it as a retirement account since it is treated like a traditional IRA once you turn 65 and some HSA brokers allow you to invest the funds. Or you could pay for all expenses using your post-tax money and reimburse yourself at a later date. Unlike FSAs, your money rolls over year to year in an account that is not tied to your employer.
Living with A High Deductible Health Insurance Plan + A Few Tips
A high deductible plan is not always pretty. I have had to have a small procedure done and some tests which resulted in some high bills from my providers that I am not used to paying. Normally, under my previous PPO plan, I would pay the $25 co-pay and that was it – I wouldn’t even check the EOB! Under the high deductible plan, I am responsible for all costs until I reach my deductible of $1,500, so seeing a bill for $300 or $500 is shocking, but for me, it still worked out to be cheaper or about the same as a PPO. The high deductible plan has an edge for allowing me to defer more income from taxes, so I still like that option better. Here are a few tips that I’ve picked up over the past 3 months of being enrolled in a high deductible plan.
Have more conversations with your doctor/doctor’s office about costs. While they may know that you have insurance, they may not know what kind. This may affect how they schedule your procedures. Also, make sure they’re sending your labs to an in-network facility. My doctor sent my samples to an out of network lab resulting in a large bill with no provider discounts! I called up the insurance company and they gave me a name of a lab to give to my doctor for future tests.
You can still negotiate costs! I called up the lab and discussed my high bill with their billing department. I was told I could receive a 10% discount for paying in full, but this is still in the works; I’ll update this post once this is finalized with more details. But, don’t hesitate to call and ask for a discount. The worst they can say is no.
Read your EOBs! I never did this when I was covered under my parent’s insurance, but under my new plan it’s a must. I noticed that I had a separate out-of-pocket max for out of network services and the entire amount I was charged for the service was not being counted toward that deductible for some reason. I had to call them up to fix this. Make sure you’re seeing the amounts you expect to see so that you don’t end up overpaying when the insurance company should be responsible.
Basically, if there’s something you don’t understand or if you need more information – call someone! So far, everyone has been helpful in me navigating this health insurance world. If this is your first time signing up, I recommend talking to your HR department or co-workers that you trust about their experiences with the plan, especially if you have a similar age/family makeup. A high deductible health plan is not for every one. Check out your company’s plan to see if it’s the right decision for you and your family.
Does your employer provide a high deductible health plan option?