Employer-sponsored group plans offer the best deals around on health insurance. In 2009, the average single worker paid only 16 cents toward every dollar of medical insurance and average families paid only about a fourth of medical insurance coverage. If your company offers health insurance, here’s what you need to know about your options.
Most plans feature networks of participating physicians and health facilities, with lower costs if you stay in the network or penalties for going outside it. The two most popular plans are health maintenance organizations (HMOs) and preferred provider organizations (PPOs). Your employer may also offer a point of service (POS) plan. The main differences between the types of plans are the scope of the networks (how many doctors/hospitals you have to choose from) and levels of reimbursement for non-network medical care. Generally speaking, the more flexible the plan, the higher your out-of-pocket costs will be.
HMOs tend to impose the most restrictions, but also offer the lowest out-of-pocket costs. Inside an HMO network, gatekeepers—a primary care physician or sometimes a nurse—control medical treatment and specialist referrals. If you choose to use an out-of-network provider, your HMO may not reimburse your medical expenses. However, when you use in-network providers, most or all of your costs may be covered.
If you want the freedom to choose any doctor, PPOs and POS plans have more flexibility. You can go outside provider networks, however your insurance will then usually cover a lower percentage of your costs.
Monthly premiums are typically deducted from your paycheck and depend on the type of plan and its features. Nationwide in 2009, average annual contributions for family plans were $3,685 for HMOs, $3,470 for PPOs and $4,835 for POS plans. Coverage varies by region, with highest premiums in the Northeast.
Most health plans cover prescription drugs although some do not. If the health plan you are considering has optional drug coverage, determine if it would be beneficial for you to opt-in. Ask your pharmacist for the full retail price of prescriptions you filled in the previous year or two and total them up. Subtract the amount your co-payments would be in the drug plan and the added cost of insurance to see how much a drug plan would have saved you. Even if the difference is small, it does not automatically mean you should forego a drug plan. In the future, you may need expensive medication and a drug plan can help you afford it.
Most plans require a co-payment each time you visit a provider. On average, HMO members paid $18 per visit to primary care doctors and $26 per visit to specialists in 2009. Members of PPOs paid slightly more, $21 and $28 per visit. If a persistent condition requires multiple visits to providers, out-of-pocket costs can quickly add up.
Plans that provide drug coverage usually require co-payments, as well, at a fraction of retail prices. Each time you fill or refill a prescription it may run you $10 to $30, depending on your plan.
Funded by your salary before taxes, HSAs may be used to pay for uninsured medical care, dental care and prescription medications. They help make high-deductible health plans (HDHPs) affordable. Open them in conjunction with health plans that have deductibles greater than $1,100 for individuals and $2,200 for families. For 2010, the IRS set contribution ceilings at $3,050 for individuals and $6,150 for families.
Life presents enough challenges without having to worry whether you can afford to stay healthy. You can’t predict illnesses or injuries, but you can ease the financial burden if they occur. When selecting company-sponsored plans, take your time, do your research and choose thoughtfully.