Choosing An Employer-offered Health Insurance Plan

Health insurance typically ranks at the top of the list of nuanced and complicated purchases you have to make. The unfortunate reality is that choosing a health insurance plan is one of the more complicated decisions you’ll have to make and it must be re-done yearly.

This guide caters toward employer plans - stay tuned for another post on Medicare, Medicaid, government-discounted plans, COBRA, and more. We've packed this guide with everything we wish we had known over the years.

Advice if you are in tip-top shape and never expect to see a doctor

Consider plans that are eligible for HSA. If your employer contributes to HSA, then that’s free money. HSAs also unlock more flexibility than typical insurance plans. For example, you may be able to pay for massage therapy with HSA funds if you have a doctor’s note deeming it medically necessary. Read more about HSAs here.

Do a sanity check to see that your plan costs are bearable if you do end up going to a few appointments. Consider what your costs would be if you end with a few trips to the doctor. Additionally, don’t forget to consider a worst-case scenario (e.g. bike accident) by checking your plan’s deductibles and out-of-pocket limits. If they are crazy high, then you can decide if another plan would further shield your bank account from a worse case scenario. If you’re looking for a tool to easily calculate this, we created a tool here.

Choose plan type wisely (HMO, PPO, etc.) Read more about plan types here.

Advice if you have a chronic illness or plan to spend a non-negligible amount on healthcare expenses

Don’t make the mistake of making a quick decision based solely on the plan premium (sticker price of the plan) and deductible.

Jot down a list of medical services and drugs you may need and then consider the following for your insurance plan options:

• Some plans have a benefit where insurance will start paying for some services even before the deductible is met. For example, even if you have a $2000 deductible that you haven’t met, an in-network mental health visit may still only cost you $20 co-pay if the deductible doesn’t apply to in-network mental health visits.
• Note the prices across different medical services. One time, I had a plan that had a $0 fee for physical therapy. Since physical therapy was my most-used service that year (over 25 visits), that plan was worth it for me.
• Read the fine print on a plan’s covered services. Not all plans are created equal. For example, some plans may cover acupuncture and some others may not.
• If you plan to go out-of-network for medical care, then that will influence the most affordable plan option. For example, most plans have a separate (and more costly) deductible and out-of-pocket limit for out-of-network services. They can cost significantly more than the in-network versions. Out-of-network services are typically dramatically more expensive because insurance companies want to persuade you against using them. If you have an out-of-network doctor that you’d like to see, make sure to estimate your medical costs based on the plan’s out-of-network costs, rather than the in-network costs.
• Consider plan limits for your medical needs. Some plans will only pay for 26 physical therapy visits. After that, they expect the patient to cover full price for subsequent visits.
• Check that your current doctors and medications are in-network with the insurance plan. Usually your insurance plan details include a support phone number you can call to check. Something that a lot of people miss here - you have to make sure that doctors and medications are in-network with your specific insurance plan, not just the insurance company. “United Healthcare POS” is different from “United Healthcare Choice Plus”, even though both insurance plans are offered by United Healthcare. Just because your doctor is in-network with one United Healthcare plan, it doesn’t mean they are in-network across all United Healthcare plans.
• If you take prescription drugs, make sure to confirm that an insurance plan covers the drugs at an affordable cost to you. Insurance companies make their formularies (a.k.a. drug lists) available to show you covered drugs and their pricing tiers under your plan (e.g. here is an example of Aetna’s drug list). If a drug you expect is not on the formulary, it is possible that the insurance company wants you to use a similar substitute drug that is available on their list. You and your doctor may send an appeal to the insurance company asking for coverage of a drug not on the list, but the final decision is up to the insurance company.
• Consider plan perks: some insurance plans offer discounts or rebates for gym memberships, weight loss programs, and benefit coverage for nontraditional services like acupuncture. Make sure you read your plan terms.
• Finally, create a cost estimation based on all your medical care needs across each of the plans (we made a calculator that you can use here).

Quick Tips that Everyone Should Read

Choosing the Right Plan Type (HMO, PPO, etc.)

We've provided a brief description, but checkout Very Well Health's guide for a detailed guide on this topic.

The health insurance world has plan type alphabet soup (HMO, PPO, EPO, POS, etc.), but luckily someone wrote a breakdown that will help you understand your choices. Just like anything else, there are ‘tiers’ of health insurance plans. The more restrictive plan types are usually cheaper - they have fewer doctors, have more red-tape around seeing out-of-network doctors, and require approvals for more things.

If your HMO or POS plan is called “open access” - this means that the plan allows you to see specialists without the red tape of needing a referral from a primary care provider first. The link above provides a general framework for understanding plan types, but be sure to read your plan details to confirm your plan’s terms.

HSA and FSA

HSA and FSA are pre-tax accounts that you can use to pay for a list of eligible healthcare expenses. You’ll typically be sent a ‘debit card’ that you can use to pay for your medical needs using the account balances.

Select insurance plans support HSA (a.k.a. Health Savings Accounts). An HSA account is a pool of money that both you and your employer can contribute to. When you contribute, contributions are pre-tax (contributed directly from your paycheck without income taxes). You can use HSA funds on eligible medical expenses, including costs toward your deductible, coinsurance, copayments, and even some medical services that may not be covered by your insurance at all. Remember though, that HSA funds cannot be used toward your plan premium (the cost toward buying your insurance plan). The advantage of HSA over FSA is flexibility - if you don’t use all the funds, they roll over to the following next year. You can even use the same funds if you decide to switch jobs.

FSA (a.k.a Flexible Spending Account) is unrelated to your insurance and you can think of it more as an employer perk. Similar to HSA, you can only spend the funds on health related expenses, but the catch is that FSA will not renew year over year. You have to spend it or you will lose it. There is also Dependent-Care FSA, that is an FSA account that can be used for eligible child care expenses like summer camp. This is worth looking into if your employer supports it.

Family Plans

If you can share a plan with your spouse, domestic partner, or parent. Do a side by side cost comparison between their plan and yours’. Oftentimes, the premiums are so expensive for individual plans, that sharing plans with someone else makes financial sense. Note that some insurance plans have stricter rules around sharing plans with domestic partnerships and their children. Remember to consider what happens if you share a plan with someone else. There are typically separate deductible and out-of-pocket limits for the family. Once each individual member meets their individual deductible, their benefits kick in. But, there's also a family deductible, which is met when the total of what each family member has paid toward their individual deductibles adds up to the family deductible amount. Once the family deductible is met, then benefits kick in for all plan participants, even if no one has met their individual deductibles yet. Also, remember that some insurance plans charge an extra fee per family member that you add to the plan.

If you are still confused, don't be afraid to ask for help. Chances are you have a friend who has done the research and can help you find a plan or a family member that has already familiarized themselves with the process. The Affordability Care Act also makes free assisters available - people that are available just for the purpose of simplifying your health insurance decisions. Check out Healthcare.gov for more info on that.

We wish you a calmer and more informed healthcare purchase this year!