FSA or HSA … low deductible plan or high deductible plan … co-pays or coinsurance … help! Health insurance terminology alone can make it challenging to select a health plan that’s a good fit for your needs. That’s why so many people end up blindly choosing a health plan because “it sounds good,” it’s what their co-workers chose, it looks the best on paper, or it’s the cheapest.
I encourage you to take a different approach: Choose a plan that’s the best fit for the way you (and your family) use health care. Here are some questions to ask as you decide what insurance plan is right for you:
· How do I use medical care? This should be the biggest question on your mind as you’re choosing a health plan. If you get an annual physical and/or other annual exams, check to see if they are covered by the plan. How will regular visits to the doctor or a specialist be covered? Walk through how you used health care in the last year, considering the coverage available as well as the cost.
Tip: If you have specific doctors you like to use, make sure these doctors are in-network. If you have prescription drugs you take regularly, see if those will be covered by the plan as well as any co-pays/coinsurance that might be due.
· How much can I afford to pay out-of-pocket? Often people focus on the premium (the monthly or quarterly cost) but forget to look into what they would actually pay out-of-pocket for a serious health event.I suggest walking through the health care you used in the last year to see what it might cost on this plan, then consider “worst case scenario” what is the maximum you could owe out-of-pocket.
Tip: While a Health Savings Account (HSA) can be a really great way to cover potential out-of-pocket costs if you are on a high-deductible health plan, you may not have access to one or you may still be building up a savings balance. This is where an emergency fund — particularly a long-term one — can be a really great resource.
· Am I looking for ways to save up for future health care expenses? According to a 2019 Fidelity study, the average 65-year-old couple can expect to pay $285,000 for health care in retirement. Even if they are on Medicare, they will still owe money out-of-pocket for premiums, co-pays, deductibles, prescription drugs, and more. So is there a financially-savvy way to prepare for the high costs of health care in retirement? Possibly. If you have a high-deductible health plan, consider an HSA, since both you and your employer can contribute money to this account and the money rolls over from year to year. You can even bring it with you to your next employer, offering you another retirement savings opportunity while also helping you to pay for health care costs today.
Tip: While building up an HSA to hedge against future costs is a great opportunity, I’d suggest taking full advantage of your employer’s retirement plan (including any employer match) before focusing on building up this account.
· What other benefits are included? I’m amazed at how the suite of benefits for different health plans have grown. Many now include dental plans, vision plans, financial incentives for healthy behavior (like getting in 7,000 steps each day on your Fitbit), fitness center discounts, telemedicine (where you can visit with a physician via video chat or even text), or mental health benefits. Take a look at what’s included. Are these benefits you would actually use?
Tip: People sometimes get hung up over whether or not their plan includes a vision benefit. As someone who has a high vision prescription and needs to visit the optometrist at least once a year, I get it! Currently, my plan covers my eye exam but offers no discount for glasses or contacts. Instead of depending on my health insurance to offset those costs, I’ve used my HSA instead. If there’s a key benefit that’s not included in your insurance, see if there are other ways you can covers the expense.
· What if the unexpected happens? Whether you’re shopping around for a new insurance plan or not, this is an important thing to know. Ask your insurer what process you’ll need to follow if an unexpected medical situation comes up. With some plans, you have to call your doctor first before you visit the Emergency Room. With others, only a specific network of providers may be covered if you need care while you’re traveling. Know your options so you can take full advantage of your coverage — and avoid the pitfalls of an unexpected big bill.
Tip: As I mentioned earlier, many plans are now offering telemedicine options so you can speak to a physician via phone, video chat, or text. These options can often give you expedited, personalized service for a fraction of the price of running over to urgent care or the ER. Get familiar with these options now. Sign up for the program, download any apps, and/or program the number into your phone so they will be ready and waiting if you need them.
This Thursday, Feb. 20, I’ll be going Live on Facebook at 8pm Central to debunk five health care myths. Only have Instagram? Don’t worry — I’ll be posting the recording to IGTV later.
P.S. Procrastinators, if you live in the Twin Cities and still haven’t signed up for my Love & Money brunch on Feb. 29, now is the time! There are just a few seats left. I’ll help you increase your financial confidence, ease your money communication, and gain clarity on where you are today and where you’re going. You won’t want to miss this!