"I JUST want to go to the doctor. How hard could it be?"
Sound kind of like you? Good. Hopefully this will provide some clarity. Health Plans are all about helping you cover the cost of going to the doctor, getting prescriptions filled, emergency room visits, etc. Simple as that - so why do they appear so daunting? Well, there are a couple main reasons...
- Commitment. A health plan doesn't go away. Yes, locations and providers may change, but the structure remains for life. Tell yourself that's a good thing, because it is. Taking care of yourself should be a commitment.
- Effort. Pat yourself on the back for reading this, but there's more work to be done. Do some more research. Look into what options would best suit your health care needs and then compare what you find to what benefits other options hold. The answer is not always obvious, so there is a level of doubt.
- Uncertainty. There's no one-step, this-is-so-simple-look-at-how-not-stressed-I-am approach. Any plan you choose will require you to determine which you think might work best.
"But why can't someone just tell me which is the right choice?"
Nobody knows for certain what to expect in the coming moments of your life, so the best your peers and mentors can provide is an educated guess. You can make a choice based on cost, depth of options, or whether or not you want a physician to be the middle-man. We're going to look at the three most common to give you an idea of what's out there: HMO, PPO, & HDHP.
The HMO and PPO Twins
Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO) are the twins of the health plan universe. There isn't one that is necessarily better... they were raised the same, but have different personalities.
- Who they hang with (Health Care Network)
A health care network is comprised of a group of doctors, hospitals, specialists, and other health care providers... friends, in this example. HMO and PPO both have a similar group of friends (In-Network); although PPO has more friends (provider options) in general. While they both have valuable acquaintances that can provide help (Out-of-Network), they tend to just stick to their friends... as friends ask for less in return.
- How they behave (Control)
HMO is equally as social as PPO; however, they are attached at the hip with their best friend (Primary Care Physician) and consult them before making any decisions.
PPO likes all their friends equally, so they are pretty carefree when it comes to making decisions on who they hang out with.
To avoid confusion, we'll end the twin analogy here. When it comes to what these plans will cost you, here are terms that apply to both plans:
- Annual Deductible: Amount that an employee pays before insurance starts paying.
- Monthly Premium: Amount paid whether care was received or not.
- Co-payment: The employee's portion of payment upon receiving a service.
- Co-insurance: Percentage of the medical expense after deductible is paid.
View our What Is the Difference Between HMO and PPO? infographic for a more visual explanation of what we just covered.
High Deductible Health Plan (HDHP) with a Health Savings Account (HSA)
To truly wrap your mind around having a HDHP with a HSA... think checking account - because it essentially is one. You get your own debit card/checks and everything. In a nutshell, you have to pay a finite amount out of that account first before insurance kicks in its share. There are three major advantages: lower monthly premiums, no Co-payment, and tax advantages.
Here's an outline to jump-start your brain:
How to get started:
- Enroll in a qualifying HDHP with your employer
- Establish a Health Savings Account at a qualified financial institution
To be eligible, you must:
- Already have a qualified HDHP
- Not be covered by Medicare or other health insurance
- Not be a dependent on someone else's tax return
- Within the annual allowable limits, choose how much to contribute to the HSA funds
- Funds deposited are tax-free, grow tax-free, and funds withdrawn (for eligible expenses) are also tax-free
- Funds can be used for the participant, spouse, and dependents
- If funds are used for non-eligible expenses: Funds are taxed and penalized (but can be forgiven if returned before tax-day)
- Any unused funds roll-over to the next year
- Ages 55+ can make "catch-up" contributions
How funds are applied:
There is a general procedure, just like with HMO or PPO:
- After a service, the doctor will submit a claim to the insurer
- Once the insurer has the claim, they will apply any eligible discounts
- The insurer will send the official bill to be paid with the special HSA debit card or HSA check
- The amount paid will count towards the annual deductible
If the HSA has insufficient funds, then the amount will need to be paid out-of-pocket; however, the out-of-pocket expense can be reimbursed once the HSA has sufficient funds. This does not apply if the deductible has already been met.
- The money always belongs to the participant. If the participant changes jobs or health plans, the account stays with them. The unused funds will continue to grow tax-free.
- Save receipts as proof for the IRS or the insurer.