I’ve worked in the insurance industry for nearly 3 years now, and without fail, every year I have a friend, or five, who takes on full-time employment ask me, “what plan should I take for health insurance?” So I thought I would try to explain a few key concepts for all to enjoy.
With Open Enrollment right around the corner for the National Healthcare Exchange – otherwise know as the Insurance Marketplace or “Obamacare” – I thought it would be beneficial to explain what all of these crazy healthcare terms means and what it looks like for my fellow 20-somethings to take ownership of their healthcare.
Whether you have a benefits package from your employer, or you’re in search of a health plan via the online marketplace, there are a few things to take into consideration before deciding on a plan that’s right for you:
- Healthcare Utilization
Lets start with Network. Most individuals have the option between an HMO (Health Maintenance Organization) and a PPO (Preferred Provider Organization).
An HMO puts more emphasis on the role of the Primary Care Physician (PCP). Think of your PCP as your healthcare quarterback. PCP’s coordinate your care in the event of a hospitalization or, if you need to see a specialist, they provide the referral – or permission slip – for you to see that doctor. There is a culture of health and wellness built into the HMO methodology as well.
In a PPO, these referrals are not typically needed and most individuals have more freedom when it comes to what doctor they want to see and when. The unfortunate reality to PPO Networks is they are typically more money upfront due to the higher cost of maintaining these provider networks
Financial security is easily the most concerning factor when deciding on which health plan to purchase. Health Insurance was designed to protect people from potentially high costs of receiving care. From a financial standpoint, there are two components to look at – monthly premium and out of pocket expenses.
The monthly premium is the amount per month it costs to have access to health insurance coverage. A good comparison to this is with car insurance. Each month you pay a set premium amount in the event something happens to your car. The next thing to consider is out of pocket expenses, in this case a deductible. On most health plans, you’re required to pay a set amount of dollars out of pocket before the insurance plan begins to pay benefits. For example, if your plan has a $500 deductible, you would pay the first $500 out of pocket and then the insurance plan would begin to pay anything after that
The amount you pay in monthly premium is related to how much you can expect to pay in deductible.
Typically, the higher the deductible the lower the monthly premium. This is because you, the insured, takes responsibility for more risk of these health care expenses than the insurer does – meaning less money up front.
How often do you go to the doctor?
Some individuals are prone to seeing the doctor for one reason or another on a weekly basis. Others, however, can go years without seeing a doctor simply because they do not need to. In this instance, its not uncommon for someone to ask, “why do I need insurance if i never use it?”
At its core, insurance was built for the unknown. So its always important to carry insurance in some capacity or another. But, for someone to pay dubious amounts in monthly premium for a rich health insurance benefit they will never utilize wouldn’t make sense either.
Utilization of healthcare is also important when deciding which plan to choose because it is the single most important factor when choosing a health insurance plan that works for you rather than the other way around. Each individual case is special, so unfortunately there is no special equation. However with a few simple calculations you can come up with a financial balance of out of pocket expenses and monthly premium.
There has been a lot much negative attention over the topic of health insurance over the last 4 years, but just like any other consumer product in this country a little bit of research and education can save you a lot of time and frustration down the road.
In a later post, ill talk about starting a Health Savings Account (HSA) for those who really want to grab healthcare by the horns. In the meantime, you can read more here from my friends at Blue Cross Blue Shield of Michigan.
Until next time,