Health insurance is complicated. As someone who has been in the Human Resources field for over a decade, navigating through health insurance coverage is one of the most complicated things as an employee.
When we added our son to our healthcare plan, it got even more complicated. Between my husband’s and my company’s medical insurance, which plan is best to add our son to? Should we enroll him to both? Does he need dental insurance?
There are so many considerations when selecting the right healthcare plan for you and your family. If you’re feeling lost and confused on which healthcare plan is best for you and your family, you’re not alone.
This post will go into detail on how health insurance works in the United States and will provide you with an ultimate guide on health insurance plans so you can make the best choice for you and your family.
Types of Medical Plans
PPO (Preferred Provider Organization) vs. HMO (Health Maintenance Organization)
First, in order to narrow down your selection of healthcare plans, you must first consider which healthcare network you want to join. If you’re not in California state, then this will not be relevant to you so feel free to skip to the next section. If you are in California, this is an important point to consider because you have a few options to consider when it comes to deciding on a healthcare network. PPO stands for preferred provider organization and HMO stands for health maintenance organization. The main difference between a PPO and HMO are the network providers. California is the only state that offers an HMO through Kaiser Permanente. HMOs are typically lower cost, but you are limited to using only their healthcare network, in this case, Kaiser. PPO networks are much more broader and allow you to access to a wider range of healthcare provider networks. In addition, you can
Different coverage levels
Once you decide on which healthcare network you want to go with, you will likely have a few different levels of healthcare plans within each network to choose from. The main differences between each plan is their level of coverage including the deductible and out of pocket maximum. The more expensive healthcare plans will have lower deductibles and lower out of pocket maximums.
Most healthcare plans will cover preventative visits at full cost. The deductibles and out of pocket maximums are for procedures, doctor visits and exams beyond your annual physical. You will want to look closely at the deductible and out of pocket maximum for each plan to decide which level of coverage makes the most sense for you and your family.
What is a deductible?
In a nutshell, the deductible is the amount you will need to pay out of pocket before your health insurance starts to kick in. For example, if your deductible is $1,000, you will need to pay $1,000 in medical expenses from your provider until your insurance will start to cover any portion of your medical costs. Generally, the lower your deductible, the more richer (meaning more coverage) your healthcare plan is.
What is out-of-pocket maximum?
The out-of-pocket maximum is the most you will pay in a year for covered services. This means once you hit the out-of-pocket maximum for the year, your services will be covered at 100% by your insurance. Generally, the richer plans will have a lower out-of-pocket maximum so you will pay less out of pocket for medical services. However, these plans are generally more expensive so keep that in mind when selecting your healthcare plan.
In network vs. out of network providers
Every healthcare plan will have a list of in-network and out-of-network providers. Generally, in-network providers will have lower deductibles and lower out of pocket maximums since they are in contract with your healthcare insurance. This means it is highly recommended to stay within your network to reduce your overall medical costs.
High Deductible Healthcare Plan (HDHP) and HSAs
Most recently, high-deductible healthcare plans (HDHP) have become increasingly popular and offered by most employers. HDHP plans is essentially a low cost healthcare plan with a high-deductible. It’s a great option for those who have very minimal healthcare needs. The HDHP will likely be the most affordable option out of all the PPO plans, because it’s the only healthcare plan that allows you to contribute to a Health Savings Account (HSA), which is a type of savings account where you can set aside pre-tax dollars for eligible medical expenses. It essentially works like a 401K but for medical expenses. There’s a maximum contribution limit each year on how much you can contribute. For 2024, the maximum contribution is $4,150 for individuals and $8,300 for families. If you are 55 years old and older, you have the ability to contribute an additional $1,000 to your HSAs. The benefit of having an HSA is it follows you wherever you go and rolls over each year. So, if you leave your employer, your HSA stays with you so you can continue to use it for future medical expenses.
Dental & Vision Coverage
If you are enrolling in dental and vision coverage through your employer, it is likely you will have limited options when it comes to dental and vision coverage. Most employers will stick to one carrier for dental and vision coverage, which makes it more simpler for you. They also will likely only have at most 3 different coverage level options so there it’s much more simplified than medical insurance. You’ll just want to make sure you choose the right coverage and that your doctors accept your company’s insurance plan.
Other Healthcare Benefits
Flexible Spending Account (FSA)
A flexible spending account (FSA) is a great option if you anticipate major medical expenses in the coming year. Like the HSA, the FSA is a type of health savings account that allows to contribute pre-tax dollars towards eligible medical expenses. However, there are key differences to keep in mind about the FSA and HSA. Unlike the HSA, the FSA does not rollover after the year. It’s a use it or lose it plan. You also are not able to change your contribution mid-year like you could with the HSA. This means once you set the total amount of FSA funds you want to contribute for the year, you won’t be able to change it during the year unless you have a qualifying life event. FSAs are great if you are planning to get a major medical procedure such as orthodontics treatment or Lasik treatment done. I’ve used my FSA funds for both my Invisalign treatment one year and my Lasik treatment another year, saving me hundreds in tax dollars.
Dependent Care FSA
Dependent care FSA allows you to set aside pre-tax dollars towards eligible childcare, elderly care or other dependent care expenses. Since becoming a parent, we’ve been maxing out our dependent care FSA each year. In 2024, the maximum contribution limit is $5,000 for families. It’s such a great way to reduce your taxes and reduce your childcare costs. You will want to be sure to check the list of eligible expenses first to verify that your expenses are covered.
How to Make the Best Choice for You and Your Family
Now that we’ve covered the basics of healthcare insurance, it’s time to make a choice. It can be overwhelming to decide on a healthcare plan, especially when you can’t possibly predict what type of medical services you and your family will need over the next year. Insurance is all about managing risk. In order to manage risk, you first want to take an assessment of your risk exposure.
1. Assess your current health condition and your family’s health condition
The first place to start is to consider your current health condition. This will give you an idea of your medical needs. Generally, the younger and healthier you are, the less likely you’ll need high healthcare coverage. There are also other services to consider. For instance, are you planning any major surgeries over the next year? Have you or your family been diagnosed with a chronic illness? Are you and your partner planning to have more children in the near future? All of these factors are important to consider when deciding on a healthcare plan. If you are planning to have high medical care costs over the next year, you may want to consider higher healthcare coverage since you will likely be meeting your deductible quickly and will want to maximize insurance coverage. Keep in mind that you can also supplement with FSA if you are planning for a major service like I did with Lasik or Invisalign.
2. Compare your healthcare plan with your spouse’s healthcare plans
If you and your partner are both working for an employer, it will be worthwhile to compare your healthcare plans and run a cost analysis. Adding yourself as a dependent to your spouse’s health insurance coverage will almost likely be more expensive than adding yourself to your own insurance as an individual. Nevertheless, you should still compare coverage by looking into the deductible and out-of-pocket maximum for each of your plans.
The best way to calculate this is to look at the minimum you would pay and the maximum you would pay in a year for each healthcare plan. The minimum you will pay is the 12 monthly premium payments. The maximum you will pay is the 12 monthly premium payments plus your out-of-pocket maximum. Once you compare the minimum and maximum you would pay for each healthcare plan, this will help narrow down your choice.
3. Consider your child’s age and evolving healthcare needs
During last year’s Open Enrollment, we did not enroll our son for dental insurance because we didn’t think he would need it. For context, he’s now 2 years old. Once we found out that a few of his front teeth are at risk of cavities and his pediatric dentist recommended frequent fluoride treatment, we started to regret not enrolling him onto our dental plan. So always take into consideration your child’s age and whether they need additional coverage.
Hopefully this post has helped you make the best choice of healthcare plan for you and your family. I would love know what factors did you consider when deciding on a healthcare plan and were there any specific calculations you did that helped make your decision?
