When taking a new job, some offerings—like salary, schedule and vacation—are clear and easy to understand. When it comes to healthcare benefits, though, things get much murkier. You already know that coverage is important, but with all of the various plans and countless details to consider, weighing your options can quickly become overwhelming. Between the rising costs and complexities, how do you know you’re getting the most out of your employer’s benefits plan?
Why Are Healthcare Benefits Important?
Health insurance (or medical insurance) is intended to protect you from the risk of financial loss when you discover that you have a need for medical care, explains Marianne Nicoletti, the technical training manager for Oswald Companies, an insurance brokerage and risk management firm.
When purchasing healthcare services, most people aren’t aware of the cost of care until after it has been received. “If you think about it, there is no other product in the world that you would buy without knowing the price prior to the purchase,” notes Nicoletti. “It would be like going to a restaurant and opening a menu to find that there are no prices listed next to the entrées, but you go ahead and order anyway, because you need to. Imagine your surprise when the waiter hands you the bill.”
Health insurance protects you against this risk, she explains, because it sets a limit on the amount you would need to pay out of pocket in any given calendar year.
What happens if you need medical care but don’t have insurance? Nicoletti says you would run the risk of being denied care at your preferred facility. “If you go to one of the major hospital systems in your area and are unable to show your insurance card, they will send you to a public health system,” she says. “In most cases, outside of life- or limb-threatening situations, it isn’t illegal for a hospital to turn a patient away.”
And regardless of where you go for treatment, you will sign a statement at check-in that indicates you are financially responsible for the care you receive regardless of the status of your health coverage.
What to Consider When Choosing a Plan
For those who aren’t well-versed in the intricacies of healthcare coverage, it can be confusing and overwhelming to weigh all of the options. To make sure you choose the right plan for your and your family’s needs and budget, Nicoletti says there are three key factors to consider.
First, look at the cost of the insurance on a monthly basis, as this will have the biggest impact on your cash flow.
Next, Nicoletti says to determine what you are actually buying when you obtain the coverage. Ask your human resources representative about how the plan works and whether there are any limitations on the policy. You’ll also want to find out which medical providers will allow you to receive the highest level of benefits and whether there are rules surrounding which prescriptions require prior approval.
Finally, spend some time thinking about how you intend to use the plan. “The best indicator of this is to look at your personal medical and prescription bills over the last two years, and then consider any known upcoming services,” Nicoletti says. “Plug each of those scenarios into a spreadsheet (or write them down on a piece of paper) to show how the potential new coverage would have affected those bills.”
This means adding these three items together:
1. Cost or premium on a monthly basis
2. Estimated monthly co-payments for office visits or prescriptions
3. Anticipated amounts you will pay for services under the deductible (for the most part, you can expect to pay the deductible for any hospital-based services, in-patient hospital stays, outpatient services and lab and diagnostic services)
Nicoletti says you should stop adding to #2 and #3 if these dollar amounts will add up to more than the out-of-pocket limits.
If you have a choice between a few different health plan options, try running the above exercise for each one. The result will show which one will be a better option based on the amount you pay for both the healthcare coverage and the cost of services.
“Too many times, we find that employees are paying a bundle for health insurance that they don’t need,” she says. “They just know that they want the best coverage, but I would argue there are many ways to save money by evaluating higher-deductible options.”
When enrolling new employees in a health plan, Nicoletti urges them to not automatically give the insurance company as much money as possible. Instead, she recommends saving the difference in premium between two plan options, taking on the higher deductible and then using money from savings to pay for any medical bills that arise. That way, if you are fortunate enough to not have medical bills that year, you get to keep the money.
“When you buy the most expensive policy with the lowest deductible and then never go to the doctor, you’re throwing your money away,” she warns.
Tips & Tricks to Get More Out of Your Health Benefits
Check with your HR provider to see if your employer offers any discount programs for services that are not covered. Also ask about the availability of price transparency tools, which will allow you to estimate your medical bills for upcoming services.
Consider utilizing HSAs (health savings accounts) and other flexible, consumer-driven health plans. With those plans, all services count toward the deductible and there are no co-payments.
Always check to see if you have some sort of coverage for “telehealth,” which is essentially video-chatting with a physician. This allows you to describe your symptoms and get medical advice for as low as an office visit co-payment. “This could be a better option for the day-to-day care you need outside of normal doctor's office hours,” Nicoletti says. Many carriers also offer a 24-hour nurse line, where you can call a nurse any time of day and ask for medical advice.
If you are not comfortable with video chat, you can seek immediate care at a “minute clinic,” which are essentially mini doctors’ offices found in local pharmacies like CVS and Walgreens.
Read the explanation of benefits that is mailed to you after every medical service. In this document, the insurance company will explain the policy provisions and detail how they paid the provider.
You will also receive a bill (or bills) after each medical visit. You might receive different bills from different providers. For instance, if you need surgery, you might receive one bill for the surgery itself, another for the lab tests you got prior to surgery and another bill for the ensuing hospital stay.
Most employers offer life insurance and disability coverage to protect you and/or your family in the event of death or injury. Make sure to sign up for this coverage so if the unthinkable occurs, you’ll have one less thing to worry about.
Basic Healthcare Benefits Glossary
These definitions have been adapted from a glossary on the website of the U.S. Office of Personnel Management.
Co-insurance: A percentage of a healthcare cost—such as 20 percent—that the covered employee pays after meeting the deductible.
Co-payment: The fixed dollar amount—such as $25 for each doctor visit—that the covered employee pays for medical services.
Deductible: A fixed dollar amount that the covered employee must pay out of pocket each calendar year before the plan will begin reimbursing for non-preventative health expenses. Plans usually require separate limits per person and per family.
Formulary: A list of prescription drugs covered by the health plan, often structured in tiers that subsidize low-cost generics at a higher percentage than more expensive brand-name or specialty drugs.
Health savings account (HSA): HSAs may be opened by employees who enroll in a high-deductible health plan. Employees can put money in an HSA up to an annual limit set by the government (for 2019, the limit was $3,500 for self-only coverage and $7,000 for family coverage), using pre-tax dollars. Employers may also contribute funds to these accounts within the prescribed limit. HSA funds may be used to pay for medical expenses whether or not the deductible has been met, and no tax is owed on funds withdrawn from an HSA to pay for medical expenses. HSAs are individually owned and the account remains with an employee after employment ends.
High-deductible health plan (HDHP): An HDHP features higher annual deductibles (for 2019, a minimum of $1,350 for self and $2,700 for family coverage) than traditional health plans, such as a preferred provider organization (PPO) or a health maintenance organization (HMO) plan. With the exception of preventive care, covered employees must meet the annual deductible before the plan pays benefits. HDHPs, however, may have significantly lower premiums than a PPO, HMO or other traditional plan.
Health reimbursement arrangements (HRAs): Unlike HSAs, only an employer may fund an HRA, and the funds revert back to the employer when the employee leaves the organization. HRAs are not subject to the same contribution limits as HSAs, and they may be paired with either high-deductible plans or traditional health plans.
In-network: Doctors, clinics, hospitals and other providers with whom the health plan has an agreement to care for its members are considered in-network. Health plans cover a greater share of the cost for in-network health providers than for providers who are out-of-network.
Out-of-network: A health plan will cover treatment for doctors, clinics, hospitals and other providers who are out-of-network, but covered employees will pay more out-of-pocket to use out-of-network providers than for in-network providers.
Out-of-pocket limit: The most an employee could pay during a coverage period (usually one year) for his or her share of the costs of covered services, including co-payments and co-insurance.
Premium: The amount that must be paid for a health insurance plan by covered employees, by their employer or shared by both. A covered employee's share of the annual premium is generally paid periodically, such as monthly, and deducted from his or her paycheck.
For more information about open enrollment, visit https://www.shrm.org/openenrollment.
