5 min read
Planning for Your Health
Know your choices before you pick an insurance policy.
One of your biggest financial risks is confronting unexpected expenses that you can’t afford, no matter how careful you are with your money. That’s why learning how to navigate health insurance could save your health and your bank account.
There is no way to predict what will happen; you may lead a lucky life without serious illness or accidents. But there is always the chance that you will have to confront a challenge that has serious financial ramifications. Having the right kind of insurance, in the right amounts, can make the difference between rising above catastrophe and being overwhelmed by it.
Health insurance isn’t optional. Ideally your employer offers healthcare plans as part of your benefits packages—or perhaps a choice of different plans.
If you have an employer plan you’re happy with, then it probably makes sense for you to keep your own coverage, even if you have a life partner who has coverage.
But if you have health insurance and your partner doesn’t—or the other way around—the first step is to find out if the uninsured person can be added to the insured person’s policy. There’s no guarantee a plan will offer partner coverage. If it does, the option may be available only for spouses, though some plans cover domestic partners. If your employer doesn’t offer the kind of coverage you need, it’s worth it to ask them to revise the policy.
If your employer doesn’t offer family coverage, check out organizations to which you belong, such as alumni groups or professional organizations. One of them may offer a plan that would meet your needs. You can also investigate the individual coverage that’s available from insurance companies or though the Affordable Care Act (ACA) in your state.
The ACA insurance marketplace is unsettled at the moment, but that doesn’t mean you should postpone getting insurance. Because coverage details vary state by state and based on your situation, it’s best to check out healthcare.gov for more information.
Employers pay an annual premium to an insurance provider offering a specific plan or group of plans. In exchange, the provider pays the healthcare costs for people insured under the plans.
Most employers pay a percentage of the premium and you pay the balance, which is deducted from your paycheck. The good news is that this money is pre-tax dollars, so it reduces what you owe on taxes. Employers typically pay a larger share than employees do. But if you can add your partner to your plan, you are likely to be responsible for more, or all, of the premium for him or her.
The majority of health insurance plans have a deductible. That’s the amount you have to pay yourself, out-of-pocket (OOP), before your plan will begin to pay its share of your healthcare costs. The premiums you pay to be covered don’t count toward the deductible.
In most plans, preventive services, such as cancer screenings and immunizations, are covered without cost to you, but they usually don’t count toward your deductible. Neither do services that your plan doesn’t cover, such as things like cosmetic surgery.
If you leave a job where you’ve had health insurance, you may be able to continue that coverage until you’re eligible for a new employer’s plan. It’s very expensive—typically you pay 102% of your employer’s cost for the insurance. And it’s not always handled effectively. But this option, called COBRA, is definitely better than not having insurance if you need medical care before you’re covered under a new employer’s plan.
One of the big issues with health insurance, in addition to being expensive, is that it’s complicated. There are multiple providers, each with several types of plans, each working differently from the others. That matters because you’re likely to find yourself in a position of having to choose among alternatives. To end up with a plan that works for you means you have to understand the fine print.
Managed care plans have a list of participating healthcare providers. The plan negotiates fees with its providers, and your cost for each visit to a provider is set by your employer’s plan. It could be a copay, which is a dollar amount, like $25, or coinsurance, which is a percentage of the total, like 10%. But if you use a provider who isn’t on the plan’s list, you’ll be responsible for a much higher portion of the cost and maybe even the whole amount.
Fee-for-service plans allow you to use any provider you wish. Your plan will pay a percentage, often 70% or 80%, of the cost it approves for a particular service. However, the cost it approves may be less, sometimes much less, than the actual cost of the service. So you could end up owing your coinsurance plus the amount that wasn’t approved.
High deductible health plans (HDHPs) are managed care plans with substantially higher deductibles than other plans but also lower premiums, sometimes much lower. The federal government sets the minimum allowable deductible each year and also the maximum amount you can be required to pay for covered services from your plan’s list of preferred providers. If you reach that maximum, the plan covers the full cost of any additional qualifying expenses.
If your HDHP meets federal standards by charging at least the minimum deductible the government has set for the year, you’re eligible to open a Health Savings Account (HSA). You contribute and in some cases your employer may contribute as well. Contributions are tax free as are withdrawals if you use them to pay qualifying expenses, such as medicines, eyeglasses or contacts, bandages, acupuncture—it’s a long list. Any amount you don’t spend in a calendar year can be rolled over for use in following years.
Many people face the question of whether or not to go with an HDHP. It costs less upfront, which is appealing. And putting money in an HSA seems smart. If you’re young and healthy, it may save you some money.
But you’ll want to know how you’d pay big medical or hospital bills if you needed medical care and hadn’t reached your deductible. And you should honestly consider whether you’d be tempted to skip seeing a doctor if you had to pay the full cost of the visit. That would defeat the whole purpose of having health insurance.