Medical Insurance

Making the Right Choice

How do you know which plan is best for you? There is no best plan for everyone. If there were, there would probably be just one plan. Determining which plan is the better choice for you involves evaluating the costs and features of each plan.

Cost

Features

  • Given your age, family status, dependant responsibility, and you and your family's medical history, which plan is better suited to keep your total out-of-pocket costs lower?
  • Total out-of-pocket costs include the annual premium, the deductible, and coinsurance up to the OOP limit plus medical expenses not covered or reimbursed under your plan.
  • How do the features and benefits of the plans compare?
  • Who are the doctors in the plan?
  • Are the doctors qualified?
  • Are the services convenient to me?
  • Do I have a choice of doctors?
  • Do I have to be bothered submitting claim forms?

There are some things you should look at closely:

  • Premium. How do the annual premiums compare among your plan options? Don't necessarily choose the plan with the lowest premium. If you anticipate that your medical expenses for the year will be very high, choosing a plan with a higher premium will typically keep your plan out-of-pocket expenses lower. If you or your family members make visits to doctor's offices frequently, a PPO or HMO can be advantageous over a traditional indemnity plan. If you rarely see your doctor, keep your monthly premiums low.
  • Deductible. The higher the deductible, the lower the premium. Your employer may offer you the same plan with different deductibles. If you're young and in good health, it generally pays to take a higher deductible. As you get older, your odds of illness and using medical care increase. Your annual income may increase too. Consider lowering your deductible if it makes economic sense. Keep in mind that some point-of-service plans offer lower deductibles when you use in-network providers.
  • Coinsurance. The higher the coinsurance (the more the insurance company pays), the higher your premium. As with deductibles, some point-of-service plans have higher coinsurance when you use an in-network provider.
  • Out-of-Pocket (OOP) Limit (maximum). This is the maximum amount of money that comes out of your pocket for covered expenses in a plan year. If you have a large family with a poor medical history, look for plans that have low OOP limits.
  • Lifetime Maximum. The new health care law prohibits insurance companies from imposing a lifetime maximum on the amount they will pay per individual. This prohibition is designed to protect those with catastrophic or life-long illnesses who risk going deep into debt after their insurance providers stopped paying.

You should also consider the plan features and benefits:

  • Freedom to Choose your own Doctors. If a PPO, HMO, or CDHC plan is offered in addition to a traditional group plan, don't feel compelled to choose the traditional group plan just to keep your existing doctors. Check the plan's directory of physicians or call your doctors to see if they belong to the plans you are considering.
  • Preventive Care/Well-Baby Care. Do you have a physical annually? The cost of an annual physical can be a few hundred dollars. PPOs and CDHC plans typically cover certain preventive care procedures. HMOs typically cover preventive care at 100%. Do you have a newborn? HMOs have no charge for pediatric care; PPOs and CDHC plans also cover well-baby visits.
  • Prescriptions. What kind of provisions does the plan have to cover prescriptions? Does the prescription plan lower your out-of-pocket cost? Does it include an annual deductible and reimbursement plan? Or does it require only a small copay? Can you order bulk quantities through a mail-order service? Are the pharmacies that participate in a network plan convenient to your home or workplace?
  • Other Major Services. You may also want to compare private duty nursing, skilled nursing benefits, home health care, hospice care, and mental health and substance abuse (including alcohol abuse) services. Most plans limit the number of days for skilled nursing and home health care. Outpatient mental health/substance abuse services generally have lower coinsurance and limit the annual covered expenses; inpatient mental health/substance abuse services usually limit hospital stays to 30 days and have low lifetime maximums. If you or someone in your family has a history of mental illness or alcoholism, review these plan limitations carefully. They can vary significantly among plans.
  • Non-Traditional Services. If you are inclined to see chiropractors or acupuncturists, or seek other non-traditional treatments, check the plans to see what is covered.

Here are some other general considerations:

  • Many PPO and CDHC plans act like point-of-service plans and pay benefits to doctors who are not participating in the plan. So, even if you want to use a doctor who is not a member of the network, you will likely still receive some reimbursement for the charges, although you should check the plan for the specifics.
  • See if any company-sponsored plan provides post-retirement medical coverage. Some company plans either provide employees with post-retirement medical coverage or allow employees to purchase this coverage in the group plan. This benefit can be extremely valuable.

Deciding on the type of plan option that is best for you also depends on your marital status, age, dependents, and general health. Let's look at each category separately.

Single

If you're young and in good health, consider the plan with the lower premium. As you get older and visits to doctor's offices become more frequent, consider switching to a plan that lowers your overall out-of-pocket costs.

Single with Dependents

If your dependents are young and in relatively good health, a PPO or CDHC plan with a higher deductible can be a wise choice. If you have dependents who need medical care regularly, an HMO may be the better choice.

Married

If you're young and married, and in relatively good health, keep your monthly premiums low. If you're a two-earner couple, review the cost of each plan as well as the plan features and benefits to determine which spouse's plan to select. As you get older and you require more frequent medical attention, consider switching to a plan with total lower out-of-pocket costs, since your risk of a major illness increases with age.

Married with dependants

Lower premiums with higher deductibles and higher out-of-pocket costs are for those younger families with no major medical problems. If you have two or more dependants and use doctors frequently, you might want to consider an HMO because it emphasizes preventive care and typically pays for services at 100%. If you're a two-earner couple, review the financial components of each spouse's plan as well as the plan features and benefits to determine which spouse's plan to select.

No one can predict what medical services will be needed in the future or how much those services will actually cost. You can, however, estimate the cost of basic or routine services, such as an annual physical, allergy shots, or physical therapy. You can also estimate the cost of a planned, major (non-emergency) service such as childbirth or a hip replacement.

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