It’s that time of year when we all seem to be mired in alphabet soup – and not the kind you eat. Open enrollment for benefits plans is here, and that includes choosing health insurance coverage.
As employers and insurers shift more of the cost to users, the annual choice gets harder, whether you buy insurance through your employer, the Affordable Care Act exchange or one of the state exchanges.
“People tend to use richer plans,” says Tracy Watts, a senior partner at Mercer. “There’s a little bit of a fear factor. We would all be better off if we made better decisions about our health spending.”
These days, the choice of PPO vs. HMO vs. EPO vs. POS vs. any other option may matter less than the specific plan you choose, since there are no standard definitions, and insurance is regulated by state law.
“Those alphabets have to do with the tightness of the networks in the plan,” says Karen Pollitz, a senior fellow at the Kaiser Family Foundation. Insurance companies can no longer refuse to insure those with pre-existing conditions. Instead, they are tightening provider networks by including fewer doctors and changing how they cover drugs, especially expensive drugs.
For some people, a higher deductible and a lower premium may cost less than a higher premium and a lower deductible. And a $10 drug in one plan may be a $100 drug in another.
In general, these are the types of plans offered:
- PPO (Preferred Provider Organization): You usually do not need a referral from a primary care physician to see a specialist and some coverage may be available for out-of-network care.
- HMO (Health Maintenance Organization): You need a referral from your primary care physician to see a specialist, and there usually is no out-of-network coverage.
- EPO (Exclusive Provider Organization): You usually do not need a referral from a primary care physician to see a specialist, and there is usually no coverage for out-of-network providers or out-of-network coverage is limited.
- POS (Point of Service): These plans may require referrals from a primary care doctor to see a specialist, but some out-of-network coverage is available.
Some of those who buy their health care coverage through the ACA are finding that their only options are HMOs or EPOs.
Every plan is required to provide a standard Summary of Benefits and Coverage, which is usually about eight pages. Lining up those summaries for each plan side by side is a good way to start evaluating your options.
Once you’ve found a suitable plan, it is a good idea to call your doctors and verify they are still participating, and to call your human resources department or the insurer to make sure that you have understood all the fine print. Those shopping on the ACA or state exchanges can get free advice from navigators. If you’re self-employed, you can also consult an insurance broker.
Here are 12 questions to ask when choosing among the plans:
What are the costs of the drugs I take regularly? For those who take expensive medications, the drug formularies may be the most important part of choosing an insurance plan. If the drugs you take are in a high tier, “You could be paying $1,000 out of pocket every time you go to CVS,” Pollitz says. “We do see some pretty aggressive tiering in employer plans.”
Are my doctors and hospitals included? Each plan has its own network, so not all Aetna or United HealthCare plans are the same, even if you’re comparing an HMO plan with another HMO plan. That means you need to research each plan you’re considering.
What is the deductible? This is the amount you must pay out of pocket before your insurance starts covering any costs. Most plans have both an individual deductible and a family deductible. “That’s getting high,” Pollitz says. “It’s typical now of health plans offered at work to have deductibles of more than $1,000 per year.”
What is the out-of-pocket limit? Each insurance plan has a limit in how much you have to pay out of pocket each year, with limits for individuals and families.
What are the copays? How much do you pay each time you visit a doctor or hospital? Some plans allow you to receive care with copays before you have reached your deductible.
Is there coinsurance? With some plans, once you have reached your deductible you are required to pay coinsurance, usually a percentage of the negotiated cost, until you reach your out-of-pocket limit.
Should I choose a Health Savings Account? Some employers offer high-deductible health plans with an HSA, an option also available via the ACA exchange and insurance brokers. With an HSA, you can contribute pretax dollars to an account earmarked for health care. If you don’t spend the money, you can use it in future years, including to pay for medical care in retirement. Your employer may even make a cash contribution to the HSA. For some, the lower premiums make these plans a good option, especially if you want to take advantage of the tax advantages – that’s if you actually put the money in the HSA.
Can I go out of network? Some plans will pay a percentage of the cost when you visit out-of-network providers. Not only will you have to cover the copay or coinsurance for out-of-network providers, you may have to pay the difference between what your insurer decides is the customary charge and what the provider charges. “You are losing the discount that your insurance plan would negotiate,” Pollitz says.
Will I be subject to balance billing? With some plans, the amount your insurance agrees to pay is all you can be billed. Other plans allow the provider to charge you for the difference, a concept known as balance billing. You also may be subject to balance billing when you get emergency treatment out of network. Some states restrict balance billing by managed care networks, and you can see your state’s rules in a Kaiser Family Foundation chart. You may need to call the insurance company to find out when you may be subject to balance billing.
Am I eligible for an ACA subsidy? People who buy their health insurance through the ACA exchange or state exchanges can get a subsidy that will lower their premiums if their income is between 100 percent and 400 percent of the poverty level, with the exact figures varying by state. In states that expanded Medicaid, there also are options for those with incomes below the poverty level. If you guess your income wrong, you can get a tax credit or pay more in taxes when you file your tax return. However, if your adjusted gross income at tax time exceeds 400 percent of the poverty level, you may have to repay your entire subsidy.
Am I eligible for an ACA reduced cost-sharing plan? If your income is between 100 percent and 250 percent of the poverty level and you buy your insurance via the ACA exchange or state exchanges, you are eligible for special Silver plans with reduced copays and deductibles. Note that you will not see those plans unless you estimate your income at that level while you’re shopping.
Should the family members use different health plans? If both members of a couple have access to health insurance at work, it might make financial sense for each to choose his or her own policy, because employers often subsidize employee coverage but not family coverage. The children can go on the policy that’s the best fit.