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?
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
This means adding these three items together:
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
Basic Healthcare Benefits Glossary
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 another 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.