Should I Change My Health Insurance Plan?
It’s that time again: open enrollment season. It’s the one time of year when you can choose to change your health insurance coverage through your employer or the state/federal marketplace. Between all of the terminology and plan options, choosing a health insurance plan can be confusing and stressful. Here’s what to know to make the decision easier:
What to consider before changing health insurance plans
Out-of-Pocket Costs
So many factors go into the overall cost of health insurance—that’s part of what makes it so tricky to choose a plan. Your total out-of-pocket costs will be the sum of all of these expenses:
Premium: This is the monthly amount you’ll pay for your health insurance.
Copay: This is the amount you’ll pay to see your doctor. Your co-pay to see a primary care doctor may be different than the copay to see a specialist.
Deductible: This is the amount you must spend on healthcare before your insurance kicks in to cover its share of expenses. Premiums don’t count toward your deductible and copays continue even after you’ve reached your deductible.
Co-Insurance: This is what you’ll pay for services once you’ve reached your deductible. It’s typically a percentage—for example, 20% coinsurance would mean you pay 20% of the cost and your health insurance pays the remaining 80%.
Out-of-Pocket Maximum: This is the most you are expected to pay out-of-pocket for your covered medical services annually. Keep in mind that if a service is not covered by your insurance, you’ll bear the full cost and it will not count toward your out-of-pocket maximum.
Provider Choice
Nothing is more frustrating than finding out that your doctor isn’t covered by your insurance plan, so ensuring your current doctors are in-network is key to keeping costs down if you don’t want to switch providers. To ensure that your providers accept the insurance you’re considering, call them directly to ask. Some types of insurance plans such as Preferred Provider Organizations (PPOs) still pay something towards out-of-network providers, but is it more expensive than in-network care. Also keep in might that some types of plans (Health Maintenance Organization [HMO] and Point of Service [POS]) require you to get a referral from your primary care doctor before seeing a specialist.
Medical Savings Accounts (HSA or FSA)
Health insurance plans with high deductibles allow you to contribute to a health savings account (HSA). This is money you can set aside tax-free for medical expenses intended to help cover higher out-of-pocket costs that you might have with a high-deductible plan. A flexible spending account (FSA) isn’t tied to your health insurance—your employer decides whether or not to offer it, but it can still be a tax-free source of savings to cover healthcare expenses. Just keep in mind that you shouldn’t contribute more to your HSA than you need in a year as the accounts are “use it or lose it.”
3 Questions to Ask Yourself Before Changing Health Plans
How much did you spend on healthcare last year? Start with what you know by looking back through your medical expenses from the last year. In retrospect, would you have saved money by going with a different plan? If you expect to have at least the same amount of expenses next year, that could be a reason to change plans.
Do you expect your medical needs to change next year? If you anticipate any major changes to your healthcare needs, take that into consideration. For example, if you know you’ll be having surgery or giving birth, you could benefit from a plan with a lower deductible.
Do you have an emergency fund or designated health savings? Insurance is all about mitigating your risk. If your savings wouldn’t cover your deductible or out-of-pocket maximum, consider switching to a plan with a lower deductible or out-of-pocket max to reduce the likelihood you couldn’t cover unexpected medical costs, even if it means paying slightly higher premiums.
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