Smart shopping pays when choosing a health care plan

While lawmakers in Washington debate the long-term impact of national health care reform, many Americans face a decision with immediate impact: selecting a health plan for the coming year.

Most employers begin "open enrollment" for the next year's insurance plans in the fall. Many companies offer two or more choices for health plans, which can make choosing a policy intimidating.  

Before selecting a health plan, it is important to make a careful assessment of the overall health of yourself and your family. Consider any potential upcoming procedures, then match that assessment against the available plan options. Review your health care records from the previous year and ask yourself questions such as: Do you have a condition that requires regular doctor visits or prescription medications? Do you anticipate any surgeries or procedures in the next year? Do you have a family of history of health conditions that require regular monitoring or medical care? To help determine the lowest total plan cost, you must consider benefit levels (i.e. co-pays), monthly premium rates and out-of-pocket costs.

In recent years, the health insurance industry has seen a significant rise in the use of health savings accounts (HSAs), which are paired with higher deductible plans and lower premiums. Taking inventory of medical needs will help determine whether a higher-premium PPO plan or a higher-deductible HSA plan is the right choice.

For most younger, healthy individuals, a health savings account should save you money nine out of ten times. Though you may pay more upfront for individual doctor's visits and procedures, you will pay less over the course of the year in premium payments.

The right type of plan can also vary depending on financial habits and style of spending. Someone who has the discipline to closely track expenses and receipts may be better suited for an HSA, while someone who is less diligent with oversight might be better off with a more traditional PPO plan.

If you are dissatisfied with the coverage offered by your employer, you should consider individual coverage. With an increasing number of cutbacks by employers in the down economy, some have reduced subsidies for dependents, in which case shopping for individual coverage may provide you with more cost-effective options. Also, many employers now provide a fixed allowance or Health Reimbursement Account (HRA) for employees to buy individual insurance or provide them reimbursement for qualified expenses.

Regardless of whether you have an employer-sponsored plan or individual coverage, it is important to take charge of your health care planning and be a smart shopper. Even if your provider remains unchanged from the previous year, benefits can change annually. Be sure to review the benefits materials thoroughly. If you have questions, contact your benefits broker. He or she should know the benefits of your plan and be able to help you make the best decision.  

Knowing these key terms can help employees make informed decisions about health insurance:

HMO: A health plan with no out-of-network benefits that only pays network providers for services. HMOs generally have lower deductibles and co-payments at time of service, but higher premiums.  

PPO: A health plan that offers benefits both within and out-of-network but comes with a higher deductible. In general, PPOs offer more options than an HMO plan and can be beneficial for those with regular health needs beyond an occasional doctor's visit or prescription.

HRA: Health Reimbursement Account is an employer-funded promise to pay for eligible expenses, often using a debit card. Generally, a fixed amount is available before traditional insurance coverage begins, but sometimes these funds are made available to help employees purchase their own individual plans.

HSA: Health Savings Accounts provide eligible persons with the ability to make tax-deductible contributions to cover health care costs. The HSA must be paired with a qualifying high-deductible plan. HSAs have lower premiums that help fund the HSA, which is used to pay for services until the deductible is met. Often, employers will aid policyholders by making a contribution to the health savings account of employees. While an HSA requires more planning and account management on the part of the policyholder, it can often result in overall savings for younger, healthy individuals.

Deductible: A pre-set dollar amount that a policyholder will spend before insurance covers the majority of medical expenses. Generally, deductibles run on an annual basis by calendar year.

Out-of-pocket maximum: The total amount that a policyholder would be asked to pay in a coverage year, usually including deductible and co-insurance. Once an out-of-pocket maximum is reached, a policyholder will receive 100 percent of services paid in full by the insurance company, with the exception of co-payments and prescriptions.