Greg from Thrift Genuity and I decided to have a little fun today and trade blogs. I’ve got a post over at his site and below is an awesome guest post from him. We hope you enjoy it and learn something new!
My name is Greg and I run ThriftGenuity. I am a 30 something-year-old business person, guitar teacher, performer, soccer referee, handyman, and avid runner living. I wear these hats for my goals of becoming financially independent and be as marketable as possible in today’s ever-changing economic environment. I make sure that all things I engage in are helping me reach this goal by either making or saving money in some way and teaching me something new in the process. I have found that an open mind and a can-do attitude can go a long way in achieving a certain level of financial independence and in life in general.
The financial pitfalls of health care and health insurance can be tricky to navigate. If you don’t understand your policy or don’t have enough coverage, it could cost you thousands of dollars. On the other hand, you could spend more than is needed by getting coverage that you likely won’t use. I work in the health insurance industry and witness many people pick what seems safe and don’t really pay attention to the options. I also get questions from friends and family that reminds me that not everyone spends their days handling policies and may not know all of the questions to ask. Knowing the difference between policies will likely become more important with changes due to health care reform. Here are a list of questions to ask yourself when choosing which policy is right for you and your family.
Can I mix and match coverage?
Take a look at the premium price of an employee only policy and an employee/spouse policy and a family policy. You will likely notice that the premium for the employee only policy is much less. Basically, the insurance company does not want to take on the liability of an employee’s family, so the premium goes up. So, if you and your spouse both work, compare the premiums of putting the whole family on a policy vs. putting the children on one spouse’s policy and the other keeping an employee only policy. It might also make sense to put the husband on the employee only policy with less coverage since, in most cases, he will end up going to the doctor the least.
Should I pick an HMO or PPO?
The main difference between and HMO and PPO is you must stay in network with an HMO, otherwise, you have no coverage. Also, HMO’s are typically gatekeeper plans. This means your care must be coordinated through your primary care physician. Unless you have a doctor that you know is not in the network, it typically makes more sense to go with an HMO.
Two very important things to remember about out of network coverage with a PPO; first, the coverage is based on a usual and customary rate and the physician can charge you over that (this is because they do not have a contract with the insurance) and second, deductibles and coinsurance for out of network coverage is completely separate from in network deductible and coinsurance
So for example, if you have a PPO policy that has a $1000 in network deductible and a $2000 out of network deductible and you met the $2000 deductible for an outpatient surgery for your child, if you then go to in an network physician for follow up, you are still responsible for that $1000 in network deductible.
Do I want a plan with a deductible or not?
It is becoming more common for plans to have deductibles. Even HMO’s have deductibles in many cases. In general, just like car insurance, the higher the deductible, the cheaper the premium. You must assess what your family’s medical needs will be for the year and if the savings in premium won’t be wiped out by meeting the deductible. Another thing to pay attention to is what types of services are subject to the deductible. Many plans cover preventive visits with only member responsibility of a copay. If this is the case, you may give more consideration to the higher deductible plan if you do not expect any major medical expenses for the year. Finally, if you go with a plan that has a deductible, make sure you have enough money in your savings to cover the deductible if something happens and you need to cover it before your benefits kick in.
Do I want the HRA, HSA, or FSA plans?
I am a big proponent of the HRA, HSA, and FSA options. HRA’s are typically bundled with high deductible plans. Any expenses you have, you can use the HRA money to cover your expenses. What I especially like about the HRA is that the money rolls over from one year to another. This means that there is the potential that you can accumulate enough money in the HRA to cover your deductible if something catastrophic happens. The HSA and FSA can be used for a wider array of expenses, but must be spent within the year. Check out the FSA store to learn more about what is covered and how to use the funds.
What is my risk tolerance?
Ultimately, your health insurance choice comes down to how much coverage you need to feel secure. No amount of premium savings is worth losing sleep over. Run your numbers, be realistic, and then choose what makes sense. The purpose of insurance is to cover you for unexpected occurrences and only you know how comfortable you will be if an unexpected occurrence happens.
Have you reviewed your policy choice? Are you choosing the coverage that is right for you?