Questions to Consider When Choosing a Health Plan for Your Family

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?

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40 Comments... Read them below or add one of your own
  • Your Daily Finance July 1, 2013

    One thing I have found is that a lot of companies want to know if both you and your spouse have insurance. If there is an option for both they require you both to be on your own plans. That makes it harder to always be on the family plan with your spouse. We tend to go with the higher deductible.

    • Greg July 1, 2013

      You’re right, many companies either charge you more for your spouse if they have another option or don’t let them on at all. Not that I am advocating this, but they have very little way of tracking it. I go with the higher deductible as well.

      • Your Daily Finance July 2, 2013

        A few jobs I worked with would actually call your spouses company and check. Many times the required you to put your spouses company name on the application. Not saying they all do but some check. I have my own company now and it doesn’t matter but I see your point.

  • Laurie @thefrugalfarmer July 1, 2013

    Great article, Greg. We tend to go with the higher deductible plan too, and then work hard to choose healthy habits and use safety gear (such as bike helmets) to minimize our risk of sickness and injury as much as we can. This technique has really helped us to spend less on healthcare. I love what you said, too, about risk tolerance. That is a crucial component of healthcare choices.

    • Greg July 1, 2013

      Thanks Laurie. I have the same philosophy and I love it even more when there is an HRA tied to a higher deductible plan to cover my preventive visits.

      I once dealt with a customer who wanted to save money and kept asking me what her best option was. I kept reminding her that the “best option” depends on your goals and risk tolerance. If your goal is to save money and have the extra risk than this, if minimizing risk before saving money, then that.

  • My wife’s employer offers two plans, both HDHP PPO’s. I always thought it was ridiculous to only offer coverage where the deductible can be as high as 25% of income.

    • Greg July 1, 2013

      I’m surprised that both options are HDHP’s. I would say best way to mitigate is keep an amount in your emergency fund to cover. You could also put some in an FSA to save a bit on the taxes. To clarify, when you say deductible is 25% of income, you don’t mean it is a sliding scale depending on income, right? If so, I’ve never heard of that.

      • No, not a sliding scale. The opposite problem. There are a lot of lower income workers whose income winds up being as little as for times the deductible.

  • Done by Forty July 1, 2013

    Hi Greg. Thanks for that article and the tip about separate deductibles for in and out of network care was new information for me.

    I also wanted to note that my HSA also rolls over from year to year. Is that an uncommon feature that’s usually for HRAs only?

  • Greg July 1, 2013

    I’ve fielded many an angry caller about the separate deductibles 🙂 .

    For the HSA, it is most common to be used within the same year, however, it is allowable to be accumulated year over year. That is a nice benefit so you can hold onto it in order to cover the deductible if something should happen. Most of the plans I have dealt with have not rolled over year over year.

  • Shannon Ryan July 1, 2013

    Great post, Greg! Health insurance is so important but it can be a bit confusing to navigate! I think HRA, HSA, and FSAs are godsends, especially with young kids. We do aim for higher deductibles too since we generally keep a robust emergency fund should something happen. It always breaks my heart when I read about someone having to debate if their child is sick or hurt enough to go to the doctor.

    • Greg July 1, 2013

      Thanks Shannon. I definitely agree. It is tough when people, especially kids, get stuck in some of the bureaucracy. All the more reason to be as knowledgeable about your coverage as possible so you understand your options and liability.

  • Brian @ Luke1428 July 1, 2013

    We’ve had an HSA for several years now and love the plan. We are a fairly healthy family with not many doctor visits, so we have saved a good deal of money in the savings portion of the HSA. This year we increased our deductible a bit so that our monthly premium stayed the same.

    • Greg July 1, 2013

      I think that is definitely the way to go.

  • Holly Johnson July 1, 2013

    We just had two buy a 2 month temporary policy because Greg has a lapse in employment in between his old job and his new job. It was definitely an experience! We ended up buying a temporary policy with Anthem that was very similar to the old policy we had at work.

    • Greg July 1, 2013

      It is pretty eye opening looking at individual policies to see how much employers put in and how the insurance companies package the policies to mitigate risk.

  • Grayson @ Debt Roundup July 1, 2013

    I am lucky to have a good plan through my employer, but I am sure that will change this year.

    • Greg July 2, 2013

      Definitely keep your eyes open as the ACA unfolds. There may end up being better options elsewhere.

  • Kim@Eyesonthedollar July 1, 2013

    We have the mixed bag of insurance. My husband has a great group policy because he is a teacher, which costs him nothing. It would be $500 per month to add myself and daughter, so we have our own HSA plan, which is only $190/month. As some of the other commenters have pointed out, the money does roll over and is never taxed as long as it’s used for health care expenses. I love the tax benefits. I agree that it certainly isn’t the best deal to always sign on with a spouses employer plan. It might offer great coverage, but if you never go to the doctor, it’s a waste of money in my opinion.

    • Greg July 2, 2013

      Sounds like a good mix and match solution. When I have kids, I will be looking at something similar.

  • DC @ Young Adult Money July 2, 2013

    We really don’t have that many options through my work. I have a high deductible HSA plan, and unfortunately the past two years I hit my out of pocket max. I do like the tax advantages that come with the HSA, and I put in the max allowed each year by the IRS to take full advantage of it.

    • Greg July 2, 2013

      Absolutely, especially if you expect to have an issue come up that will use all of your deductible. Sounds like if you hit it two years in a row, you might benefit from a higher coverage plan.

      • DC @ Young Adult Money October 16, 2013

        Again, there really aren’t many options at my work. It’s not like we have 15 different choices. There were essentially only two plans to choose from and I choose the one with higher premiums and lower deductible, though the difference between the two plans is small in my opinion.

  • John S @ Frugal Rules July 2, 2013

    Nice post Greg! I am actually writing one on health insurance myself here in a couple of weeks. When we started our business last year we had to go through a lot of this ourselves and ended up going with a HDHP and combined it with an HSA. We’re fairly health so we can manage the risk, especially considering the benefits of the HSA.

    • Matt @ momanddadmoney July 3, 2013

      I would love to have that arrangement. If I ever go the self-employed route I might be hitting you up for some advice.

  • Budget & the Beach July 2, 2013

    Thanks for your input! I have to buy my own health insurance and I do find the whole thing aggravating and confusing at times. I’ve switched policies twice during my time as a freelancer because of rising premium costs. I must admit that I have taken shortcuts to my health care because my coverage is nowhere near what it was when I was a full time employee, and I find that to be sad and typical for a lot of people who have to buy their own…or they just don’t have it at all, which is worse. I think the main takeaway is to really examine your needs and how much of a deductible you’re willing to pay.

    • Matt @ momanddadmoney July 3, 2013

      In my quick looks into the individual health insurance world, it definitely seems scary! I think the problem you describe is a really serious one. One of the biggest factors as far as I can tell is that people largely have no idea what they’re paying for their healthcare, myself included. The premium is deducted from the paycheck and then most of the care is likely covered except for a small co-pay. But when you get in your situation, you actually notice the incredibly high costs and it leads to avoidance. I think if everyone had more of a financial stake in their actual care, we might see more price competition that would hopefully bring the costs down. But that’s more a dream than a possible reality at this point.

  • Pauline July 2, 2013

    If I have kids, until they are 15 or so I think I would go with a low deductible, the odds are too high. Tonsils get removed, arms broken, there is chicken pox, whatever it is, kids are too exposed to take the risk.

    • Matt @ momanddadmoney July 3, 2013

      I haven’t run the numbers, but even with kids I could see it making sense to go the high-deductible route. It depends how much you’re saving in premiums, and whether your family has any unique conditions, but I think there are definitely situations where it would be worth it.

  • MyMoneyDesign July 2, 2013

    Rock on Guitar Teacher! I also play the guitar:

    I’m glad to have health insurance through work and not have to deal with making the choice. It kind of aggravates me how complex they make the whole thing seem.

    • Matt @ momanddadmoney July 3, 2013

      It’s funny, not having to make the choice is pretty nice, but isn’t that a strange sentiment? What other areas of our life would we be happy if we simply had any semblance of choice taken away? I definitely get where you’re coming from and have felt the same way myself. I just think it’s strange. And I think the market would likely be better if we did have more choice.

  • JW_UmbrellaTreasury July 2, 2013

    This is a great post. When I first started working, I made the mistake of signing up for the PPO rather than HMO. It probably cost me about $1,000 more over the course of the year. And do you know how often I went to the doctor that first year? Precisely ZERO times (not even for a regular in-network physical). It was a silly decision because I don’t have any special medical conditions that would require me to see an out-of-network practitioner. (Dental is a different story, however). As you can probably gather, I’ve since switched to the HMO.
    My husband and I each have employee-only coverage from our employers. For the time being, it’s less expensive than “employee plus spouse” option.

    • Matt @ momanddadmoney July 3, 2013

      It can definitely be confusing when you’re evaluating different options. And I work at a small company where no one really has a good understanding of the different policies, so every year when we’re up for renewal it feels like a new round of pin the tail on the donkey. Hopefully we get it right, but it’s hard to know.

  • AvgJoeMoney July 2, 2013

    Cool post. We ran into trouble when our twins were born. I was changing companies at the time and my wife’s pregnancy was going to fall in as a “pre-existing condition.” Ouch! That’s when I found out that an HMO is great for pregnancies….we were allowed to go with that option and it saved us a fortune.

    • Matt @ momanddadmoney July 3, 2013

      We have an HMO as well and barely paid anything for my wife’s pregnancy. I don’t know what the tradeoff is between all those years of premiums and that one-time non-payment, but at the time it felt good at least.

  • Tie the Money Knot July 2, 2013

    Nice post. I don’t have much of a choice, in that I have to go with a high deductible plan at present. Given a choice, with kids I’d go with a lower deductible one.

    • Matt @ momanddadmoney July 3, 2013

      I don’t have a choice either, but I’m always intrigued by the high deductible options. Although the possibility is always there, we don’t typically spend a ton on healthcare. Do you have an HSA as well? If so, what’s your experience been like using it?

  • Lindsey @ Cents & Sensibility July 2, 2013

    Wow, dude – American health insurance is crazy complicated! These look like good tips though!
    In Canada, I pay for provincial health coverage (standard coverage) and then I have extended health benefits through work. These top up coverage for things like massage therapy, dental work, eye appointments & glasses etc. Both the employer and employee (me) do pay into this – it looks after most of our needs. 🙂

    • Matt @ momanddadmoney July 3, 2013

      It’s definitely really complicated. Are extended benefits typical there? If not, would the standard coverage be sufficient for your needs?

      • Lindsey @ Cents & Sensibility July 3, 2013

        Standard coverage is sufficient for most people’s needs, I think. Prescriptions, dental, and some other stuff can get expensive for people but most can just go to the doctor if they get sick. They don’t have to worry about co-pays, deductibles, which docs are covered etc….

        However, sometimes getting coverage between provinces can get a little weird…depending on where you travel.

        I would say that extended coverage is pretty common with most professional-type jobs and union positions.

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