It’s that dreaded time of year again.
You’re sifting through mountains of marketing material, hoping to figure out which health care plan is less f*cked up than the others. HR is bombarding your inbox with resources that will (not) make the decision easier. You realize that no amount of glossy literature, Q&A sessions, or time spent on hold with a toll-free number can make your options easier to understand.
We can’t tell you every detail of your health care plan (and your insurance company probably can’t, either), but we can arm you with a basic knowledge of health insurance features to help you make informed choices.
Your premium: The amount you pay your health insurance carrier regularly.
It’s usually deducted out of your paycheck. The amount varies depending on which plan you choose.
Your deductible: The amount you have to spend before your health insurance kicks in.
Wait, whaatt? Even though you’re paying premiums, you have to spend some more of your own cash before health insurance will cover expenses. Many millennials are attracted to high-deductible plans, which have higher out-of-pocket costs, but lower premiums. They’re great if you never go to the doctor. They’re not so great if you still call your pediatrician every time you think your hangover may actually kill you.
Your copayment or coinsurance: The amount you have to cover for medical services *after you’ve hit your deductible.*
A copayment is a flat fee, and coinsurance is a percentage of the cost of a medical service. You’re usually responsible for 10–30% of the cost, depending on the type of service and whether your doctor is in-network.
For example, a copayment for a regular office visit to your primary care physician might be $20. A coinsurance payment might be 20% of the cost of the visit. If the visit costs $100, you’re on the hook for $20.
Ugh. What’s an “in-network” doctor, and how do I know if I have one? In-network doctors accept your health insurance and charge less for services.
Most health insurance providers list in-network doctors on their website. We strongly advise making sure your cosmetic dermatologist is in-network before booking a chemical peel (which is actually a covered expense in many insurance plans). #blessed
HMO vs PPO: HMOs can be less expensive, while PPOs can offer more flexibility.
An HMO plan gives you access to a network of healthcare providers that have agreed to charge lower rates for plan members (that whole “in-network” stuff we just mentioned). However, there may be lots of strings attached, like needing to designate a primary care physician, and getting referrals from that PCP to see a specialist.
PPOs provide more flexibility when choosing your healthcare providers. Like an HMO, they’ll offer in-network providers, but with fewer restrictions on going out-of-network. Alas, premiums are usually higher.
Your Out-of-Pocket Maximum: The most you will pay for covered medical services in a year.
Your out-of-pocket maximum includes your deductible and any copayments. Once you’ve spent your out-of-pocket max, 100% of all covered medical expenses are paid by the insurance company.
HRA: AKA a Health Reimbursement Arrangement, an HRA is an account to which your employer contributes on your behalf.
You can use the money toward medical expenses not otherwise covered by your insurance.
FSA: As of 2018, you’ll be able to contribute up to $2,650 pre-tax to a Flexible Spending Account annually, and use the money for everything from copays to condoms.
However, an FSA behaves a bit like that shitty spell Cinderella’s Fairy Godmother cast on her—when the calendar year runs out, the money in the FSA disappears. You can roll over up to $500 into the next year, but anything above that goes back to Uncle Sam.
HSA: An employer-sponsored Health Savings Account for those who elect a high-deductible plan.
The HSA is basically the Dom Perignon of healthcare savings plans. As of 2018, you’ll be able to contribute $3,450 pre-tax every year. It gets better.
Your employer can contribute to your HSA (these contributions count toward the maximum contribution)
The entire balance rolls over year after year
The funds in the account can be invested
It’s like an IRA for your health. You can make pre-tax contributions, the money can grow, and you only withdraw it when you need it. If you withdraw money for a non-medical expense, however, it will be subject to income taxes, and you’ll face a 20% penalty.
Of course, you’d never do such a thing, because you’re a H.E.N.R.Y.™ and you have your financial sh*t together.