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What You Need to Know About Open Enrollment: Health Insurance Options

by Ryan Guina

Open Enrollment is currently in season for thousands of employees. For most people, this is the only time of the year when they can make benefits elections for their health, dental, vision, and other company sponsored insurance plans. Most companies only give a two week window to make changes, so let’s take a look at the most common health insurance coverage options available to most employees.

Open enrollment health insurance options

Open Enrollment Health Insurance Options

It’s hard to focus when there are so many choices!

There are several types of medical insurance, and we will cover the most common types – keep in mind that your company may offer variations, combinations, or something completely different than these listed here. This is general information only, and you should examine your policy options closely before making a decision on which health plan option to choose.

Fee for service health care plans

Fee for Service health care plans are the most flexible healthcare insurance plans available, as you can visit any doctor at any time, without a referral required by the insurance company. You do not need to worry about in or out of network providers and you can visit any hospital in the country. You also pay for this flexibility.

You are required to pay a health insurance deductible out of pocket before the insurance company will begin paying for any of your medical bills. Once you reach your deductible you pay coinsurance, which is when you share the health care costs with your insurance company, usually by a set percentage of the total bill. Some fee for service plans place a cap on the amount of out of pocket expenses you can incur within the course of a year. For example, in addition to your monthly premiums you may have a $500 deductible, and a $5,000 annual cap on your insurance. Be sure to read the plan thoroughly because there are often restrictions regarding which types of medical care are covered in this type of health insurance plan.

Pros and cons of fee for service health care plans:

  • Pros: Freedom to choose health care provider, Cap on annual expenses.
  • Cons: Restrictions on some plans, cost may be more than an HMO or PPO.

Health Maintenance Organization – HMO

With HMOs, health insurance companies negotiate fixed rates for health care with a select group of medical care specialists. Health care is limited to in-network health care providers who are a part of your HMO plan. To receive care, you are required to select a Primary Care Physician (PCP), usually a general care practitioner, who is your central point of contact for all medical care, including appointments, specialist referrals, and other medical care. You will need to visit your PCP for all medical inquiries or to get a referral to a specialist. You run the risk of paying out of pocket for using an out of network medical professional unless it is an emergency or your plan specifically gives permission. While there are limitations to HMO plans, they are often a low cost health insurance option because of the low rates the health insurance companies are able to negotiate.

Pros and cons of HMOs:

  • Pros: Lower premiums and deductibles, and higher coverage rates.
  • Cons: Required to select a PCP, must get specialist referrals, and are restricted to in-network health care providers.

Preferred Provider Prganization – PPO

Preferred Provider Organizations are generally a little more expensive than HMOs, but they offer more flexibility. PPOs have negotiated rates with their networks, but you are free to go out side the network for healthcare coverage, though you may have to pay more for it. Primary Care Physicians are not required and you can visit a specialist without a referral.

Pros and cons of PPOs:

  • Pros: PCP is not required, referrals are not required for specialists, and out of network providers are covered.
  • Cons: Premiums and deductibles are often higher than HMOs, percentage of coverage may vary.

Health Savings Accounts and High Deductible Health Insurance Plans

Types of Health Insurance

Be sure to double-check your prescription medication options!

Health Savings Accounts (HSA)are gaining in popularity among both employers and employees – employers because they save money on group health insurance costs, and employees because they have more choice on how they use their medical coverage and they can save the money they don’t use in any given year and roll it over to the next year. HSAs are a tax-favored savings account that is combined with a high-deductible health insurance plan.

Contributions to your Health Savings Account are considered an “above the line” tax deduction and are considered a federal income tax deduction, regardless of whether or not you itemize your deductions. Some states also allow tax deductions for HSA contributions.

Pros and cons of HSAs and High-deductible plans:

  • Pros: Low monthly payment, money grows in a tax-deferred savings account until withdrawn for health care needs. This may be a good plan for healthy individuals with few medical care needs.
  • Cons: High deductibles and co-pays. limited coverage in some cases.

Other Health Savings Plans. There are several health savings plans available, including HSAs, Health Reimbursement Accounts (HRAs), and Flexible Spending Accounts (FSAs). You can read more to determine which Health Savings Plan is the best for your needs.

Individual health insurance may be cheaper!

One of the things that surprised me is that it was cheaper for me to get health insurance coverage through an individual health insurance policy rather than a group health insurance policy. When comparing individual and group health insurance, you need to look at several factors including amount of coverage, insurance policy rates, and other factors. We ended up saving several thousand dollars per year with an individual health insurance plan that we purchased through eHealthInsurance.com.

Terminology is important!

When comparing health insurance plans, it’s important to understand what you are getting. For example, “in-network” and “preferred providers” are often interchangeable. Co-pays are when you make a payment at the time of service, often a set rate that is clearly negotiated as part of you plan. Co-insurance is when you pay a percentage of the bill, usually in the 10-30% range. There is a HUGE difference in the meanings of co-pay and co-insurance when you are dealing with a major medical procedure!

Be sure to read your health coverage plan thoroughly, and call your Human Resources department or insurance company if you have any questions or if there is anything you are unsure of. Remember, cheap health insurance isn’t always the best health insurance. But with some research, you should be able to find affordable health insurance that meets your needs.


Published or updated November 19, 2012.
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{ 5 comments… read them below or add one }

1 Miranda

Great guide. We just found out that we are going to be socked with an age-based premium increase of $80 ($40 as my husband and I each turn 30). So we’re looking at the HSA with high deductible. If we can get the premium low enough on the health plan, it would be totally worth it to pay out of pocket for doctor’s visits (especially since some of them offer a discount if you don’t use the insurance company).

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2 Financial Samurai

Ryan, this is a great update. It’s all about estimating how sick you will be next yr! After spraining my wrist, and playing 10 hours of tennis every week for 8 months, as well as getting into a big basketball fight, I need to check myself out, and am willing to pay a high premium!

FS

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3 Manshu

If I change from one type to another, is there anything extra I’ll have to pay, like a switching fee or something?

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4 Ryan

Check with your plan, but there is usually no fee if you change your benefits elections during the annual open enrollment period. However, the cost of your coverage may change, so be sure to read the details of the new plan you select.

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5 J.R. Seaman

I am a health and life insurance agent but mostly deal with health insurance for groups and individuals. You need to make sure of a couple of things before you switch.

1. Make sure you don’t cancel coverage with one company before you switch to another.

2. If you have bad health conditions you may not get covered by another company. If you are sick it is smart to stay who you are with.

3. Look at all of the options, out of pocket maximum/stop-loss, copay, deductible, Rx benefits, and of course your monthly premium.

4. Make you effective date with the new company on the first of the month. Once you are accepted by the new insurer, cancel your old plan on the last day of the previous month. This will give you a clean transition and help you not have to deal with billing complications.

By the way, I have never seen any kind of fee for canceling a policy. I am located in Texas and the laws may be different in your state. So, it is better to be safe and check. But there shouldn’t be any charges.

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