Today I’m putting my adulting face on in full display to break down the final boss of adulthood chores: health insurance and healthcare benefits. But before you go running off with your fingers in your ears, I can promise you one (awesome) thing. If you come on this journey with me right now, you’ll be better off for it. A simple analysis of your health insurance and benefits arguably has the biggest upside out of any other adult “chore.”
When it comes to benefitting from benefits, I have the best possible partner helping me today. WEX is an organization that has been helping employers and employees with their benefits for decades. WEX is home to tons of knowledgeable people motivated to educate us about our healthcare benefits, and I’m excited to tackle this topic with their team!
I’m going to structure this post in the same way I researched the topic. I first approach health insurance from a general perspective because I didn’t understand anything about it, and then I worked into some of the more confusing terms and unique available options. I took into account over 50 (!) reader-submitted questions as I compiled this post, too.
It’ll be fun, I swear!
Why should I care?
For starters, we’re in the midst of the greatest public health and economic crisis of our generation. So it’s probably a good time to learn the fundamentals of your healthcare options so you can make it work to your advantage.
Research shows that up to 50 percent of applicants don’t understand even the most basic parts of their health insurance policy and nearly 80 percent spend less than an hour evaluating their options during open enrollment.
And I get it! Health insurance is confusing. It’s all written in this weird acronym-coded jargon and it’s easier to just be lazy and stick with last year’s plan. But it’s important, and as your situation changes, your plan should change with you.
What is health insurance?
The future is a confusing place full of unforeseen dangers and expenses. Luckily, insurance is available to offload some of that future risk onto someone else. There are insurance options for all kinds of scary future risks. There’s car insurance in case you incur future car expenses, homeowners insurance in case something happens to your house, life insurance in case you die, and pet insurance in case you don’t want your pet to do the same. And then there’s health insurance, which is undoubtedly the most controversial and confusing of ’em all.
Simply put, though, health insurance is a product you buy that takes the risk of future medical expenses off your shoulders. Your current self pays money so that your future self will have help with medical bills.
Signing up for health insurance
Health insurance is paid for in monthly installments called premiums. Your monthly premium payment gains you access to a slew of benefits, but it will not pay for 100 percent of all future medical expenses. Instead, each unique health insurance policy offers a unique combination of premiums, out-of-pocket costs and other benefits. We’ll get into specifics on these below.
Most Americans get access to health insurance from their employer, or from the government via Medicare or Medicaid. As self-employed people, Kelly and I had to find our individual insurance policy on the open market.
I’ve personally found the government’s Healthcare.gov marketplace to be the easiest place to find health insurance. It’s a simple website that quickly and effectively guides you through the process of signing up for insurance. It’s straightforward, understandable and honest. They have friendly helpers available any time, too, and all the important information is in easy-to-digest and easy-to-compare formats.
This was true when I first signed up, when Kelly and I got married, when we switched insurers, when we had kids, and when we changed professions. But if the open marketplace isn’t your thing, you can always sign up with an insurance company directly.
That said, health insurance companies don’t let people just sign up or change their insurance policies willy nilly. So unless you’ve undergone a Qualifying Life Event, you’ll need to wait for the Open Enrollment Period to sign up or change your policy. This year’s open enrollment will take place from 11/1/20-12/15/20, which is exciting because if you want to update your policy, you can do it SOON!
Selecting a provider
Providing health insurance is a complicated thing. Insurance companies gather specific information and then use complicated math to determine how much to charge you. While insurance companies can not legally consider preexisting conditions when determining coverage and premiums, they do take into account age, region and tobacco use. So, for example, a young, person who doesn’t use tobacco will often pay less than an older person who is more likely to require expensive medical care. As a result, the costs associated with your policy will be unique to you, which makes it more difficult to compare with the policies of other people in your life.
Each state has its own regulations and each population has its own needs. As a result, each region has its own unique set of providers. This complicates things a bit as it’s difficult to get a sense of each providers’ strengths and weaknesses due to the regional nature of their coverage. Since moving to Chicago, we’ve changed health insurance providers four times due to companies moving in and pulling out of the state for one reason or another.
Similarly, each doctor, hospital and medical facility will accept only specific insurance policies. It’s worth finding out which policies are accepted at your preferred facilities when starting your search.
Selecting a policy
Most people spend less than five minutes selecting their health insurance packages. Yet if you’re this far into the blog post, I take it you’re not like most people. 😉 Selecting a plan isn’t easy, but if we define a few simple terms, it becomes far simpler to pick a plan that works for you.
Insurance companies have a tough job. Not only must they predict the future to determine how expensive your future medical bills are likely to be, they then must turn around and create an appealing mix of costs and benefits to lure you in as a customer and not bankrupt their business in the process. The result is an incredibly confusing array of unique policy offerings, each with their own mixture of premium payments and future payments. (Like co-pays and deductibles, maximums, and other benefits.) This is where most people throw up their hands and just pick whatever plan to make the decision-making pain stop.
I’ve been there. But let’s break down the major decisions you’ll be confronted with along the way so you don’t have to go there!
- Preferred Provider Organization (PPO): PPO plans have contracts with certain medical providers to create a network of facilities that provide care at a discounted rate. PPOs do allow for care to be received outside of this network without the discount.
- Health Maintenance Organization (HMO): HMO plans limit coverage to doctors and facilities who have a contract with the plan. They typically do not cover medical care received outside of this contracted network.
Plans are also organized into gold, silver or bronze tiers. Gold plans charge more money upfront but offer more significant coverage and benefits. Copper plans, by comparison, have lower fees upfront but they’re less beneficial if medical treatment is needed. Savvy insurance shoppers can customize their plans accordingly to try and save money by either increasing or decreasing their insurance coverage. For example, when Kelly was pregnant with Lucy, we changed our policy from bronze to gold after calculating how much the pregnancy and delivery would cost on each available plan.
Remember that health insurance providers are private businesses that must both attract customers via appealing cost/benefit offerings, but also turn a profit. To do this, they offer a broad mixture of options in the hopes of offering the right plan for a particular customer. Unfortunately, the incredible variety of options for when and how expenses are handled can be confusing. So let’s break down the different costs below.
- Premiums: This is the price of your insurance policy. It’s typically paid in monthly installments. Your premium payment gains you access to the benefits offered by your insurance plan.
- Deductibles: Certain medical expenses will only be paid for by your insurance policy after you first pay this predetermined fixed amount of the total cost yourself. You can determine if you prefer a higher deductible (and a lower premium payment) or a lower deductible (and a corresponding higher premium) when signing up for the policy. Your insurance will handle the remainder of your medical bills after you meet your deductible. For example, if your deductible is $2,000 and your medical bill is $10,000, you will pay the first $2,000 of the bill and your insurance will handle the remaining $8,000.
- Copays: Copayments are a fee charged by your insurance after your deductible is met. So, using the above example, your insurance might charge you a $50 copay after you pay the $2,000 deductible. Similar to deductibles, copays vary from plan to plan, and plans with lower premiums typically have higher copays. Unlike deductibles, most insurance policies charge different copays for different kinds of medical services. For example, your copay for a visit to the family doctor can be different than your copay for a visit to the emergency room.
- Coinsurance: Some insurance plans charge a coinsurance fee instead of a copay. Coinsurance is charged after the deductible is met and is typically a percentage of the total bill.
- Out-of-pocket maximums: Most health insurance policies have a maximum amount of money you can pay in a given year. This maximum includes any expenses related to in-network services covered by your plan such as deductibles, copays and coinsurance. Notably, it does not include your premium payments.
- Prescriptions: The level of coverage and cost for prescription drugs varies from plan to plan. It’s worth researching these variations as prescription drug expenses can add up quickly.
- Dental insurance: Health insurance policies do not cover dental expenses. As strange as it sounds, you must sign up for an additional dental insurance plan. Luckily, Healthcare.gov makes this process very simple.
Specifics about benefits
Enough about the costs! Let’s talk about insurance benefits. Because in addition to paying for future medical expenses, health insurance companies have actually introduced some pretty interesting ways to save you money.
- Health Savings Account (HSA): Many health insurance plans allow you to create a special savings account that can be used for medical expenses. The nifty thing here is that the money you put into your health savings account is “pre-tax” meaning that it’s not taxable. The savings also grow free of taxes, and you’re able to make tax-free withdrawals to cover qualified medial expenses. It’s a triple tax advantage! This reduces your tax burden elsewhere and saves you money. While you can’t pay your premiums from a health savings account from the account, you can pay for deductibles, copays, co-insurance and other expenses with it. Even better, the funds in your HSA can be invested and can grow before they’re spent. So if saving money is your thing, this one is a no-brainer.
- Flexible Spending Account (FSA): If you’re insured through your employer, a flexible spending account is another great way to save money via reduced tax burden. Similar to the HSA, these accounts are filled with tax free money to be used on copayments, deductibles and other medical expenses. Unlike the HSA, flexible spending accounts must be spent by the end of the year.
- COBRA: I’m trying not to rely on acronyms in this post but COBRA is so much better than Consolidated Omnibus Budget Reconciliation Act. COBRA is a law that allows you to pay for your health insurance plan even after a big life event like losing your job.
- Wellness benefits: Many insurance plans incentivize their enrollees to maintain healthy lifestyles with gym memberships, smoking cessation aids, weight loss programs and health screenings. Do something for yourself and reap the benefits!
Upcoming important dates
- Health Savings Account Day: This year, National HSA Awareness Day is tomorrow, October 15th. This big day is celebrated annually by WEX to raise awareness for the benefits provided by HSAs to help people manage their healthcare costs. As mentioned above, HSAs are not only an effective tool for reducing expenses but also for saving money and planning for retirement.
- Open Enrollment: Unless you have had a qualifying life event such as loss of employment, having a baby or getting married, the Open Enrollment Period is the only time of the year to change your health insurance plan. This year’s Open Enrollment Period is from 11/1 – 12/15.
- The 2020 election: The role of government in healthcare is very much a part of the debate around November’s national election. Many Americans feel that the American public could benefit from the government expanding its influence in the health insurance market by offering a public insurance plan backed by the federal government. Others feel that the government should keep its nose out off the insurance industry and that free market-based competition in health insurance is best for consumers. It’s an interesting debate and it’s worth casting your vote on November 3rd.
I hope you found this post helpful. Please leave any questions you might have in the comments below. And as always,
In collaboration with WEX; all opinions are my own. As always, thank you so, so much for supporting the partnerships that keep Kelly in the City up and running!