Starting a new job can be exciting, but it’s also easy to feel stressed out by meeting your new team and completing all of the necessary paperwork. When your employer hands you the information on your health insurance options, you might be tempted to just pick the cheapest plan and move on. But doing so can end up costing you in hefty medical bills later on.
Carefully reviewing your employer’s policies and insurance plans can prevent any costly surprises from popping up.
Understanding Health Insurance Basics
Before you can start comparing plans, you need to understand the fundamentals of health insurance.
Your insurance premium is how much you have to pay each month for your insurance plan. Even if you don’t visit the doctor or fill prescriptions often, you still owe that money every month.
Your deductible is how much you have to pay before your insurance starts chipping in on medical expenses. For example, if your deductible is $500 and your bill for a medical procedure is $750, you are responsible for paying $500 and the insurance company will pay the remaining $250.
Opting for a higher deductible will give you lower premiums, but that means you’ll have to pay more out of your own pocket to cover medical expenses. That might not be a big deal if you’re relatively healthy, but even a simple injury like a broken arm can cost thousands.
Copayments are what you pay at the doctor’s office after you meet your deductible. For example, if you visit your general practitioner, you might have to pay $20 per visit.
The 3 Types of Insurance Policies
There are three kinds of insurance policies; what plan you choose affects what doctors you can visit:
1. Health Maintenance Organization (HMO): With an HMO, you can only go to doctors within the policy’s network. If you go to a physician outside of the network, the insurance company won’t cover the expense and you’ll have to pay the entire bill on your own. And, you need a referral to see specialists.
2. Preferred Provider Organization (PPO): PPOs give you more flexibility. In-network doctors are still cheaper, but you can visit out-of-network doctors. The insurance company will cover a smaller portion of the bill, but you will be covered. In addition, PPO policies do not require a referral to see a specialist.
3. Point of Service (POS): A POS plan allows you to pay less if you go to an in-network doctor, but you still need a referral to see a specialist.
If you are on any prescription medications, it’s important to understand the insurance provider’s formulary. The formulary is a list of medications that the insurer will cover. Some medications might be covered, but some prescriptions will not be eligible. That means if your prescription isn’t on their list, you might have to spend hundreds for that necessary drug yourself.
Most plans will post the formulary online, or you can call the insurer’s customer service line to find out if your medications are covered.
Comparing Insurance Plans
Many employers offer a range of plans, from a barebones, inexpensive plan to much more expensive options with low deductibles and more coverage. Depending on your employer, you might have to pay some or all of the premium.
Some companies will cover 100 percent of the employee’s premium if you select a lower level plan. If you opt for a higher tier, you will likely be responsible for the difference. If you have anyone in your family, such as a spouse or child, that needs coverage, you will likely have to pay the premium for that person yourself.
The cheaper plans make sense when you are young, healthy and don’t need regular medical visits or prescriptions. In that case, having a basic policy that provides coverage in the case of an emergency is practical.
If you have an ongoing health condition, you will probably need a higher tier plan. While more expensive, these plans provide more coverage, so you’ll ultimately pay less for procedures and prescriptions.
Signing Up For Health Insurance
Choosing a healthcare plan is a big deal, so you shouldn’t pick one randomly. Instead, make sure you understand the specifics of each plan. If there are sections you don’t understand, you can contact your human resources department for help. They can walk you through what all of the different factors mean, and how much each plan will affect your paycheck.
Although researching each plan can be time-consuming, a little extra effort now could save you hundreds or even thousands in the long run.
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