Choosing your health insuranceisa taskthatwarrants your attentionevery year. Even if you’re happy with your coverage, it’s still a good idea to review your options to ensure you’re making the best choice for yourhealth and wallet.Here are the three most common types of health insurance plans along with what to consider for each.
HEALTH MAINTENANCE ORGANIZATION (HMO)
Withan HMOplan,you are givenalist of doctorswithin a network(whoeither work directly for the HMO or contract with it)andpick a primary care physiciantooversee all your care.
Pros:HMOs are often the most affordable choicebecausethey typically have lower monthly premiums, which is the amount you pay each monthforyour coverage.BecauseanHMO often focuses on wellness and preventive care,it canhelp you maintain a healthier lifestyle.
Cons:Your choices are limitedto the network’s list of providers, andyourinsurer typically won’t pay for a providerwho’soutside the network (oritwill make you pay a much higher proportion of the cost).Plus, ifyou need to see a specialist, you’ll most likely needa referral from your primary care physician.
PREFERRED PROVIDER ORGANIZATION (PPO)
For PPOplans, youhave a list of pre-approved providerswhocontract withtheplan,rather than providers who work directly forit. While reimbursem*nt percentages vary forseeing someoneout of network, a 60/40 split is common,which meansthe insurer pays 60 percentof the costsand you cover the remaining 40percent.
Pros:In addition to havinga greater choice of doctors, youwon’t need to ask fora referral to visit a specialist.
Cons:APPOwilllikelycostyoumore than an HMO, astheytypicallyhavehigher monthly premiums and copayments.In addition,youoftenhave topay a deductible (the amount you pay out of pocket before your insurance benefits kick in).Soif you have a $1,000 deductible,this meansyou will pay the entire $1,000forany medical services you receive before insurancekicks in.
HIGH-DEDUCTIBLE HEALTH PLAN (HDHP) WITH A HEALTH SAVINGS ACCOUNT (HSA)
As the name suggests,HDHPs have high deductibles(and usuallylower monthly premiums). For 2021, theIRSdefines an HDHP as one with a deductible of at least $1,400 for an individual or$2,800 for a family, butthey can behigher. Maximum annual out-of-pocket expenses (including deductibles and copayments, but not premiums) for HDHPs can run up to $7,000 for an individual or $14,000 for a family.
To offset the high deductible, insurance companies that offer HDHPs willoftenallow you to set up ahealth savings account (HSA). The money you put into an HSA is contributed pre-tax, and if you use it to pay for qualified medical expenses, there’salsono taxon withdrawals. (Note that ifyou use that money for something other than medical costs, you’ll pay taxes plus a penalty.) For 2021, theIRSwill allow you to set aside up to$3,600annually for individuals and$7,200for families in your HSA.Ifyou don’t useall the money within theyear, thefunds roll over for futureuse.
Pros:If you typically don’t require many medical services, paying lower monthly premiums and settingasidetax-freemoney in an HSA could save youmoney. Many routine screenings, such as colonoscopies and mammograms, are also covered free of charge.
Cons:If you do go to the doctor often, the out-of-pocket expenses can add up quickly. Remember, you could be paying up to $7,000 foryourselfor $14,000 for your family each year, which you’ll need toaccount for in your budget.
