Know your healthcare options when open enrollment comes around
This open-enrollment season, many employees will have to decipher a confusing alphabet soup of options.
As employers struggle to contain health costs by paring their contributions to employee health coverage, that alphabet soup is here to stay. So you will need to figure out what these different options mean to you.
Why don't I start with the increasingly common CDHPs, or consumer-driven health plans, which are anything but driven by consumers because if they were, they'd be much easier to understand. These plans are being driven by employers desperate to reduce their healthcare contributions.
A CDHP allows you to choose you own healthcare providers, although out-of-network services may cost more.
Within a CDHP you can have a high-deductible health plan or HDHP, which when you boil it down is really a catastrophic insurance plan. The premiums are inexpensive, but you have to pay in some cases several thousand dollars of your healthcare expenses before your health plan pays any benefits.
An HDHP can be coupled with a health savings account, or HSA, which is a tax-advantaged account that allows you to set aside pre-tax money to help with medical expenses. The total annual out-of-pocket expenses, not counting premiums, can be as much as $5,250 for a single person or $10,200 for a family.
A health reimbursement arrangement, or HRA, is an employer-paid benefit in which an employer agrees to cover healthcare costs up to a set amount. The funds, which can range from $1,000 for singles to $3,000 for families, are available to pay for deductibles, copayments, and other qualified medical expenses. Once the allotted money is spent, you cover healthcare costs at 100 percent until you reach your deductible, typically $1,000 for single coverage and $2,000 for a family. Once the deductible has been met, another level of copayments kicks in.
As with all CDHPs, the cost of preventive care, such as annual physicals, immunizations, OB/GYN visits, may be completely covered and won't count against your healthcare account.
Now, some of the more-familiar options. As many of you know, a health maintenance organization, or HMO, requires you to select a primary care physician, or PCP, from a network of physicians who work for the HMO. Your PCP has to refer you to a specialist, should you need one. An HMO is typically the cheapest, usually requiring a copayment for most visits.
A preferred provider organization, or PPO, allows you to choose any provider. With this plan you get higher benefits for using preferred or in-network physicians and hospitals. PPOs generally have higher premiums or require that you pay slightly more out of pocket than HMO plans.
A point-of-service plan, or POS, is a hybrid of an HMO and PPO. With this plan, you use both in-network and out-of-network providers. Like an HMO, you choose an in-network doctor to be your primary care physician, and like a PPO, you can go outside of the network for healthcare services. However, if you choose an out-of-network provider, you'll get a lower benefit.
If you or your family members are healthy, choosing a consumer-driven plan could save you a lot of money. That is if you stay healthy.
Before you choose, take some time to figure out your annual healthcare expenses. Try the health expense calculator at planforyourhealth.com.
In past years, I might have elected a consumer-driven plan.
But then a few years ago my daughter, Olivia, was diagnosed with juvenile rheumatoid arthritis. Within a month of that diagnosis, she developed a rare complication of the disease.
One month we had a healthy, happy 7-year-old; the next month she was near death and racking up a hospital bill that topped six figures. Had we been covered by a consumer-driven plan, we would have had to come up with several thousand dollars on top of any premiums paid. We would have blown through any money saved in an HSA within a week or two.
That's life, of course. You can't predict what will happen.
Michelle Singletary is a columnist for The Washington Post 