Four Tips for Choosing a Health Insurance Plan

It's open enrollment season, meaning your employer is dropping a bunch of health insurance options in your lap to pick from before year's end. If you're like most people, you'll just stick with the status quo. A fall 2011 eHealthInsurance survey found that 53% of respondents with employer-based coverage say they're likely to keep their current plan. Only 36% review their health insurance costs on an annual basis.

But inertia could cost you. Many plans are shifting costs and benefits around, so you could pay more in your current plan -- or significantly less if you choose another. Because your open enrollment decision will stick with you for all of 2012, it's wise to scrutinize all of your choices.

Here are four tips to consider as you compare health insurance options for next year.

1. Find Out What's Changing This Year.

The good news is you probably won't see significant increases in copayments and deductibles as in past years.

"But 2012 looks like a year when we will start to see costs go up, primarily via increased premium contributions," says Julie Stone, senior consultant at the employee-benefits consulting firm Towers Watson. "Employers are becoming increasingly focused on raising the cost for dependents and to encourage working spouses to shift to their own employer's plan."

2. Determine Where Your Costs Will Increase.

To do a cost comparison, Carrie McLean, consumer specialist at eHealthInsurance, recommends going through each plan's paperwork and checking numbers associated with the following.

  • Your deductible.
  • Your co-insurance, which is the portion you're responsible for after the deductible is covered.
  • Your out-of-pocket maximum, which is the maximum amount you pay each year before insurance kicks in and covers everything afterward. "If some catastrophe happens, you know how much you're financially responsible for," says McLean.

The cost of health insurance also includes out-of-pocket expenses. You should know how much your copay is for doctor visits and trips to the emergency room.

"If you have frequent appointments, those can add up," McLean says. "If you don't, you may want a plan that has higher copays but lower premiums."

You should also evaluate the drug benefits part of your plan, and consider whether it's worth paying more for brand-name drugs or switching to generics.

"We expect to see continued changes in the prescription drug arena, with employers encouraging even greater use of generics and implementing more rules around prior authorization of certain drugs," says Stone. "Employees may also find increased copayment differences between generics and brand-name drugs."

Health savings accounts and flexible spending accounts are also worth a look during open enrollment, but consider whether they meet your health care and financial needs.

Some employers contribute money to HSAs, which lower monthly premiums, but these plans are best for those in good health who can afford to put money into (them) and have time to manage the account, says Nancy Metcalf, senior program editor for Consumer Reports Health. "It's not good for those with expensive chronic conditions -- you'll be spending a lot in copays while being stuck in a high-deductible plan."

FSAs lower your taxable income, but you must be careful to keep medical receipts and know how to best use your insurance. "Don't put too much money in because if you don't use it by year's end, you'll lose it," says McLean. "FSAs don't cover over-the-counter medication anymore so check first to see what expenses qualify for reimbursement."

Check for the list of FSA expenses that qualify for reimbursement.

3. Consider Your Health Care Needs.

Buy only what you need, so you can save on premiums. "A plan with robust maternity coverage may not be the best match for singles," says McLean. "If you don't care about brand-name drugs, go for a plan that covers only generic drugs."

However, if you're expecting significant health care changes next year, such as childbirth or major surgery, make sure your plan adequately covers those events, or be prepared to pay the deductible.

Metcalf suggests asking whether you're better off with a health maintenance organization, or HMO, or a preferred provider organization, or PPO. In an HMO, your share of medical costs is mainly upfront copays, while PPOs have more complicated bills and claims. HMOs have smaller networks of doctors, but they're more likely to be held accountable for quality of care. "However, if you need access to a specialist or have college-age kids living across the country, PPOs offer a broader choice," she says.

If it's important to you to keep seeing your regular doctors, be sure they accept the plan you're considering as plan networks change frequently.

4. Ask Your Employer About Wellness Programs.

More employers are rolling out wellness programs and offering to reward employees who stay healthy in order to keep their group medical costs low, says McLean. For example, you could get a financial reward or a discount on premiums for participating in a weight loss program or smoking-cessation classes.

"Ask your HR department if they'll be rolling out any wellness programs in 2012," says McLean. "If you don't participate, you may be leaving money on the table."

Regardless of the health insurance plan you choose for 2012, be sure to track all of your health care costs, including premiums, copays and drug expenses, throughout the year. Good record keeping will help you evaluate your health care needs for open enrollment in 2013.