For many companies, November marks the start of open enrollment season for health-care plans, and although weeding through insurance jargon and coverage cost-sharing formulas is not the most appealing of tasks, experts say it's extremely important to make sure you have the proper coverage at the right cost.
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Consumers find reading over health-insurance plans time consuming and intimidating, says Michael Mahoney, vice president of marketing for health-insurance quote comparison site GoHealthInsurance.com, but enrolling in a plan is a major financial decision.
"It's the second biggest purchase decision a person will make outside of their home when you think about how much money you will pay into the system over your lifetime.”
Health insurance plan benefits need to be treated in the same vein as a 401(k) plan, he says. And that means consumers need to review and evaluate their plans at least once a year, and open enrollment season is the perfect time to do just that.
"Most employees don't even look through their benefits to see what they're eligible for," says Mahoney. "It's rare to see what you really have. But needs are different every year; [people] get married have children, or have specific medical needs they've never had before.
Karen Pollitz, senior fellow at the Kaiser Family Foundation, suggests consumers review their plan and their other coverage options even if they are happy with their current plan. "It's good to remember you may have other options."
When reading through your benefit plan options, here's what Maloney and Pollitz suggest looking for:
No. 1: Consider the annual out-of-pocket cost. Take a hard look at your deductible and co-pay amounts before choosing one plan over another; especially consider deductibles, because they can become very costly, says Pollitz.
"Usually plans will have an out-of-pocket limit, meaning that after you pay a certain amount out of pocket, then the plan goes back to paying 100% for the rest of the year. Most of us don't worry about that because we are not sick enough to reach it, but if that happens, it's really important."
Most plans are now required to cover preventive services like mammograms and other screenings, according to Pollitz. She also advises looking at covered benefits for things like physical therapy, which may have a yearly cap on them.
"You want to get as much as you can from your plan.”
No. 2: Compare HMO and PPO options. Most insurance plans let you choose between health maintenance organization (HMO) and preferred provider organization (PPO) plans, Mahoney says. HMOs tend to be the cheaper option, but it will limit the doctors you will be able to visit.
"PPO plans let you go [to doctors] inside or out of your network," he says.
No. 3: Evaluate your risk tolerance. Insurance is a financial risk product, and needs to be treated as such. Mahoney says consumers need to decide how much they want to pay monthly to avoid risk of being hit with a massive health-care bill. Cost may not be as flexible for those covered under group benefit plans, which evaluate the group's risk as a whole.
"On the individual market, you have a ton of choice on how much risk you want to pay," he says. "You have higher and lower-deductible plans. And your risk tolerance may change depending on other things going on in life."
Pollitz echoes this tip, and warned consumers of how quickly things like coming down with the flu, or a brief hospitalization, can alter your perspective.
"Really try to assess the level of protection the plan offers—you're not buying health insurance in case you stay healthy. Try to get as good coverage as you can afford."
No. 4: Never give up benefits before you have new coverage. Make sure you have new coverage before you cancel your current coverage. Mahoney also suggests looking at the conditions you currently have before going into a new plan.
"You may not want to leave your current coverage if you develop a new condition, because another company might offer you insurance but not cover you for pre-existing conditions," he says.
No. 5: Keep an eye out for plan changes. Open enrollment is the time to be on the lookout for changes in your health-care plan, Pollitz says. Under the Affordable Care Act, employers will have to adopt a uniform summary of coverage so that no matter what, consumers will always have consistent information on what is and isn't covered, cost, and more, to make things easier to understand.