Health Insurance Options to Consider
Bills.com CEO offers four tips to make health insurance choices for coming year
SAN MATEO, Calif., Oct. 3, 2007 - Sixty percent of American employers offer health insurance to their staff, and autumn is the traditional open-enrollment season for health insurance, when many employees choose among health, vision and dental coverage options for the coming year. Andrew Housser, co-founder and co-CEO of free online consumer portal Bills.com (www.bills.com), suggests consumers can make the most of their health insurance choices and save money, even as health insurance costs are increasing at an annual rate of about 8 percent. "The average employee pays $3,000 annually for health coverage, while companies pay more than $12,000 annually for an employee's family policy," Housser said. "Insurance is big business, but it also can be a big help if families make the right choices." Housser's guide to health insurance choices includes the following options:
- Indemnity, high-deductible, PPO, or HMO plan: With indemnity coverage, the beneficiary pays a portion of costs and the insurance company pays the rest. Most plans today are HMO (health maintenance organization) or PPO (preferred provider organization) managed care plans. With these plans, the beneficiary pays a co-payment for medical care visits and has an annual deductible for certain expenses. Be sure your preferred physicians are in the plan's network, or you might pay higher-than-expected co-payments. High-deductible plans (indemnity or other) mean beneficiaries carry a higher amount of financial risk in exchange for much lower monthly premiums. "While the monthly savings can be appealing, be cautious about signing onto such a plan unless you are sure you can cover the deductible amount," said Housser, who added, "In fact, some experts suggest that high-deductible plans should only be used by the 'healthy and wealthy.'" To help choose a plan, calculate total monthly premiums for the year, plus total co-payments and out-of-pocket expenses for the family's health care visits and prescription medications. Then look at what one ER visit and one surgery (or whatever possibility might befall your family) would cost with each plan. Also consider the lifetime maximum -- a bout with cancer could easily exceed a $1 million or $2 million lifetime maximum.
- Flexible spending account: A flexible spending account (FSA) is a tax-benefited account that allows employees to be reimbursed for medical and dental expenses on a pre-tax basis. If your employer offers an FSA, calculate your anticipated annual expenditures to select an annual amount that will maximize your tax benefit. Then, put in place an organization system for yourself that makes sure you obtain reimbursement for your costs. Otherwise, you effectively will be throwing away part of your salary. Learn more at http://www.irs.gov/publications/p969/ar02.html#d0e1731.
- Mandatory coverage: Most group health plans must cover all employees, regardless of health status. Individual health plans do not have the same restriction. Pre-existing conditions can be excluded from coverage, or a person can be denied coverage altogether. In this situation, look into your state's coverage options. "If you currently have employer-sponsored coverage and a pre-existing condition, think carefully about the costs and benefits if you are considering changing jobs," Housser cautioned.
- Additional coverage: "Medical coverage should be prioritized, because costs for chronic conditions or injuries can soar into the thousands or millions of dollars," Housser said. "If cost is an issue, dental insurance and vision insurance can come second, unless your family has extraordinary needs for these coverages. Also, individual insurance policies usually exclude these coverages because their costs generally are predictable rather than catastrophic." To find out the value of coverage, ask your dentist, orthodontist and ophthalmologist what their services cost. Professional offices can provide rates to compare with premiums.
"Health insurance coverage is one of your most important benefit choices," Housser reminded consumers. "With careful consideration of the options, you can make sure you are protected if a medical situation arises next year." Based in San Mateo, Calif., Bills.com is a free one-stop online portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. The company blogs about consumer finance issues at http://www.bills.com/. Since 2002, Bills.com has served more than 20,000 customers nationwide while managing more than $500 million in consumer debt. Bills.com is a division of Freedom Financial Network, LLC, whose co-founders and CEOs, Andrew Housser and Brad Stroh, have been named Northern California finalists in Ernst & Young's Entrepreneur of the Year Awards.