How to choose a health insurance plan

Whether you’re starting a new job or it’s open enrollment season at your current one, choosing a health insurance plan (and other employee benefits) is an important financial decision.

Selecting a plan that’s right for you will ensure you get the most value from your health insurance coverage. Even if you’re planning to stay with the same coverage, comparing health insurance plans can help find one that best meets your healthcare needs.

This guide provides a clear, step-by-step approach to navigating your open enrollment options.

Assess your healthcare needs

Think about what you and/or your family need from a healthcare plan. Coverage that was a perfect fit last year might not be the best choice today. Before selecting a plan, evaluate your usage and anticipated costs. Ask yourself these questions to guide your strategy:

• Have my (or my family’s) health or prescription needs changed in the past year?
• Do I anticipate major life events, planned surgeries or ongoing treatments?
• How often did I visit the doctor or specialists and what were my out-of-pocket costs?

Because coverage can change from year to year, reviewing your current health needs gives you the information you need to choose a plan that fits your situation and helps protect against unexpected costs.

Compare your health insurance plan options

Once you have a clear picture of your needs, you can evaluate the plan options available to you. The differences typically lie in where you can go for care and how much you’ll pay out of pocket. Your options may include the following:

• PPO (Preferred Provider Organization): These plans offer more flexibility to see both in-network and out-of-network doctors without a referral. You generally pay higher premiums, deductibles and coinsurance for this level of access.
• HMO (Health Maintenance Organization): These plans often have lower monthly premiums but typically require you to use in-network providers and get a referral from your primary care physician to see a specialist.
• EPO (Exclusive Provider Organization): These plans require members to get care within the plan’s provider network. Care received outside the network is billed at full cost, though federal law protects emergency care costs.
• POS (Point of Service): These plans allow you to choose care within your network or outside it at the time you need service.
• HDHP (High Deductible Health Plan): These plans offer lower premiums in exchange for higher out-of-pocket costs and are typically paired by a health savings account (HSA). Any of the plans above can be an HDHP.

As you review your options, it’s important to look beyond the monthly premium to understand the total cost of the plan.

• Premium: The fixed amount you pay for your coverage, regardless of the services you use.
• Deductible: The amount you pay for services before your insurance kicks in.
• Copayment: A fixed fee for certain kinds of office visits, prescriptions, or other kinds of care paid at the time of service.
• Coinsurance: The percentage of costs you pay after meeting your deductible.
• Out-of-pocket maximum: The absolute most you will pay for in-network care during the year.

When comparing insurance plans, weigh the lower premiums of an HDHP against higher potential out-of-pocket costs. For example, a healthy individual might save money with an HDHP, while someone managing a chronic condition may find a lower-deductible plan more cost-effective.

Unlock tax savings with an HSA or FSA

Health savings accounts (HSAs) and flexible spending accounts (FSAs) allow you to pay for medical expenses with pre-tax dollars, which may lead to significant savings.

What is a health savings account (HSA)?

An HSA is a tax-advantaged account paired exclusively with an HDHP. It offers a unique "triple tax advantage:"

• Contributions are tax-deductible.
• Account growth is tax-free.
• Withdrawals for qualified medical expenses are tax-free.

HSA funds roll over year after year and belong to you even if you change employers. Many HSAs offer investment options, making them a powerful vehicle to fund healthcare costs in retirement.

What is a flexible spending account (FSA)?

An FSA is an employer-offered account that allows you to set aside pre-tax money for qualified medical, dental, and vision expenses. Unlike an HSA, these funds generally expire at the end of the plan year. Some employers offer a grace period or allow a small rollover, but it’s not guaranteed.

When funding an FSA, carefully estimate your expected medical expenses to avoid forfeiting money at the end of the year.

Review other valuable employee benefits

Your open enrollment period may also be an opportunity to secure other valuable financial benefits through your employer, such as:

• Disability insurance: Short-term disability typically replaces a portion of your salary for a few months while you recover from an illness or injury. Long-term disability provides income protection for extended periods if you cannot return to work.
• Life insurance: Many employers offer a basic policy equal to one year of salary at no cost. You can often purchase supplemental coverage for yourself or dependents at competitive group rates.
• Dental and vision: Dental and vision plans usually cover preventive care like cleanings and exams at little to no cost. They may also offset expenses for procedures like fillings, braces or eyewear.
• Commuter benefits: You may be able to set aside pre-tax dollars to cover the cost of work-related parking or public transit, with the added benefit of lowering your overall taxable income.
• Wellness programs: Your employer may offer incentives that reward healthy behaviors such as gym reimbursement, premium discounts or cash rewards for completing health screenings.

Take control of your financial well-being

Being an active participant in open enrollment can help you make the most of your health insurance plan and other employee benefits. By reviewing your needs, comparing plan options, and contributing to tax-advantaged accounts like HSAs or FSAs, you can take more control of your healthcare costs and strengthen your financial position.

Insurance plays an important role in your financial plan. Learn how our collaborative approach to financial planning can help you see a full view of your financial picture and work toward your financial goals with confidence.