As you’re ticking off the many good things that roll around each year in the fall—crisp air, leaf peeping, pumpkin lattes—there’s a pretty good chance open enrollment doesn’t make the list. Nearly 3 in 4 respondents to Aflac’s Open Enrollment Survey say reading about their benefits is long, complicated or stressful. And almost half would rather do something truly unpleasant—like talking to an ex or walking over hot coals—than complete this year’s benefits enrollment.
The upshot? Most punt. Four out of five say they spend less than an hour on their benefits decisions, and even more just choose the same benefits year after year.
The Price of Inaction
That can get expensive if you choose wrong. Say you opt for a plan where a doctor you see once a year is out of network. That may be a cost you’re willing to bear. But if you end up needing that doctor’s services for an unexpected additional procedure? You could end up paying 300% of what it would cost if you’d found an in-network doc from the get-go, according to a 2015 study by the AHIP Center for Policy and Research. Likewise, if you opt to pay the higher premiums that come with plans that have lower deductibles, but rarely see a doctor or fill prescriptions because you’re healthy as a horse, you could end up paying more in up-front costs than need be.
And the price of sticking your head in the sand is only heading higher. The total cost of healthcare in the US is about $3 trillion a year, of which consumers pay out of pocket about $400 to $500 billion—and our share is rising about 10 percent a year.
“I'm willing to bet that our share is just going to go up,” says Thomas Torre of Copatient, a company that helps consumers negotiate their doctor and hospital bills. “That trend is unstoppable.”
Making the right benefits decisions, therefore, depends on arming yourself with a real understanding of the first: having a basic understanding of the terms you see when you read about today’s health plans. (Aflac tested this, too. Most people don’t.) And second, being able to answer a couple of questions that will tell you which kind of plan is likely to be best for your wallet.
Making the right benefits decisions, therefore, depends on arming yourself with knowledge and understanding of the fundamental insurance concepts at work.
Speak the Language
First, you need to have a firm grasp on common health insurance terms. In its survey, AFLAC found most people don't have a grip on a basic healthcare vocabulary. It’s hard to make a decision if you don’t know the following terms:
PPO: A preferred provider organization. This is a health plan that doesn’t typically limit you to in-network healthcare providers (or make you get referrals for specialists) but will require you to pay higher out-of-pocket costs for out-of-network healthcare providers
High Deductible Plan: A plan that requires you to pay for most of your care (doctors and prescriptions) until you meet your deductible. Qualifies you to open an HSA or Health Savings Account.
HSA: To help defray the costs of your higher deductible, you’ll have a health savings account into which you and your employer can deposit pre-tax money that can be invested and grow tax-free. If you use the money to pay for qualified healthcare expenditures, you generally won’t have to pay any taxes on it when you use it.
Premium: The amount you pay—typically monthly—to purchase health insurance.
Deductible: The amount you pay out of pocket for healthcare before the insurer starts to pay its share.
Co-pay: The amount you pay for an office visit or prescription that supplements what the insurer pays (until you meet your out-of-pocket maximum).
Coinsurance: The percentage of a healthcare service you are required to pay until you meet your out-of-pocket maximum.
The Big Decisions
Now you can move on to picking the right plan for you. Here are the big decisions you'll need to make.
PPO vs. high deductible plan with HSA. If you’re getting a plan through your employer, these are likely your choices. To make the call, look back at your medical usage over the past year. How many times did you see a doctor? How many prescriptions did you fill? If you’re healthy and don’t take a lot of medications, you’re generally better off with a high deductible plan. If you have high expected medical expenses, including pharmaceuticals, you’re generally better off with a PPO.
Compare the deductibles against those premiums. Notice, I said “generally better off.” It is possible to follow those guidelines and make mistakes. Pick a health plan based on premiums alone, according to the Copatient survey. Premiums are important, but they’re not the only element to consider, says Justin Sydnor, Associate Professor at the Wisconsin School of Business. Add up your yearly premiums and compare what you’re paying on a higher-priced policy to what you’re saving on the deductible. If your employer is making a contribution to a Health Savings Account to defray a high deductible, make sure to take that into account.
Consider the doctors, formularies and other costs. Make sure you take into account the variables that don’t have a price tag attached. Are the doctors that you want to see on your plan? Are the drugs you’re likely to take? How much will you pay—in the form of a copay or coinsurance—every time you go for medical care? Look at last year’s health history, and assume your behavior will be largely the same.
And if you can’t afford the pricier plan? Remember: A cheaper plan is better than no plan at all.
With Kelly Hultgren