How to make smart decisions during health care open enrollment

Sep 13, 2011 08:55 AM EDT

HSAs often accompany high-deductible plans. With HSAs, consumers pay lower premiums in exchange for higher deductibles. (©Hemera/Thinkstock)

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By Andrew Housser

As autumn approaches, many U.S. workers will be receiving information about open enrollment periods for health care. During these periods, employees can choose to join or change health insurance plans. Whether this applies to you or not, autumn is a good time to evaluate your health insurance coverage and make sure you have the coverage you need. Here are some suggestions for how to make decisions about medical insurance.
1) Know your coverage option.

Learn about different types of health insurance plans to find out what kind of coverage is best for you and your family. Ask your employer's human resources office for information, and search online. The basic types of health insurance plans are:

1.HMO -- Health maintenance organizations, or HMOs, usually charge lower monthly premiums in exchange for having fewer covered doctors and services you can choose among. If you choose this option, check to see if your doctor is available in the network. These plans also cover preventive care such as annual check-ups. If you go outside the network, though, you won't be covered.


2.PPO -- Preferred provider networks, or PPOs, also use a network approach to limit costs. These plans do allow out-of-network care, but it is covered at a lower rate. Premiums are slightly higher than with an HMO. Preventive care might or might not be covered.


3.FFS -- Fee-for-service (FFS) coverage refers to "old-fashioned" health insurance where the doctor bills for individual services and the health insurance pays for services it has specified, at a pre-determined rate. You might have to pay out of pocket and be reimbursed. Some services will be covered and others will not, depending on the contract.

2) Join forces with employer plans.About 44 percent of U.S. workers are covered by employer-sponsored health plans. Another 25 percent receive government-funded coverage (whether from Medicare, military benefits or another source). These plans are often more affordable and might have more extensive benefits than individual insurance. But for some people, individual insurance is the only option -- or is more cost-effective. Review all your options to find the best one.

3) Evaluate an HSA.Health savings accounts (HSAs) often accompany high-deductible plans. With HSAs, consumers pay lower premiums in exchange for higher deductibles. The consumers then save pre-tax dollars in a dedicated HSA. They can cover the cost of deductibles or pay other medical bills from these HSA accounts, tax-free. HSA funds that are not used in one calendar year roll over to the next. Do be aware that today, however, only certain plans qualify for an HSA. Even if the plan has a high deductible, it might not be designated "high-deductible" for HSA purposes. Usually, premiums are lower for non-HSA plans. Compare the tax savings you would receive with an HSA and expected medical costs to the premium savings for a non-HSA plan before making a choice.

4) Compare apples to apples.Understand what your costs could be with each option. A pricier HMO plan that combines low co-payments, covered treatment for a child -- from wellness to winter colds -- and covered prescriptions might pay off in the end. A high-deductible plan's lower premiums look good, but does your cash flow allow enough flexibility to pay a $500 deductible for a procedure if one is needed during the year. Estimate your anticipated costs over a full year with each health insurance option. Don't forget to include premiums, office visit co-payments, prescriptions, alternative care such as massage and chiropractic, and other care such as mental health care that one plan might cover while another does not.

5) Don't forget Medicare.Medicare open enrollment takes place at the end of each year. During open enrollment, Medicare beneficiaries can choose among different health plan options and coverages. As with any health plan, open enrollment is a good time to check up on the coverage you have selected.

6) Use up FSA balances.A health flexible spending arrangement (FSA) is a tax-benefited account that allows employees to be reimbursed for medical expenses. Employees choose an amount to contribute to their FSA account each pay period. The FSA deductions can be taken pre-tax, with no income tax paid on the amount. Employees then submit proof of medical expenses to be reimbursed by the employer or FSA account administrator. If you have an FSA, plan ahead to use up the entire amount you have deducted from your pay during the FSA plan year. If you do not use it, you lose it -- unlike an HSA, these funds do not roll over from year to year. Open enrollment is a good time to check your FSA balance.

7) Negotiate medical costs.If you have medical costs that insurance does not cover, you may be able to negotiate them. Contact the doctor or hospital's billing office and ask what options they provide. For example, some providers will offer a discount for cash payment or will set up a monthly payment plan.

8) Get a second opinion.Of course, a second opinion can help make sure you receive the right care. But it can also help with your medical expenses. Especially for major procedures, check with several providers to be sure you are paying appropriate costs.

Keeping a close eye on your health care costs can help you breathe easier. It can also help you avoid going into medical debt, one of the most common causes of debt problems. Best of all, you can make sure you are able to receive the health care you need -- without breaking the budget