Every year, during the benefits “open season”, federal employees have to make decisions about which health insurance they will want to be covered by under. Plans change each year in terms of coverage and in premium amounts, and it’s important that you keep up with the details of these changes.
We’ll be talking about the main details of specific health plan types, including PPOs, FFS, HMO, POS, High Deductible Plans, and consumer driven plans. The Office of Personnel Management offers resources to do research and be able to find plan costs, but they expect that it is your own responsibility to know what you are looking at.
I’m pretty sure most of you don’t spend you leisure time in the evenings reading about financial planning topics like health insurance, so my hope is that you’ll be able to have more information in your toolbox to be able to pick the health plan that’s right for you and your family, so here we go.
HMO Plans: Health Maintenance Organizations
HMOs have historically been known for being focused on wellness and prevention. They typically require that you go see your primary care physician for the majority of your care. Since this primary physician sees you frequently, they have a good idea of what is going on with you and attempts to keep you healthy. This also means that most if not all of your care will be through in-network providers.
This is an important consideration because if there is a specific doctor that you see regularly, you’ll want to make sure that they fall within your network if you are opting to go with an HMO. HMOs also usually have a co-pay instead of deductibles.
With an HMO, if you require medical care from a medical professional that is considered a specialist, you usually have to first contact your primary care physician and get a referral. While this isn’t necessarily a game changer, it’s an important factor to know about. You risk not having coverage if you visit a specialist without first having a referral from your primary care physician.
Another thing to note is that you’ll also likely be seeing a specialist that falls within your network. Again, something to considering if there is a specific doctor that you like to see.
There are a few different types of sub HMO categories that apply to how the doctors work. We won’t go into that, but if you have questions it’s important that you contact the plan first before you select it as your insurance.
FFS Plan: Fee-for-Service
A Fee for Service plan is a more flexible type of insurance. With these plans, they will typically pay the medical provider directly, or they might reimburse you after you filed an insurance claim for medical treatment. This means that you have more flexibility in choosing your medical care providers so you can change doctors frequently if you’d like, without having to talk to your primary doctor.
If your fee for service plan is an indemnity plan, then you have what’s called a deductible. The plan will only pay for a portion of the medical costs and pass the rest on to you as the insured. It’s not until you reach your deductible limit that or max out of pocket that the insurance company will begin covering the remainder of the cost for your medical care. Out of pocket maximums reset each year, so just know that you may be putting yourself at risk for more expenses if you see many doctors with this plan.
In some plans, you might have access to what’s called a PPO, or Preferred Provider Organization. As the name indicates, this is a group of medical providers that agreed to being part of this group and as such, reduce their charges for service. An employee seeking medical care from a PPO would likely pay less of our pocket, but as with everything, there are exceptions so be sure to look carefully before signing on the dotted line.
POS Plans: Point of Service
A point of service is a combination plan. If you took some of the nice features about HMO plans and put it together with a PPO, you’d get this plan.
Enrollees are typically less restricted than in an HMO since their range of doctors is bigger. Enrollees also tend to have lower costs and out of pocket expenses than compared to a PPO.
You’ll still select a primary care physician from the list that they let you pick from, and you’ll still need to have a referral if you’re going to see a specialist. In these manners, it seems like a regular HMO, except you’ll find that the cost to you tends to be less than the traditional HMO.
It’s been my experience with our clients that point of service plans has required them to use generic brands of prescription, so if you are on continued medication, make sure you check this detail out. Any cost savings can easily be blown out of the water by extra expenses from prescriptions, especially if you take a medication that does not have a generic equivalent, or perhaps the generic doesn’t work as well for you.
HDHP: High Deductible Health Plans
A high deductible plan is one in which an enrollee typically has higher annual out of pocket expenses. The deductible is a much higher amount than in other types of plans. So why in the world would an employee choose this plan?
There are a few reasons. For one, the monthly premium tends to be lower with high deductibles. This makes sense, since you would be paying more for actual medical care, so if you are someone that does not frequently require doctor visits and are in good health, perhaps this might be a good plan for you.
Yearly checkups (wellness visit) are included in this so don’t think you can’t go see your doctor every year. Get those checkups; it’s important.
Another incredible benefit of a high deductible plan is that you have access to an HSA (health savings account). This magical type of account allows you to deposit money into it on a pre-tax basis, grow it with investments, and then use the grown money in a tax-free status if you’re using it for qualified expenses. It’s similar to an FSA, but better because any balance that you don’t use will rollover into the next year for you. If you use it for non-qualified expenses, you’ll be penalized though so be careful.
There are so many things that insurance may not cover (including Medicare) that you can use these funds to cover in a tax-free status if they’re qualified expenses. Not a bad deal. This is such an underutilized planning vehicle, especially by young people, so to my young feds out there – don’t neglect looking into this.
CDHP: Consumer Driven Health Plans
The last one we’ll talk about today are Consumer Driven Health Plans. This one is the odd one out. These are still high deductible plans, but as the name indicates, these tend to be more customized plans, and it isn’t really just one particular type of plan.
You still have the ability to set aside money on a pre-tax basis to help pay for your health care, but the cost of health care will be higher than some other traditional types of health insurance. These plans tend to have lower premiums and as such, are most popular by employees that tend to be healthy and conscientious about their health and the care they need.
In short, it allows enrollees to look around and select competitive care in an effort to reduce costs. The philosophy is to put the power in the hands of the enrollee. It hasn’t been too popular of a plan since most people just don’t have the knowledge or time to research the world of medical care. You have more choices of medical care providers than traditional health care programs but that also means more research on your part.
Conclusion
As you can see, no plan is perfect for everyone and it all depends on your specific needs. There is a lot to think about as each plan type serves a specific group of people and their needs. There so much more detail about each category but I hope this gives you a base to start.
We put together a cheat-sheet infographic on the details for each category so if you want that, send us an email at info@rmgadvisors.com and request a copy.
