The ABCs of Insurance
As featured in the
Charlotte Observer
More workers will likely be offered an option called consumer-directed health plans, during open enrollment in coming weeks. Here are tips for evaluating the plans.
Q. What's a consumer-directed health plan?
This insurance typically carries a premium lower than traditional coverage. The trade-off is a deductible that tops $1,200 and can be up to $10,000 for family plans.
That can mean paying full bills for blood tests, X-rays or a doctor's office visit, instead of the $20 co-pay many are used to. Consumer-directed plans are paired with a special account to help manage these expenses. Most common are health reimbursement arrangements and health savings accounts.
Q. How do I tell an HRA from an HSA?
HRAs are employer-funded accounts that help pay out-of-pocket costs. That money belongs to the company and stays with it if a worker leaves. In contrast, customers own health savings accounts, or HSAs, which let them set aside pre-tax dollars for health costs. Unused money stays in the accounts, earning interest.
Q. How do I know if it's right for me?
A lot depends on what's offered. The plans vary widely.
Financial planners say they generally work best for people who use little health care. Those customers can pay a smaller premium, get a tax break on money put in their HSA and build that account.
The plans are a poor match for those struggling to save.
"For people that are really on a tight budget and are close to being in financial trouble, that risk could push them over the edge," said Jon Beyrer, vice president of wealth management for Blankinship & Foster, a Solana Beach, Calif.-based financial advisory firm.
People with chronic conditions like diabetes might drain savings accounts and get stuck with a high deductible every year. But they also may benefit, depending on a plan's specifics. Many high-deductible plans come with a lower limit for what the customer must spend out of pocket yearly. In those cases, such a plan helps a heavy health-care user.
Q. How do I know what my medical needs will be?
Check the plan's benefits summary for its lifetime coverage maximum and how it might cover a hospital stay. See whether the annual out-of-pocket maximum is lower than what you have now or other options available. But remember that deductibles and out-of-pocket maximums reset yearly. If you're diagnosed with cancer in December, could you handle a high deductible for that year, then another in January?
Several Web sites offer expense calculators, including www.planforyourhealth .com , created by Aetna Inc. and the Financial Planning Association.
Q. How should I evaluate a consumer-directed plan?
Compare it to your current insurance coverage. Check for differences in premiums and deductibles, listed in the benefits summary. Compare the co-insurance, as well. This is the percentage your insurer will pay for a bill after you meet your deductible.
Say you need a $3,000 test, and your coverage pays 80percent after you meet your $1,000 deductible. If you've paid nothing yet, that means a bill totaling $1,400.