Employers typically offer a choice of one or more plans, so deciding which one is best for you may be difficult. There are many decisions that go into selecting the right plan—not just the cost of the premium. The first step in making the best choice is understanding how the different types of medical plans work.
Key Terms for Understanding Your Medical Plan Options
There is typically a deductible per individual and a deductible per family. If you have more than two family members, the family deductible can help your coinsurance (see below) kick in faster. Here's how:
Say your individual deductible is $250 per year and your family deductible is $500. Your covered expenses are $250, your spouse's are $200, and your child's are $150—that's a total cost of $600 in covered expenses. Even though only one of you has met the $250 individual deductible, together you have met the $500 family deductible. So, your coinsurance starts to pay your costs over $500.
Types of Health Insurance Plans
To make the right health insurance decisions, you will need to understand what kinds of insurance plans are available. The principal ones are as follows:
IMPORTANT NOTE: The Affordable Care Act of 2010 put in place certain consumer protections regarding health insurance plan practices. For example, health insurers must publicly justify the reasoning in order to raise premiums by 10 percent or more. Insurers can no longer cancel policies except under specific, strict conditions. And, under the 80/20 Rule, a health insurer must spend at least 80 percent of every premium dollar on medical care and quality improvements. If they spend more than 20 percent on advertising, overhead, or executive compensation, they must provide a rebate to members.
Tax, Funding, and Other Considerations
You will also need to understand how you are paying for medical coverage—is it with pre-tax dollars? If you have a choice of insurance plans, making the right choice depends on a number of factors, and you should take them all into account. If you terminate employment, your employer may be required to offer you COBRA coverage. For details see the section on COBRA Coverage.
In addition, you should look into the costs and benefits of dental plans and vision and hearing plans.
Increasingly, the trend in paying for medical care is for individuals to "self-insure" by establishing a savings account dedicated to medical payments. There are two principal types:
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