Insurance Basics
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Evaluating a health insurance plan

What's the plan?

Look at the coverage you're being offered. These days, looking at the type of insurance -- HMO, PPO, traditional indemnity plan -- doesn't tell you as much as in years past. "What is most striking to me is that there seems to be a lot of convergence in health insurance plans," says Hoyt. "HMO and traditional health insurance plans are acting an awful lot like each other."

David Sommer, associate professor of risk management and insurance at the University of Georgia, agrees. "There are not necessarily hard and fast distinctions that make them vastly different," he says. "HMOs were first to offer co-pays. Now PPOs use them as well. Ditto preventative care. You can't just look at the name of what it is and know exactly what you're dealing with. You have to know the details."

Look at the type of insurance you're being offered, and then do a little digging to find out exactly how this particular version operates.

Premium just part of the price

Start with the price. How much are the premiums? And how much, if any, would your employer pay?

Keep in mind that premiums are just a small part of the price. Look at the care you used in the past few years and see what you would have paid under the plan. What's covered and what's out-of-pocket? What are the various deductibles? What's the co-pay? After you've hit the deductible, how much of the cost do you have to cover (known as the co-insurance)? What prescriptions are covered, and for how much? Does it pay for all or just a portion of brand names? Is there any kind of annual cap on out-of-pocket expenses in a year? If so, is it manageable or would it wipe you out?

Also consider any special health-care needs you might have in the near future like having another child or getting knee surgery. What would you pay under the plan? What about unexpected events, like an accident or illness?

Savings plans for health

If the plan has any special feature, like a health savings account (HSA) or flexible spending account (FSA), what are the rules, and do they make sense for you? With both plans, your insurance will have very high deductibles, which makes the premiums less expensive (making it a popular option for employers). Does your employer put any of those savings into your HSA?

"Most companies today are contributing something to health savings accounts because the insurance they are providing is less expensive," says Sommer.

And what happens if you bank money and don't use it by the end of the year? With a health savings account, you can roll it over for next year (and even take it with you if you leave your job). But with flexible spending accounts, it's likely the employer will keep any money not used by year's end.

But be forewarned: Health care reform is rapidly changing the cost and features of HSAs and FSAs. If you are considering either, be sure to look closely at the policy before buying.


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