If you are moving to a job in a new organization, one of the things you will need to think through are the health insurance options you will have to choose from. For most of us, interpreting the insurance-speak on the paperwork is mind-numbing and it feels like we are reading a foreign language.
I recently changed jobs, and for the first time in my life signed up for a high deductible health insurance plan and a health savings account (“HSA”). I’ve always been interested in having access to a HSA, but it just hasn’t made sense with the insurance premiums that would be deducted out of my paycheck for the options I’ve had to choose from. This time, the formula flipped. I took the plunge.
The jury is still out – but so far, we haven’t had to use the insurance to any extensive degree, so costs have stayed low.
What is a high deductible plan and an HSA?
The theory with a high deductible plan is your premiums are lower – and you pay out of pocket upfront for services until you hit the deductible. You still have the benefit of the lower rates negotiated between service providers and the insurance company, so that should save you some money – but you definitely will have more costs up front when you see a provider.
At my prior employer, the premiums I had to pay for my insurance would have been higher for the high deductible plan than the option I chose (which still surprises me). Here at my new employer, the numbers flipped.
To help with the higher deductible, my employer couples the insurance plan with a health savings account. This was exciting to me. I have eyed the HSA world for a long time. And now I finally could sign up for one. For those who aren’t familiar with an HSA – it’s essentially an account that allows you to save money up to certain IRS limits that will grow tax-free over time that can be used for qualified medical expenses. It affords some benefits similar to a tax deferred retirement plan – you can contribute with pre-tax dollars, and the funds grow tax-free within the account. However, you can use the money today to help cover your health care expenses.
Over the longer term, the HSA concept has the potential to be a real boon as I think about saving towards retirement. Funds that I don’t spend now on healthcare will be available in the future – and all the studies and projections show that retirees can spend large sums of money on healthcare in retirement. So fingers crossed, nothing major will happen and I can keep funds in my HSA account.
So, what should you think about when evaluating healthcare options that your employer offers?
First things first -- signing up for health insurance is a vital part of any financial plan. Medical costs can quickly skyrocket if you are diagnosed with a serious condition – so it is important to protect yourself with insurance coverage. Unfortunately, plans don’t cover everything, so you also need to couple your health insurance with building up an emergency fund and if available, an HSA balance.
We recommend you do the following in your evaluation process:
- Compare the benefits offered by the plans you can choose from. Your employer should be able to provide you with comparative benefits charts that illustrate the benefits and provide you examples of what the out-of-pocket cost of various services and procedures would look like under each plan.
- See if your current providers accept the insurance you are looking at. Be aware of the implications of in-network vs out-of-network costs – and the possibility that you may want to consider changing providers.
- When you look at the costs, there are two things you need to think about: 1) How much money will be deducted from each paycheck, 2) what costs will be paid for services when visiting a doctor or seeking out treatment. Both parts need to be considered in the cost equation.
- If you have chronic things you deal with, make sure to pick the plan that best provides for your needs. Not all plans are equal in this regard, so when you do your cost analysis, this is an important consideration.
- When in doubt, talk to the experts. Your Company can provide you with contact information to talk through specifics and help you as you decide.
- If you choose a plan that includes an HSA, take advantage of the savings opportunity that you have! If you don’t need the funds to cover expenses today, you can help build towards retirement! One thing to be aware of the fees associated with HSA accounts -- they can eat into your balance. So when you leave an employer, you want to shop around to make sure you have the best choice for your facts and circumstances.
Changing jobs is always a stressful time – we hope the considerations above will help you as you look at your healthcare options with your new employer. Healthcare is important – so don’t forget about it in the process!