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Aside from an insurance professional, nobody else finds essential health insurance exciting. A necessary evil? Sure! Something you have to research and make some decisions on? Absolutely! But fascinating and interesting? Probably not so much. 

Sorting out the confusion

Aside from being a dry subject, most people don’t like healthcare insurance material. It’s peppered with industry jargon that makes people’s eyes glaze over before they get halfway down the page. 

While there are many articles about different healthcare options, we have aggregated here the most essential health insurance options to be aware of. We have also included suggestions as to which plan fits any given situation best. 

What is the best or most essential health insurance plan?

The short answer is – the one that fits your situation the best. 

Typically you can choose from a few healthcare plans either provided by your employer or in the marketplace. The advantage of employer-sponsored plans is the employer paying for the majority (or sometimes entire) of monthly insurance premiums. 

HMO vs. PPO

Two primary plans that employers often offer are HMO (Health Management Organization) and PPO (Preferred Provider Organization). HMO usually requires smaller copays and smaller (or no) deductibles making it ideal for those in good health who only need routine appointments. The disadvantage of the HMO plan is that you will need a referral to a specialist. The PPO plan allows you to see any doctors you choose without any referral requirements; however, these plans are usually more expensive. You will also need to pay higher copays and will likely have a bigger deductible before the coverage kicks in. 

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According to the Kaiser Family Foundation, about 90% of all people in the US were insured in 2016. Even so, many enroll in health plans they don’t understand. Most employers set up informational meetings. However, these meetings rarely address which plan is better for which situation.

The basics of essential health insurance

Let’s start at the basics and talk about the plans that are available and which plan might be the best for you.

If you are a full-time, salaried employee, your employer will most likely offer you enrollment in one of their sponsored plans. Some employers offer only one plan. Others give you a choice between a few. Your employer pays the majority (or all) of the monthly premium, giving you a lower cost.

If you are eligible – enroll!

The different options for essential health insurance explained

• HMO (Healthcare Management Organization)
  • With this plan, you need to see providers within the network unless there is an emergency or no in-network provider within a certain distance of where you’re at. The distance will be specified in your policy contract; typically, it is set at 100 – 150 miles. 
  • You always have to see your primary physician first, and if you need to see a specialist, you will have to be referred to them by your primary doctor. 
  • Cost: One of the most significant advantages of this plan is the low copays and non-existent deductibles if you go to a provider within the HMO network. If you see somebody outside the network (for example a second opinion), you will have to foot the whole bill. HMO premiums are also usually cheaper.

Non-HMO Options

• PPO (Preferred Provider Organization)
  • If you choose PPO, you will have the freedom to go to whichever specialist you wish, without the need for a referral. Your plan will also pay for both in-network and out of network providers. However, if you go to an out of network provider, you have to pay a higher portion of the bill. 
  • The ability to go to any doctor is a double edge sword. On the one hand, you have greater freedom in choosing your providers. On the other hand, doctors go in and out of network pretty frequently so you will need to confirm their status, ideally before every appointment. If you don’t, however, you may have a more massive bill than you were expecting. 
  • Cost: The PPO plan will almost always charge more monthly than an HMO plan. Pay a flat fee copay or split with the insurance company after the deductible is met. For example, if you have an 80/20 PPO plan, pay 20% of the visit’s cost and the insurance will pay 80%.  
• PPO’s are most advantageous to those who require specialized care or who have a preferred doctor that they really want to see and who might be out of network for an HMO plan. 

Spending Accounts

• FSA (Flexible Spending Account)
  • Use this plan in conjunction with your insurance plan. Save your pre-tax dollars for future health-related expenses not covered by insurance with this option. Typically you will deposit a pre-determined portion of your pre-tax paycheck in the account. In 2019 the max contribution is $3,500 for an individual plan and $7,000 for a family. IRS has announced that these will go up $50 and $100 respectively in 2020. 
  • The IRS has clear guidelines on which items you can spend this money on. Typically it will include copays, deductibles, dental visits, etc. 

Important! You will lose any money left in FSA at the end of the plan’s yearly period. You can’t withdraw the funds.

Other Savings Options

• HSA (Health Savings Account)
  • This is used to make pre-tax contributions that you can use for medical expenses throughout the year. Unlike with FSA, you don’t use-it or lose-it with this savings account. The money left at the end of the year keeps growing tax-free. Pull the money out for non-medical expenses, and you’ll have to pay tax on it, along with a 10% penalty if you are younger than 65 years old. The max contributions for HSA are the same as we’ve seen for FSA ($3,500 for individual, $7,000 for family) with an additional $50 and $100 respectively approved for the year 2020.  
  • You can only use a savings account if you’re enrolled in a High Deductible Health Plan. 
  • The high deductible plan is typically a PPO plan (where you can see any doctor). Usually you can’t apply that deductible to preventive appointments. 

Proceed at your own risk

You should also carefully choose your health insurance plan because you will have it for a year. Some people avoid going to preventive checkups to reduce the out-of-pocket cost. But, while it will undoubtedly reduce the cost at that moment, it has the potential to cost you much more if you develop a serious health condition.

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About the Author

Olga Fawcett

Insurance Broker

As a former insurance broker for over 10 years, Olga has deep knowledge of insurance concepts and policies. She is passionate about helping others understand the insurance policies they are purchasing and find policies that suit their unique needs.
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