Benefit Time Tips. How Much Health Insurance Do You Need?

By Paul Jarvis, Portfolio Manager and Certified Financial Planner™, Bell State Bank & Trust

Many consumers need enough to ensure that if they (or a covered family member) get sick or injured, their household is not footing the entire medical bill. Options for coverage that are available to many families include an HMO, a PPO, and a traditional indemnity plan, frequently made available by an employer.

The answer is simple: enough to ensure that if you (or a covered family member) get sick or injured, you’re not footing the entire medical bill on your own.

If you receive health insurance through your employer, your choices are limited. Some employers will offer plans from multiple health insurance providers, but most limit their offerings to one provider. Additionally, most employers offer one or more of the following: an HMO, a PPO or a traditional plan.

  • An HMO (or health maintenance organization) is usually the lowest-cost alternative. As a result, enrollees are limited to doctors and treatment facilities within a limited “network.” These plans usually have no deductibles. Enrollees are required to make copayments when seeing a physician.
  • A PPO (or preferred provider organization) allows enrollees greater flexibility. Enrollees can see doctors in or out of the PPO’s established network of providers. Deductibles usually apply and co-payments are required. A visit to an out-of-network doctor will trigger an additional charge.
  • A traditional indemnity plan is usually the most expensive, as it typically gives enrollees the greatest number of choices in choosing doctors and facilities. But the deductibles can be high and the insurance company may cap the amount of money it will spend on the enrollee’s behalf over his/her lifetime.

Check out this Health Plan Matchmaker by following this link: Health Plan Matchmaker

Choices for the Self-Employed

If you are self employed, you can comparison shop among the insurance providers licensed to do business in your state. It is a good idea to get as many estimates as you can because coverage and premiums vary significantly. Be sure you are comparing apples to apples: You want cost breakdowns for coverage with similar deductibles, copayments, prescription benefits, and physician access.

Beyond Standard Insurance

As you can see, even the best plan probably won’t provide 100% coverage for you or your family. If your employer allows, you can also fund a flexible spending account (FSA) or health savings account (HSA). An FSA, which is an employee benefit typically funded through payroll deduction, allows you to set aside pre-tax dollars to use toward copayments, out-of-network coverage, or other medical expenses. The drawbacks of an FSA: The maximum you can contribute is low and any funds not used during a calendar year are forfeited. An HSA, available to those enrolled in a high-deductible plan, has a higher annual contribution limit and no “use-it-or-lose-it” rules.

If you feel you need more coverage and can afford it, you can also buy supplemental health insurance. The three most common types are disease specific, accidental death or dismemberment, and hospital indemnity. Again, be sure to comparison shop before purchasing.

For additional resources and information here are a couple links:

www.healthcare.gov

www.medicare.gov

www.planforyourhealth.com

Additional information from PlanforyourHealth.com:

Health benefits can be confusing. The following articles give you tips on choosing a plan, making payments, filing claims and preparing for the year ahead. Your choice of plan can affect your physical and financial health. The more you understand, the better you will be at making decisions that are right for you.

Start Here to Impact Your Financial Health throughout the Year

Paul Jarvis is a member of The Financial Planning Association (FPA®)

The FPA connects those who need, support and deliver financial planning. We believe that everyone is entitled to objective advice from a competent, ethical financial planner to make smart financial decisions. FPA members demonstrate and support a professional commitment to education and a client-centered financial planning process.

Paul Jarvis is an Ambassador for the CFP Board and has partnered with the CFP Board to offer the public education and resources. 

The information in this article is not intended to be tax and/or legal advice and should not be treated as such. You should consult with your tax advisor and/or attorney to discuss your personal situation before making any decisions.

 

If you are interested in financial planning for a more secure future, contact Paul Jarvis to start the conversation.

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