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How to Choose the Best Health Plan

Last week's column on health insurance, which mentioned the start of the "open enrollment" period for corporate health plans, generated a few questions. In fact, many employees spend only a few minutes reviewing their options, and this year-end task gets relegated to the bottom of the "to-do" list. That could be an expensive mistake.

So this week's column offers some resources for those who would like to make informed decisions about their employer's health plan alternatives, but simply don't know where to start.

It's worth spending the time to understand your options, because the company may have added new choices, including a Health Savings Account. Or your plan may have switched PPO (Preferred Provider) options, eliminating your favorite physician from the list. Or your own personal and family health needs may have changed wotj age or the birth of a child, so that a different portion of the company's healthcare plan might be better suited to your needs.

Your choices may include:

  • HMO: On the plus side, Health Maintenance Organization costs are low, with one fixed, monthly pemium and either no payment, or a nominal one, required for office visits. On the minus side, you will be limited in your choice of physicians and specialists. And the HMO must authorize diagnostic tests.
  • PPO: With a preferred provider organization, you'll have your choice of a wide range of physicians in the plan - and may be able to choose a provider outside of the plan, if you pay for a substantial portion of the cost. You may be required to pay larger out-of-pocket expenses for copayments and diagnostic tests, since a PPO not only negotiates discounts with its providers, but likely requires pre-certification for these tests
  • HSA With a health savings account, you set aside money on a pretax basis to pay for healthcare expenses throughout the year. If you don't spend the money, you get to roll it forward on a tax-deferred basis, to help with future medical expenses. The plan likely gives you a wide choice of providers, counting on your willingness to choose the most cost-effective course of treatment.

After examining the company's choices, you have to set some priorities, and decide which plan is appropriate. Some of those priorities may include:

  • Choice of physicians, hospitals and other providers
  • Cost of premiums, copayments, and "out of pocket" expenses
  • Coverage for prescription drugs
  • Wellness program coverage
  • Tax advantages

If you're young and healthy, you might benefit best from a health savings account option. You'll probably only spend money on an annual checkup, or a flu shot. The money you don't spend will continue to grow. And you know you're covered for any major expense should you require care in case of an accident.

But if you have a family with young children, and many office visits for everything from colds to playground accidents, you might want to choose the HMO option, so you aren't hit with a co-payment for every trip to the doctor!

And if you already have existing medical conditions, be careful about changing your insurance coverage. Pre-existing conditions may not be covered for six months if you switch. Also, be sure that any pecialists you're currently seeing are included before switching from a traditional "fee for service" that gives you unlimited choice into a lower-cost PPO.

Getting Help Choosing the Best Plan

If you're still confused about those choices and how they meet your priorities, there's plenty of help online. Many of the most informative sites are offered by health insurers. They have both the money and the vested interest in creating educated healthcare consumers, so they're worth checking out in spite of the abundance of logos!

Humana offers FamilyHealthBudget.com to help you calculate how much you're really spending on healthcare, when you include premiums and out-of-pocket expenses.

Did you ever consider healthcare as part of your family budget -- or just as a cost that you hope will be covered by your insurance? This site will help you take a realistic look at costs, no matter whether you are covered by your employer's plan, a spouse's plan or Medicare. And there's advice even if you don't have insurance coverage. Plus, you'll find in-depth explanations of the kinds of plans mentioned earlier in this column.

Aetna (AET) serves up PlanforYourHealth.com , which offers both a "health benefit priorities" tool and a "health expense calculator." The link to "Navigating Health Benefits" on the home page is especially useful in this open enrollment period to help you make choices based on premium costs, copayments, and plan limitations.

Unfortunately no one has developed the "perfect" tool to make the decision for you. That still requires your own logical thinking. But you can't make a sensible decision if you don't take the time and make the effort to carefully examine your choices. And that's the Savage Truth.

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Terry Savage is an expert on personal finance and also appears as a commentator on national television on issues related to investing and the financial markets. Savage's personal finance column in the Chicago Sun-Times is nationally syndicated, and she released her fourth book, The Savage Number: How Much Money Do You Need? in June 2005. Savage was the first woman trader on the Chicago Board Options Exchange and is a registered investment adviser for stocks and futures. A Phi Beta Kappa graduate of the University of Michigan, Savage currently serves as a director of the Chicago Mercantile Exchange Corp. She also has served on the boards of McDonald's and Pennzoil.

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