Published October 28, 2016|7 min read
Health insurance can be complicated to navigate. That’s why a lot of us are lucky to have it provided as a benefit from our employer. Whether it’s covering some of the cost or just narrowing down our options so we don’t get paralyzed by choice, it’s helpful.
But employees still have to make some decisions when it comes to their employer-based health insurance. The problem is that most people don’t. A recent study showed that 57% of employees spend less than 30 minutes making choices regarding their health insurance during their annual enrollment period. That’s probably because most people just go with whatever they had last time. If it was good enough then, it’s good enough now, right?
But you shouldn’t just blindly accept your employer-based health insurance. You could be missing out on some valuable insurance knowledge (and maybe even some pretty good benefits). Here’s what you should look at when you’re enrolling in health insurance through work.
This is a reasonable question to ask. A lot of people accept that they should – or have to – use their employer-provided health insurance. But if your employer-provided life insurance isn’t enough, is the health insurance?
You aren’t legally required to use your workplace health insurance. There are a few reasons you might look outside your workplace to buy your own health insurance: maybe the contribution you’re expected to make is too high, or medication you need isn’t included in any of the plans, or the dependent care is too expensive.
While you have more options if you shop on your own, the truth is you probably won’t get a better deal. Employer-based health insurance has to be "affordable," which means it can’t cost more than 9.66% of the employee’s income. If it meets that threshold, you aren’t eligible for a premium tax credit even if you do shop on your own. That means you’re footing the entire bill, and you can’t get any help in the form of subsidies.
In short, while you can get your own health insurance even if your employer offers it, you’re likely better off just going with what’s provided.
Depending on your employer, you may just get a "Hey, this is your health insurance" option. Others might let you pick from a couple of plans. Either way, you should know the category and types of plan(s) being offered. It’ll affect how you get them and how you use them.
Employer-based health insurance comes in two flavors: defined benefit plans and defined contribution plans. Defined benefit plans are the classic American Dream version of health insurance: your employer offers a group plan, you make your choices based on what’s offered, and you go on your merry way.
Defined contribution plans are a little different and require a bit of legwork on your part. Instead of giving you plans to choose from, your employer gives you an allowance to spend on private benefits marketplaces like Liazon to buy health insurance, along with other products (like life insurance and disability insurance).
You also need to know what kind of plans are being offered. Health maintenance organizations (HMOs) have strict networks and require referrals to see specialists; preferred provider organizations (PPOs) don’t require referrals and let you go outside of your network, for a higher cost; and exclusive provider organizations (EPOs) have a tight network, like an HMO, but don’t require referrals.
This is important to know because it affects how you’ll be able to use your insurance. Will you be able to see a preferred doctor if he or she isn’t in-network? How far will you have to travel to see an in-network doctor? Is getting a specialist referral more hassle than you want to deal with?
These are the practical aspects of using your health insurance that you need to keep in mind when you’re making your choices. If you aren’t aware of what’s being offered, you’ll hit some roadblocks when it’s time to see the doctor.
Health insurance plans have to include dental and vision coverage for children as part of their essential benefits, but adults may be on their own. Don’t assume that your dental or vision coverage is included in your health insurance plan; they may be, or they may be standalone plans. If they’re separate, that means you’ll have to enroll separately or else you’ll miss your chance for coverage for the year.
You should also be aware of how much the employee contribution is for those plans, too. It’s an added expense on top of your health insurance contribution that you’ll need to budget for.
There are two ways employers can approach wellness programs, both of which have their drawbacks. The "carrot" method gives employees a discount on their premiums if they stay healthy within the wellness program. The "stick" adds a penalty to their premium, causing them to pay more. The problem with the "carrot" is that if you eventually reduce or eliminate the discount, employees are angry. The problem with the "stick" is that you’re charging employees more, so they’re already angry.
And that’s on top of one of the main concerns of wellness programs: giving employers further access to employees’ private medical information.
Most people don’t know if their employer offers a wellness program. Whether or not you agree with it is sort of irrelevant; it could be affecting your premium payments, so it pays (literally) to find out.
Did you know that health insurance isn’t the only health benefit your employer might offer? Flexible spending accounts (FSAs) and health reimbursement accounts (HRAs) are additional benefits offered by some employees that help make healthcare more affordable.
These plans have a few differences, but they’re both employer-sponsored ways to pay for medical expenses. With an FSA, you can contribute money pre-tax and use it to pay for qualified medical expenses. That means that you’re also saving on your tax bill come April.
HRAs, on the other hand, have money contributed by the employer. This works well if they provide high deductible plans; they can save on the monthly premiums, but the HRA can help employees handle medical costs when they have to actually use their insurance.
FSAs and HRAs aren’t directly linked to your health insurance, but you’ll probably deal with them at the same time you’re choosing your insurance plans. If you need to make a choice between plans and you’re offered one of these savings vehicles, keep in mind how they’ll affect your health budget for the year.
Having health insurance coverage through your employer is great. But if you’re no longer at your job, is that it? Are you just cut off, left to fend for yourself? Luckily, no.
Although it sounds like the evil organization from G.I. Joe, this COBRA is actually pretty helpful for people who have health insurance through their employer. Or, rather, had health insurance. COBRA, or Consolidated Omnibus Budget Reconciliation Act, lets some employees keep their employer-owned health insurance when they’re no longer at their job.
COBRA coverage is temporary and typically more expensive than your health insurance was when you were an employee. And if you’re let go from your job, it triggers a special enrollment period where you can buy new health insurance. But if you had health insurance at your job and no longer do, COBRA is a valuable stopgap until you can get back on your feet.
Employer-based health insurance is a great resource for a lot of people, but it’s not something you should just enroll in blindly. Make sure you know what you’ll be getting so that you’re prepared when the time comes for you to actually use it.
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