The Newly Hired Employee’s Guide to Choosing a Medical Plan

Congratulations on starting a new job! You’ll have a lot to take care of and a lot to learn.  Familiarizing yourself with the processes and culture of your new company can be all-consuming in those first few weeks of employment.  One of the most important things you’ll do, almost right away, is elect your medical benefits. Here are some tips to save you time and set you on the right path when choosing your medical plan. 

Know your timeline

All election periods have a hard deadline.  Make sure you know yours.  You don’t want to be rushed into making a decision last minute, losing your benefits options or being stuck with the “default” benefits many companies provide.  No matter how long you have to make your decision, get started with thinking about your options right away. The process of choosing could take you longer than you might realize. 

Decide what’s important

Each individual has their own needs and concerns when it comes to health insurance.  What are yours?  Cost?  Coverage?  Access to certain doctors?  A good place to start is by writing down your specific needs and the needs of any family members who will be on the plan with you.  Sometimes you can even eliminate some choices by having a clear list, right in front of you, of what is most important in medical benefits.  For example, if cost is your over-riding concern, you may decide not to even look at plans that exceed the budget you have set for yourself. 

Do the math

When choosing benefits, people often get blinded by the plan’s listed co-pays and deductibles. However, a low deductible or co-pay isn’t necessarily going to be the most cost-effective option. This is because many people fail to take into account the plan’s annual premium, or the cost to the employee to purchase the plan. The best way to look past the surface elements of a medical plan design is to do the math.  Here’s an example of a decision matrix for medical benefit elections of three different plan options. These are based on an employee who has one office visit and one prescription in a given year.  

Plan Type	Premium	Office Visit copay	Rx Copay	Total cost
Plan One	$500 per year	$10	$25	$535
Plan Two	$1000 per year	$5	$10	$1015
Plan Three	$2000 per year	$0	$5	$2005

When first looking at benefits offerings, plan three may seem like a great plan.  Owing no copay for an office visit and $5 for medication sounds fabulous!  But by doing the math on each plan we find out that plan one, which has the most expensive co-pays for office visits and the most expensive cost for drugs, will, in the long run, cost the least once we factor in the annual premium.

To use this matrix to figure out which plan is right for you, estimate how many office visits you are likely to have during the plan year, how many prescriptions you plan to purchase and fill in the matrix accordingly. 

Trust yourself to be an expert

There is only one expert on your personal benefits and that is you!  You know what is best for you and your family so trust yourself to make the best decision on which benefits will work for your lifestyle, budget and health needs.

If your employer hasn’t provided you such tools as plan comparison models, formulary information or provider directories, reach out to them or your benefits provider for this information.  Understand the differences between a co-pay and coinsurance (see glossary below).  Be aware of the impact of a deductible.  If there’s something you don’t understand, talk to your human resources or benefits representative.  

Don’t be complacent

As time goes on, your needs will change.  You may, over your lifetime, get married, have children, get divorced, become chronically ill, or any combination of these circumstances.  Make sure that, with each open enrollment period, you check all of your benefits to make sure they make sense for your current life situation. 

Understand your terminology

In the world of benefits, there is a lot of information to absorb.  Along the way, you may run into some terms you do not understand.  Here is a brief glossary to help you become a better consumer of employee benefits. 

• Claim: A claim is what your healthcare provider files with the insurance company in order collect the money they are owed for services. After the claim is filed, you will get a bill for any remaining amount you owe, depending on your plan design. 
   
• Co-insurance is a percentage of the cost of care received.  This is not a fixed dollar amount but varies depending on the design of the plan you have elected.  For example, if you have a plan that pays 80 percent of the cost of a service you have received, you will be responsible for the remaining 20 percent.  That 20 percent is your co-insurance.  Your payment, plus the insurance carrier’s payment, make up the total amount due for the treatment you have received.
   
• Copay: As opposed to co-insurance, a copay is a fixed dollar amount for the cost of care received.  It is part of the design of your plan so it is communicated in advance of seeking treatment.  Co-pays are often used by insurance companies for office visits.  When you see your provider, you pay that fixed amount for the service, regardless of the complexity of the care you receive. 
   
• Deductible: When you have a medical procedure, office visit or prescription, this is the amount of money you are responsible for paying before the insurance company will start paying. After your deductible is met for the year, insurance will pay the balance, or a portion of the balance, for the rest of your medical care in that plan year. How much the insurance company pays after the deductible is met is dependent on the plan you have selected.
   
• A dependent refers to any persons you have covered under your insurance, such as your spouse and/or children.
   
• Out-of-pocket maximum: As protection against catastrophic illness or injury, the out-of-pocket maximum limits a patient’s liability for services received.  It is the maximum amount someone will pay, despite the total cost of their care. 
   
• A policyholder is the person who “owns’ the policy or is covered by the policy. As the employee signing up for benefits through your employer, this would be you.
   
• Premium:  This is the monthly out-of-pocket cost you pay to have health insurance. Most employers who offer benefits pay for part of this coverage and take your share of the premium out of your paycheck, pre-tax. 
   
• Waiting period: The period of time after an employee is hired before an employee is eligible to enroll in benefits.  Not all policies have a waiting period and that choice is usually up to the employer. 

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.

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