How to choose a health insurance plan during open enrollment

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The open enrollment period for your health insurance plan comes once every year, usually during the fall. The corresponding paperwork typically generates as much enthusiasm as yearly tax forms. But don't be tempted to just put a checkmark next to your current plan. With so many insurers and employers raising health insurance premiums and scaling back benefits, you need to know how your health plan stacks up against any others offered to you at work.

After all, you're stuck with your decision for another year. For example, if you don't know that your plan is reducing coverage for your brand-name prescription allergy drug, you'll be in for a bad surprise when the pharmacist asks you to hand over $180 for 100 tablets rather than your usual $25 co-payment. You won't be able to go back to your benefits administrator and ask to switch to a plan that will pay for your prescription.

Keep in mind that the Patient Protection and Affordable Care Act includes these rules affecting health plans:include:

•   You can keep your adult children on your health plan until they are age 26.

•   Plans cannot exclude coverage for pre-existing conditions for children under age 19.

•   Lifetime limits on health insurance coverage are not allowed.

•   Caps on annual coverage are being phased out.

•   A wide range of preventive care for men, women and children is fully covered, which means you pay nothing out of pocket - no co-pay or deductible - when you receive those services. For more details, see 6 health insurance freebies for pregnant women and new moms .

The following information will help you make the best decision during the open enrollment process.

What types of changes can I make to my health insurance plan during open enrollment?

If you're not currently enrolled in a health insurance plan, you may enroll at this time. If you are enrolled, you may switch plans (if this an option), correct inaccurate information, or add eligible dependents, such as a spouse and children not previously covered.

Which is more important when choosing a plan: cheaper premiums or less expensive co-payments?

It depends on your situation. If you're young and healthy, you can opt for lower premiums and higher co-pays and gamble that you won't visit the doctor much. But if you're older, have a chronic health condition, or have young children who make frequent visits to the doctor, you're probably better off with higher premiums and lower co-pays. You also have to weigh the value of your health insurance plan versus price. If you go with a cheap health plan but it doesn't pay for the benefits you need, you are not getting good value for your health insurance dollars.

See How to buy the worst health insurance plan ever: 7 scenarios to avoid .

I'm paying for what?!

The cost of group health insurance is often fueled by state-imposed health insurance mandates . These are benefits that must be offered in group health plans, whether workers want them or not (except for "self-insured" employers). Mandated benefits can include coverage for maternity, drug dependency, autism and many other conditions. Some mandates require coverage for certain types of providers, such as chiropractors or dieticians.

Can I switch health insurance plans without exclusions for pre-existing conditions?

Yes. Employer-sponsored group health plans cannot exclude coverage for pre-existing conditions if you maintained health insurance coverage for the 12 months, with no coverage lapses of 63 days or more. And health plans that cover maternity care cannot exclude coverage for pregnancy, regardless of whether you maintained health insurance coverage in the last year. Read about the HIPAA law: Your rights to health insurance portability .

What's better, an HMO, POS or PPO? And what are they?

Health plans come in several varieties, including traditional indemnity fee-for-service (FFS) plans, health maintenance organizations (HMOs), point- of-service (POS) plans, and preferred provider organizations (PPOs). Consider each plan's features before choosing.

HMOs are generally the least expensive, but also the least flexible of all the health insurance plans. They require that you select a primary care physician and obtain pre-authorizations before seeing a specialist, going to the hospital (except in emergencies) or having certain medical procedures. POS plans are more flexible than HMOs, but they also require you to select a primary care physician.

PPOs give policyholders a financial incentive - in the form of reasonable co-payments - to stay within the group's network of practitioners, but the plans usually allow visits to out-of-network specialists without pre-approval.

What is a drug formulary and what are pharmacy benefit tiers?

A formulary is the list of medications for which a health insurance plan pays. Most health plans that pay for prescription drug benefits have pharmacy benefit tiers that group certain medications together for pricing purposes. Brand-name drugs that are usually in the top tier are the most expensive, while generic medications are in the lower tiers and are the least expensive. Your prescription drug co-pay for a medication in the lowest tier may range from $5 to $10, while your co-pay for drugs in the highest tier may range from $25 to $50. Most health plans have three or four pharmacy benefit tiers, but some have several tiers.

What are FSAs, HSAs and HRAs?

These are tax-advantaged financial accounts you can use for out-of-pocket medical expenses, such as deductibles, co-payments or medical services that aren't covered by your plan.

A flexible spending account, or FSA, lets you set aside pre-tax dollars for out-of-pocket health and dependent care costs. You decide each year how much money to put in the account through pre-tax payroll deductions. Any money you don't use by the end of the year is returned to your employer.

A health savings account (HSA) is paired with a high deductible health plan. Each year you elect how much to save from pre-tax dollars up to a certain limit, established by the IRS. In 2012 you can save up to $3,100 for yourself or $6,250 for a family in an HSA. Any money you don't use one year rolls over to the next and earns interest. The account is portable - you keep the money, even if you change jobs or health plans. Before age 65, you can spend the money only on medical expenses, or you pay income taxes, plus a 10 percent penalty, on withdrawals.

A health reimbursement arrangement (HRA) reimburses you for qualified medical expenses up to a certain limit. The employer contributes to and owns the account, and unused money can roll over to the next year.

How can I judge the quality of competing health insurance plans?

The most important factors are usually price and whether the family's doctors participate in the plan's network (if there is a network). However, there are other criteria to use.

Accreditation groups, such as the National Committee for Quality Assurance, measure plans using a variety of quality standards. Ratings companies, such as Standard and Poor's, A.M. Best and Moody's, give you a picture of a health insurer's financial strength. "Report cards" published by consumer groups, independent websites, and your state insurance department are good sources of consumer-satisfaction ratings. Here's how to judge the quality of a health plan.

Who can help me if I have questions?

Your employer's human resources director or benefits administrator as well as insurance company customer service departments can answer most of your questions.

What about life insurance through work?

The open enrollment period is also your opportunity to add group life insurance to your benefits. Group life is the cheapest way to secure life insurance, but a group policy typically provides only a small death benefit, and the coverage disappears if you leave or lose your job. That's why it's best to view group life insurance as supplement coverage to life insurance that you buy on your own.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Insurance

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