Starting a new job is exciting, but all the paperwork around insurance, taxes, and benefits can be confusing. Health insurance is an important benefit offered by most employers, and taking advantage of it and making the right decisions can save you thousands of dollars.
Use this article as a guide to help you understand your new health insurance options for work.
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what should employers offer?
Under the Affordable Care Act, businesses with more than 50 full-time employees must offer health insurance coverage, or face a tax penalty. smaller businesses are offered tax credits for offering health insurance.
Employers generally offer their employees the insurance plans that make the most financial sense for the company. the employer generally pays a portion of the monthly plan premium while the employee pays the rest. some companies offer to pay the full monthly premium as an additional benefit for employees.
While some employers offer coverage on the first day of employment, many require employees to work for the company for up to 90 days before coverage begins. If you’re a new hire waiting for your health benefits to kick in, you can get a short-term policy to fill this temporary gap in health coverage.
Employers may also offer dental and vision plans, workplace wellness programs and flexible spending accounts, which allow employees to pay for medical costs with pre-tax dollars. learn more about these requirements at healthcare.gov.
types of plans
Most large employers will give you a choice of several types of health insurance plans. each plan comes with its own benefits and drawbacks, depending on your anticipated needs and health care costs.
ppo: a ppo, or preferred provider organization, is a health plan in which you have the ability to choose your own health care providers. If you choose a doctor in the insurer’s preferred provider network, you’ll get additional discounts and savings. if you choose an out-of-network provider, you will get reduced benefits.
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hmo: An hmo, or health maintenance organization, is a health care provider where your insurance company is your primary health care provider. Your doctors are employed by the same company that offers your insurance. You have fewer options when choosing a doctor, and you generally must receive all non-emergency care through the hmo to receive insurance coverage.
hdhp: an hdhp, or high deductible health plan, is usually similar to a ppo. however, these plans have a high deductible that you must meet before your plan begins to pay a portion of your costs. A high-deductible plan typically has a lower monthly premium but higher out-of-pocket costs. in 2016, the minimum deductible to qualify as a high deductible plan is $1,300 for individuals and $2,600 for families.
Premiums are the monthly payments you must make to the insurance company whether you go to the doctor or not. Employers often contribute to premiums as an employee benefit.
Monthly premiums can vary widely depending on the plan you select and the amount your employer chooses to pay. Because insurance providers treat employees of the same company as part of a group, you may pay lower premiums than you would if you purchased the same plan directly from the insurance company.
Employee health insurance premiums are typically tax deductible, meaning you don’t pay taxes on these payments. Most employers handle this for you by automatically deducting your premium payments from each paycheck as a pre-tax deduction.
Most ppo and hdhp plans have a deductible. In these plans, you pay 100% of health care costs out of pocket until you meet the deductible amount. at that point, your insurer begins to pay a portion of your costs while you pay the rest. this is known as “coinsurance.”
For example, if you have a $500 deductible and 80% coinsurance, you pay 100% of all covered medical expenses up to $500 per year. once you reach $500, your insurance company will start paying 80% of your costs, while you pay the rest. Once you reach your plan’s out-of-pocket maximum, your insurance company will begin paying 100% of your eligible costs.
Each plan has a different deductible and coinsurance percentage, and some plans separate prescription drugs from other health care costs. Breaking down your annual medical expenses can help you choose the plan with the best deductible for your needs.
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In general, plans with lower deductibles have a higher monthly premium. If you’re generally in good health and rarely go to the doctor, a high-deductible plan may make more sense. If you have persistent health problems or frequent doctor visits, you can save money by choosing a plan with a lower deductible and higher monthly premium.
maximum out-of-pocket expenses
In addition to monthly premiums and a deductible, each health insurance plan has an annual out-of-pocket maximum. once you’ve paid that amount, your insurance company will pay 100% of your future eligible costs.
Some plans have a lower out-of-pocket maximum and others have a very high one. If you choose a plan with a high out-of-pocket maximum, it’s important to have emergency savings in case of a medical emergency where you’ll have to pay thousands of dollars for treatment.
tips if your employer doesn’t offer insurance
Many small employers offer no health insurance at all, and others offer a small stipend that employees can put toward their own policies. If your employer doesn’t offer coverage, or you’re currently unemployed, it’s important to get your own health insurance plan.
The Affordable Care Act requires the uninsured to pay a penalty and offers discounts and assistance to individuals and families with income levels below certain thresholds. If you are currently uninsured, you can purchase your own health insurance plan through a federal or state exchange. You can access the federal exchange through healthcare.gov.
make an informed decision
Before you choose a health insurance plan through your new job, be sure to review your health care costs from the previous year. have a good understanding of your own health and your family’s health care needs and consider any changes that may occur over the next year. in particular, evaluate the following:
- number of doctor visits
- expected surgeries or other types of hospitalization
- upcoming non-surgical procedures
- prescription drug costs
- money available to spend on health care
Consider each plan’s deductible, premium, and out-of-pocket maximum, and choose the plan that best fits your needs.
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