It's open enrollment season. Here's how to make the best decision for you

Marielle Segarra (0:00)

You're listening to Life Kit from NPR.

Hey, everybody, it's Marielle. It is open enrollment season, that time every year when many of us have an opportunity to enroll in a new healthcare plan, whether that's through an employer or on your state's healthcare exchange. Now, I think a lot of us put this off until the very last minute, because it's so complicated. There are all these terms that you may or may not understand. Every health insurance plan has its own wrinkles and caveats, and it's hard to know exactly how much you'll end up spending. There's just a lot going on.

Cindy George (0:33)

So we hop scotch. So we double dutch. We jump around and we stand formed, and we look at our personal situation, we look at our options, and we figure out what the best choices are, to the best of our knowledge.

Marielle Segarra (0:48)

That's Cindy George, the Senior Personal Finance Editor at GoodRx.

So on this episode of Life Kit, we'll do our best to help. We'll give you some definitions, explain the different types of health care plans, you know, HMO, PPO, that sort of thing. We'll talk about tax savings, and then we will help you put it all together and do the math to compare your options.

Okay, here we go. First up, some definitions. There are terms you'll see as you're looking at health insurance plans. One is premiums.

Cindy George (1:21)

Your premium is what you pay every month as the cost of having a health plan. So your health insurance costs you something every month, just like your car insurance or other kinds of insurance. There's a monthly payment that would be your premium.

Marielle Segarra (1:36)

If you have an employer, your premiums will get taken out of your paycheck. Now, keep in mind, the plan with the cheapest premiums won't necessarily be the cheapest over the course of a year. Premiums are just the upfront cost, but other costs will get added on as you go to doctors and need services.

Another word you'll see is co-pay. That's a set dollar amount you pay every time you see a specialist, for instance, or get an x-ray.

Another term, deductible. That's how much you pay out of pocket before your health plan starts reimbursing you or paying your doctors directly for your care. Under some plans, there are services that aren't subject to the deductible. So your insurance starts paying for those right away. And the amount of the deductible will depend on your plan.

Cindy George (2:17)

But Kaiser Family Foundation did a study and found that for individuals in employer-based health plans, about a third of individuals have a deductible that's $2,000 or more.

Marielle Segarra (2:31)

Now, a deductible is different from an out-of-pocket maximum.

Cindy George (2:34)

The deductible is the beginning. The out-of-pocket maximum is the end. So a deductible is everything you pay upfront before cost sharing begins.

An out-of-pocket maximum is where you reach the end of the tunnel, and then your health plan takes over.

Marielle Segarra (2:52)

That is until the next plan year, usually in January.

One other definition we want to go over is co-insurance. Sometimes under your health insurance plan, you don't pay a co-pay for, let's say, a specialist visit. Instead, you pay a percentage of the bill and the insurer pays the rest. That's the case with Medicare.

Cindy George (3:10)

Traditional Medicare is typically, Medicare pays 80 percent, the insured Medicare enrollee pays 20 percent of a covered service after you meet your deductible. So we're always talking about a percentage when we talk about co-insurance.

Marielle Segarra (3:27)

And this is why open enrollment can be so maddening, because it just feels like we shouldn't have to do this, to estimate so specifically what our health care is going to be, and also make these guesses like, okay, so my co-insurance is 10 percent, but what's the actual bill going to be for this thing? I just want to acknowledge that here. It's not a good system, but here we are.

All right. Next up, Cindy and I talk about the different categories of health insurance plans you might be offered. What are some different health plan types? They're often acronyms like HMO or PPO or HDHP. Yes.

Cindy George (4:08)

It's all so confusing, isn't it? It's alphabet soup.

Marielle Segarra (4:12)

Yeah. Well, let's start with the HMO.

What is that?

Cindy George (4:17)

So an HMO is a health maintenance organization. And a health maintenance organization is a tight network or a narrow network of providers, which means that you'll have to stay in network for your care to be covered by your plan. An HMO typically requires you to refer all your care through a PCP or a primary care provider. An HMO is going to have lower monthly premiums, which means what you pay every month is lower than maybe other plans.