Okay so if you just got that dreaded open enrollment email from your employer you've come to the right place today i'm going to give you an in-depth breakdown of the different types of health care plans
phil you went on that healthcare lingo what is the deductible anyways and then try to help you walk away knowing which plan might be best for you now i'm not saying this will be the most exciting topic
but i am going to give you some crucial information to use when thinking about your overall financial situation healthcare can have a massive impact on this i mean for many of us medical emergencies
might be the most expensive purchase you make in any given year so if you want your finances to stay on track don't let a medical emergency derail you keep watching this video [Music] okay so first off
what is open enrollment this is the time when you have to decide which health care plan you're going to choose for the following calendar year and it's typically november 1st through january 15th and once
you choose that plan you're pretty set for the next year unless there's some major event like a new job or child so it's really important you do a bit of extra research right now to choose something that might
you might be stuck with for a full year okay but what are the different plans out there the main options are hmo health maintenance organization ppo preferred provider organization and hdhp high deductible
health plan there are other types of plans available especially for those using non-employer group plans but today we'll just cover these but before we get in the details we gotta cover some of this basic
healthcare lingo first off what is a premium this is what you'll pay each year just to have insurance usually this will come out of your paycheck and employers typically cover some portion of this expense
like around 70 to 80 i mean this is basically your payment to have insurance now what is a deductible this is the amount of money you need to spend on health care not including your premiums before your
insurance starts to chip in keep in mind that preventative care is generally covered in full before you hit your deductible so when talking about the deductible we're really talking about the additional care you
need beyond those standard checkups what is coinsurance this is the percentage of healthcare costs you pay after hitting your deductible but before you hit your out-of-pocket max many plans will require you
to pay about 10 percent of co-insurance for example after you hit that deductible so what is out of pocket max mean this is the maximum amount of money you will spend out of pocket on health care in a given year this includes your deductible but not your premium after you hit this maximum your
insurance covers a hundred percent of your health care costs so once you hit that out of pocket max you can go ham on health care costs i mean don't really do that what is a copay short for co-payment this is
a fixed amount that you pay for covered medical services the remaining balance is covered by the insurance company a common scenario with this is like when you go to the doctor and do a 20 copay
every time you see that doctor but then you don't pay anything after that just that flat fee all right so now that we got that basic lingo out of the way let's get into the details about the different types of plans and we'll start with the hmo the hmo requires patients to choose a primary care physician who then handles all the recommendations and referrals to other specialists for additional care if needed the
premiums tend to be lower for hmo plans because they have special agreements with certain healthcare providers but they also have more restrictions as well because you have to start with that primary care physician to really do anything else a big thing to consider here is how much you care about flexibility
with that healthcare option do you want to be able to see a specialist without having to first get an appointment with that primary care doctor every single time if so it might be worth paying more for the next plan i'm going to talk about the ppm so the ppo preferred provider organization is the most
common type of health insurance plan by enrollment and it allows you to see in-network health care providers including specialists without any type of referral the key with this plan is to stay in network dub because if you go out of network with any provider you'll likely end up paying much higher costs
and spend way too much of your time going back and forth between the health insurance company and doctor it's just a headache and in my experience you want to try to stay in network trust me generally ppo plans have higher premiums but much lower deductibles now ppo plans typically require the
insured to pay a copayment each time they visit a provider or they must meet a deductible before the insurance covers that claim now the deductibles are typically lower for ppos so it doesn't usually end up being a huge cost to cover these initial visits before the insurance company starts covering those costs
ppo plans are also more comprehensive regarding coverage including many services that other health insurance programs might exclude so you may end up getting to see a wider variety of health care providers in this type of plan it kind of makes sense why it might be more expensive in that case right so what is an fsa an fsa is a tax advantage account that you can use for healthcare expenses that
typically comes with a ppo or an hmo this account is offered through your employer and you contribute pre-tax dollars straight from your paycheck to be used on medical expenses throughout the year the important thing to know about an fsa is that you have to decide during open enrollment so right now
how much you want to contribute for the whole year and it's a use it or lose it so once you change jobs or when the year ends any money you contributed but didn't use it's gone now estimating a whole year of healthcare expenses and knowing you have to remember to use it might stress you out but with a
little planning and a few helpful spending hacks you can easily make an fsa work for you i'll talk more about this in a bit so just stay tuned now hdhb the high deductible health plan has higher deductibles and lower premiums but typically offers the ability to utilize an hsa health savings account to pay for
qualified medical expenses using pre-tax dollars this kind of similar way that fsa does this plan is the second most common type of health insurance plan after ppos and they're similar to ppos in that you can generally see in network specialists without a referral but the networks for hdhp plans tend to be higher so you tend to have more options for what's considered in-network according to the irs rules a
plan is considered to be high deductible if it has a deductible of at least 1400 for an individual plan or 2800 for the family plan also the out-of-pocket max is capped at 7k for individual plans or 14k for family plans now these type of plans tend to favor those who have fewer medical expenses like someone who's generally healthy and doesn't visit the doctor very often because you pay lower premiums and then don't end up worrying about the high deductible if you never see the doctor
however it's always hard to anticipate medical expenses for the upcoming year so you kind of have to bank on not having too many issues for that following year but you could save hundreds or even thousands of dollars by choosing this plan when there's a good chance you'll have very little to no medical expenses what is an hsa nhsa is a health savings account that is only available if you have a
high deductible plan and it allows the participant to save for healthcare expenses this can be offered through your employer or you can open your own hsa as long as you have an eligible high deductible health care plan and you can contribute pre-tax dollars straight from your paycheck to be used on future medical expenses and it's not a user to lose it like the fsa now it's tax advantage and that contributions to
hsa are withheld from your paycheck pre-tax so it lowers your taxable income a bit and any earnings within the hsa are also not taxed when used on eligible medical expenses most hsas also offer the ability to invest your contributions as well not all hsas give this option but it has become more common this is
a great way to build some long-term savings for healthcare expenses that you may have late in life health care expenses are typically the number one expense later in your life so if you can start putting away some savings now and then let them compound over the next 30 plus years or so this can really
add up some experts say that the average american couple will need about three hundred thousand dollars to cover out-of-pocket expenses for health care and retirement that's a lot the irs does put a limit on how much you can contribute to an hsa so for the year 2021 you can only contribute a maximum of
3 600 that may not sound like much especially when you think about ira limits of 6k and 401k limits of like 19 500 however when you add in the investment option and therefore the power of compounding with the tax-free withdrawals you can really start putting away a lot of money for future healthcare and
unlike the fsa hsa contributions and earnings can roll over each year so it's not a use it or lose it they can just keep adding up assuming you max out your hsa contributions each year for 20 years through monthly contributions of 291.67 and assuming a seven percent annualized investment return you could
end up with over a hundred and sixty thousand dollars and if you were to still contribute the same amount each month but let it sit and cast just making let's say 0.10 you'd end up with around 80k so this means by simply investing your hsa contributions and assuming a seven percent return you could
double your future savings now this does assume you max out your contributions for 20 years but it's just a great way to illustrate the power of compounding and if you've watched any of my previous videos you know i love the power of time and compounding so how do you know which plan is right
for you right you should probably break it down into three main factors premium deductible and then out of pocket max the premium is that monthly cost to you right whether your employer covers it or not so a lower premium will typically mean a higher deductible the deductible is the guaranteed cost if you have healthcare needs so you need to make sure you're ready to cover this amount for example if you have the high deductible health plan you'll pay lower premiums but if you have to get a blood test for
example you might end up paying for the full amount of that test as you must hit your deductible first before the insurance really starts covering costs often a lower cost to you each month can mean a higher deductible and out of pocket max and vice versa so you have to weigh what makes sense more for your needs maybe you get more peace of mind from knowing that you're paying more each month without
having to worry about you know covering a high deductible for instance on the flip side if you rarely go to the doctor you may just want to save on the monthly premium costs and risk the higher deductible with the high deductible health plan if you can really build up that hsa as well this could be a better plan for those that are young and saving and don't anticipate a lot of medical costs now for that third factor
the out of pocket max this is the max that you'd have to cover if you really have really big health care expenses for the year so you want to keep this in mind now i've only dealt with this number one time and that was when we had our child during 2020 a birth and then subsequent nights at the hospital can be super expensive so we ended up meeting this out-of-pocket max pretty early on if we had chosen a different health care plan that had lower out-of-pocket costs we could have saved thousands of dollars
however if this plan has lower out-of-pocket costs it likely has other downsides like a lack of flexibility for in-network providers there is also another factor worth mentioning here kind of a fourth factor which we can view as the bonus factor employer hsa contributions if your employer contributes a decent amount to your hsa which some do you might want to consider this plan this typically doesn't require you the employee to even contribute to the hsa so if your employer is going to give you free
money through these contributions to use for future health care expenses this may be the deciding factor similar to 401k match contributions if you can take advantage of this free type of money it's always worth considering all right but how do you even estimate your medical costs this is a big one right how does anyone really know how much they'll spend on this like we'll never be able to get you to that exact
number but there is a decent way to do this and how to think about this and it starts with your recurring costs first so if you really want to put this number on paper start with those costs that you know for sure you're going to regularly have over the next year this includes multi-prescriptions contact lenses dental visits you know typically twice a year ride those co-pays and are there any regular visits that you're
going to make now if you regularly visit your primary care physician for health care checks you can also add in this cost depending on which plan you're looking at it is worth mentioning that preventative care is usually covered 100 but there might be some cases where these checkups don't actually qualify
for that if you might need physical therapy this is another recurring cost that you can account for who doesn't have that nagging injury that they keep putting off to get checked keep in mind that if you overestimate your costs and then use the fsa at the end of the year you may be scrambling to use what's left in the account right you might be surprised that an fsa can be used for things like sunscreen over-
the-counter medicine like tylenol and amazon even has an hsa fsa page where you can start looking at what's eligible you might be surprised to find out how easy it is to use these funds last minute so once you put together those recurring costs then think about the big ticket costs like surgeries or maybe even starting a family many people are surprised that you're probably going to have to pay thousands of dollars out of pocket for those birthing costs like we talked about it's definitely not free for most
healthcare plans to even have a baby my wife and i thought we had this one cover but ended up getting overwhelmed with the amount of bills coming our way even 12 months after our son was born and in some cases you have to visit an out-of-network hospital that then has to build the insurance company and then it's just a mess you're kind of the go-between i simply suggest that you consider the high-end
your out-of-pocket max and what you might end up having to pay if your in-network plans change nhsa or fsa is one of the nice ways to help prepare for this so i hope that breaks it all down and it gives you a better understanding of kind of what to do over the next few weeks or even months during open enrollment it's a really important decision don't fret over too much hopefully your employer has
simplified this a bit lays out your plans in a pretty understandable way and you can use this video as a guide to kind of get going and make that important choice i'm tony from wealthfront thanks so much for joining i'd love for you to subscribe to our channel have a great day
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