HOW TO CHOOSE A
MEDICAL PLAN
MOTT COMMUNITY COLLEGE
Chadd Hodkinson
SET SEG Employee Benefit Services
Account Executive
The content in this presentation is informational. Each
employee should review the benefit summary and
network information specific to their plan and discuss
specific circumstances and questions with their carrier.
Health savings accounts (HSAs) and flexible spending
arrangements (FSAs) are IRS-regulated accounts.
Nothing in this presentation represents tax advice.
Discuss HSA/FSA questions with a tax advisor.
TOPICS OF DISCUSSION
• Insurance terms
• The “Pick Two” concept
• Traditional plan vs. high deductible health plan
• Flexible spending arrangements
• Health savings accounts
• Risk tolerance
• How to choose a medical plan
WHAT IS INSURANCE?
•
Insurance is paying someone else to take risk for you
•
Insurance versus budget
•
How is premium determined?
•
Where does the premium go?
COVERAGE LEVEL
This usually sets what is covered and the amount we have to spend out
of pocket for services received
•
Covered services
List of medical procedures and prescription drugs that are covered under the
plan
•
Deductible
What employee owes before insurance plan pays
•
Copayment or “Copay”
A fixed amount paid for a particular service
•
Coinsurance
Employee’s share of health care costs after deductible is met
•
Out of pocket maximum
Maximum amount we will spend on deductibles, coinsurance and copays
COINSURANCE EXAMPLE
0% Coinsurance
After Deductible
100%
Coverage After
Deductible
(except for
services
subject to a
copay)
$500
Individual
Deductible
20% Coinsurance
After Deductible
100% Coverage After
Deductible and
Coinsurance (except
for services subject
to a copay)
$500
Individual
Deductible
20% Cost
Share Up to
Another
$1,000
OUT OF POCKET MAXIMUM
EXAMPLE
100% coverage (even for
services subject to copay)
Deductible,
coinsurance and
copay
expenditures for
approved, innetwork
services
$1,500 per
individual,
$3,000 total for
a couple or
family
FLEXIBILITY
•
Traditional
Maximum flexibility
•
Preferred Provider Organization (PPO)
Self-referral
•
Point of Service (POS)
Primary care physician
•
Health Maintenance Organization (HMO)
Managed care
PREMIUM COST SHARE
Premium cost share is what your employer
deducts from your check each pay period for
you to stay enrolled in the plan.
PA 152
Public Act 152 of 2011 limits the amount that public employers can
pay toward employees’ health insurance (medical coverage).
Currently, the annual hard cap limits are:
• Single Coverage: $5,857.58
• Two Person Coverage: $12,500.00
• Family Coverage: $15,975.23
The difference between the plan cost and the hard cap amount the
employer can contribute is the premium cost share for the
employee.
THE PICK TWO CONCEPT
•
Coverage Level
What benefits and prescriptions are covered; out of pocket costs under
the plan (deductible, copays, etc.)
•
Flexibility
The degree of employee discretion when choosing facilities and
providers
•
Premium Cost Share
The amount the employee has deducted from their check each pay period
to be enrolled in the plan
TRADITIONAL PLAN
•
•
•
•
•
•
May or may not have deductibles
Copays generally apply on day one of plan
Deductibles generally only apply to certain services (e.g. inpatient hospital stays, out patient surgical procedures,
diagnostic testing, etc. – see benefit summary for details)
Copays generally cover standard services (e.g. office visits,
urgent care visits, emergency room visits, prescription drugs,
etc.) and do not apply to deductible
Depending on carrier and plan, may provide high or low level
of coverage, high or low level of flexibility and high or low level
of cost
Compatible with a flexible spending arrangement (FSA)
HIGH DEDUCTIBLE HEALTH
PLAN (HDHP)
•
•
•
•
•
•
Deductible of at least $1,300 for a single person and $2,600 for
two-person or family coverage
Employee pays 100% (except for preventive care) of medical
and prescription drug costs (less any carrier discounts) until
deductible is met
Copays do not apply until deductible is met
Generally lower coverage level and lower cost
Depending on carrier and network, may provide high or low
level of flexibility
Compatible with a flexible spending arrangement (FSA) or a
health savings account (HSA)
FLEXIBLE SPENDING
ARRANGEMENT (FSA) BASICS
•
Tax sheltered account that can be used to reimburse approved
medical expenses on a pre-tax basis
•
Employee’s FSA is funded with employee-elected, pre-tax, payroll
deductions. The employee sets the contribution amount.
•
Money goes in tax free and comes out tax free (if spent on
approved medical expenses)
•
IRS allows contributions up to $2,550 for 2015 (discuss maximum
contribution specifics with college HR department)
•
Account is use it or lose it
•
The entire elected amount is available on day 1 of the FSA plan year,
even though money will be deducted over the course of the year
HEALTH SAVINGS
ACCOUNT (HSA) BASICS
•
The account and its contents belong to you
•
Money goes in tax free, can grow tax free and comes out tax
free (if spent on approved medical expenses)
•
Rolls over year after year (no use it or lose it)
•
Fully portable if you leave the high deductible plan or the
district
•
Accessible in retirement
HSA LIMITATIONS
Only available with tax qualified high deductible health plan
(HDHP)
• May not contribute (or receive contributions) to an HSA if
enrolled in other coverage that is not a tax-qualified HDHP
(including Medicare or a medical FSA)
• May not contribute (or receive contributions) to an HSA if
claimed as a dependent on someone else’s tax return or if a
beneficiary of someone else’s general purpose FSA
•
•
Discuss other limitations that apply to HSAs and/or FSAs with a
tax advisor
RISK TOLERANCE
•
How much risk related to your health insurance is too
much risk for you? No one else can decide that for
you.
o
Example: With your current health and financial
circumstances, plan A will cost you less in premium cost
share than plan B. However, if you are prescribed a very
expensive medication during the year, plan A will require
you to pay a large share of the cost of that expensive
medication while plan B will only require you to pay a small
share of the cost.
RISK TOLERANCE
•
Neither plan is the “right” choice; neither is “wrong”
•
If you choose plan A, have a plan for covering unexpected
expenses
•
If you choose plan B, be sure you can afford the premium cost
share and still have money left to pay any out of pocket
expenses under the plan
HOW TO CHOOSE A MEDICAL PLAN
Which two elements of the “Pick 2” concept are offered?
•
What does the plan cover and what is the out of pocket
exposure? (Coverage Level)
•
What hospitals, providers and facilities participate with the
plan’s network? (Flexibility)
•
What is the premium cost share for the plan? (Cost)
What tax leveraged accounts are available?
•
FSA?
•
HSA?
Is this plan compatible with my level of risk tolerance?
WHICH PLAN IS RIGHT FOR ME?
Example: Plan 1, BCBSM, $1000/$2000, assume family coverage
Best Case
Worst Case
Actual – How
much will you
spend in each
category?
Deductible
$0
$2,000
?
Coinsurance
$0
$0
$0
Copays
$0
$10,700
?
Annual Premium Cost
Share
$4,280
$4,280
$4,280
Annual Total
$4,280
$16,280
?
*Example assumes member accesses approved, in-network services only.
Numbers rounded for simplicity.
HOW TO CHOOSE A MEDICAL PLAN
Plan 1 – BCBSM Traditional PPO $1,000/$2,000
•
Higher coverage level, higher flexibility, higher cost
What tax leveraged accounts are available?
•
FSA compatible
Is this plan compatible with my level of risk tolerance?
•
Fits an individual with a lower risk tolerance
WHICH PLAN IS RIGHT FOR ME?
Example: Plan 2 HSA, $1300/$2600– Assume Family Coverage
Best Case
Worst Case
Actual – How
much will you
spend in each
category?
Deductible
$0
$2,500
?
Coinsurance
$0
$0
$0
Copays
$0
$2,000
?
Annual Premium Cost
Share
$790
$790
$790
Annual Total
$790
$5,290
?
*Example assumes member accesses approved, in-network services only.
Numbers rounded for simplicity.
HOW TO CHOOSE A MEDICAL PLAN
Plan 2 – BCBSM HSA $1,300/$2,600
•
Lower coverage level, higher flexibility, lower cost
What tax leveraged accounts are available?
•
HSA or FSA compatible
Is this plan compatible with my level of risk tolerance?
•
Fits an individual with a moderate risk tolerance
WHICH PLAN IS RIGHT FOR ME?
Example: Plan 3 HSA, $2000/$4000 – Assume Family Coverage
Best Case
Worst Case
Actual – How
much will you
spend in each
category?
Deductible
$0
$4,000
?
Coinsurance
$0
$0
$0
Copays
$0
$2,000
?
Annual Premium Cost
Share
-$1,010
-$1,010
-$1,010
Annual Total
-$1,010
$4,990
?
*Example assumes member accesses approved, in-network services only. A
negative amount represents a deposit to the employee’s health savings account.
Numbers rounded for simplicity.
HOW TO CHOOSE A MEDICAL PLAN
Plan 3 – BCBSM HSA $2,000/$4,000
•
Lower coverage level, higher flexibility, lower cost
What tax leveraged accounts are available?
•
HSA or FSA compatible
Is this plan compatible with my level of risk tolerance?
•
Fits an individual with a higher risk tolerance
SAMPLE FAMILY – “ACTUAL” CASE 1
Tim Smith: Rarely goes to the doctor. Got sick twice during the year, saw his
primary care physician both times and was prescribed a generic antibiotic each
time.
Jan Smith: Visited her primary care physician once. Filled two generic 90-day
prescriptions four times during the year. Visited urgent care once and the
emergency room once for two separate cases of bronchitis. Filled two additional
preferred brand name prescriptions and two additional generic prescriptions.
Johnny: Receives his vaccinations and his parents take him to his annual visits.
Broke his leg and required surgery, a cast, two specialist visits and five physical
therapy visits. Three pediatrician visits per year for illness. Three generic
antibiotic prescriptions during the year.
SAMPLE FAMILY – “ACTUAL” CASE – PLAN 1 BCBSM TRADITIONAL PPO; $1,000/$2,000
Tim
Jan
Johnny
SAMPLE FAMILY – “ACTUAL” CASE PLAN 1
Number
Annual premium cost share
Deductible
Primary care physician office visit
copay ($30)
Specialist copay ($30)
Urgent care copay ($30)
Emergency room copay ($150)
Generic drug copay ($15 for 30 day)
Generic drug copay ($30 for 90 day)
Preferred brand drug copay ($50)
Non-preferred brand drug cost/copay
(50%; $70-$100)
Annual Total Cost
Cost
Number
Cost
Number
Cost
Total Cost
$4,280
SAMPLE FAMILY – “ACTUAL” CASE – PLAN 1 BCBSM TRADITIONAL PPO; $1,000/$2,000
Tim
Jan
Johnny
SAMPLE FAMILY – “ACTUAL” CASE PLAN 1
Number
Cost
Number
Cost
Number
Cost
Annual premium cost share
Deductible
Primary care physician office visit
copay ($30)
Specialist copay ($30)
Urgent care copay ($30)
Emergency room copay ($150)
Generic drug copay ($15 for 30 day)
Generic drug copay ($30 for 90 day)
Preferred brand drug copay ($50)
Non-preferred brand drug cost/copay
(50%; $70-$100)
Annual Total Cost
0
$0
0
$0
1
Total Cost
$4,280
$1,000
$1,000
SAMPLE FAMILY – “ACTUAL” CASE – PLAN 1 BCBSM TRADITIONAL PPO; $1,000/$2,000
Tim
Jan
Johnny
SAMPLE FAMILY – “ACTUAL” CASE PLAN 1
Number
Cost
Number
Cost
Number
Total Cost
Cost
Annual premium cost share
$4,280
Deductible
0
$0
0
$0
1
$1,000
$1,000
Primary care physician office visit
copay ($30)
2
$60
1
$30
3
$90
$180
Specialist copay ($30)
0
$0
0
$0
2
$60
$60
Urgent care copay ($30)
0
$0
1
$30
0
$0
$30
Emergency room copay ($150)
Generic drug copay ($15 for 30 day)
Generic drug copay ($30 for 90 day)
Preferred brand drug copay ($50)
Non-preferred brand drug cost/copay
(50%; $70-$100)
Annual Total Cost
SAMPLE FAMILY – “ACTUAL” CASE – PLAN 1 BCBSM TRADITIONAL PPO; $1,000/$2,000
Tim
Jan
Johnny
SAMPLE FAMILY – “ACTUAL” CASE PLAN 1
Number
Cost
Number
Cost
Number
Total Cost
Cost
Annual premium cost share
$4,280
Deductible
0
$0
0
$0
1
$1,000
$1,000
Primary care physician office visit
copay ($30)
2
$60
1
$30
3
$90
$180
Specialist copay ($30)
0
$0
0
$0
2
$60
$60
Urgent care copay ($30)
0
$0
1
$30
0
$0
$30
Emergency room copay ($150)
0
$0
1
$150
0
$0
$150
Generic drug copay ($15 for 30 day)
Generic drug copay ($30 for 90 day)
Preferred brand drug copay ($50)
Non-preferred brand drug cost/copay
(50%; $70-$100)
Annual Total Cost
SAMPLE FAMILY – “ACTUAL” CASE – PLAN 1 BCBSM TRADITIONAL PPO; $1,000/$2,000
Tim
Jan
Johnny
SAMPLE FAMILY – “ACTUAL” CASE PLAN 1
Number
Cost
Number
Cost
Number
Total Cost
Cost
Annual premium cost share
$4,280
Deductible
0
$0
0
$0
1
$1,000
$1,000
Primary care physician office visit
copay ($30)
2
$60
1
$30
3
$90
$180
Specialist copay ($30)
0
$0
0
$0
2
$60
$60
Urgent care copay ($30)
0
$0
1
$30
0
$0
$30
Emergency room copay ($150)
0
$0
1
$150
0
$0
$150
Generic drug copay ($15 for 30 day)
2
$30
2
$30
3
$45
$105
Generic drug copay ($30 for 90 day)
0
$0
8
$240
0
$0
$240
Preferred brand drug copay ($50)
Non-preferred brand drug cost/copay
(50%; $70-$100)
Annual Total Cost
SAMPLE FAMILY – “ACTUAL” CASE – PLAN 1 BCBSM TRADITIONAL PPO; $1,000/$2,000
Tim
Jan
Johnny
SAMPLE FAMILY – “ACTUAL” CASE PLAN 1
Number
Cost
Number
Cost
Number
Total Cost
Cost
Annual premium cost share
$4,280
Deductible
0
$0
0
$0
1
$1,000
$1,000
Primary care physician office visit
copay ($30)
2
$60
1
$30
3
$90
$180
Specialist copay ($30)
0
$0
0
$0
2
$60
$60
Urgent care copay ($30)
0
$0
1
$30
0
$0
$30
Emergency room copay ($150)
0
$0
1
$150
0
$0
$150
Generic drug copay ($15 for 30 day)
2
$30
2
$30
2
$30
$90
Generic drug copay ($30 for 90 day)
0
$0
8
$240
0
$0
$240
Preferred brand drug copay ($50)
0
$0
2
$100
0
$0
$100
Non-preferred brand drug cost/copay
(50%; $70-$100)
0
$0
0
$0
0
$0
$0
Annual Total Cost (including premium cost share, deductible and copays):
$6,130
SAMPLE FAMILY – “ACTUAL” CASE 1
Tim Smith: Rarely goes to the doctor. Got sick twice during the year, saw his
primary care physician both times and was prescribed a generic antibiotic each
time.
Jan Smith: Visited her primary care physician once. Filled two generic 90-day
prescriptions four times during the year. Visited urgent care once and the
emergency room once for two separate cases of bronchitis. Filled two additional
preferred brand name prescriptions and two additional generic prescriptions.
Johnny: Receives his vaccinations and his parents take him to his annual visits.
Broke his leg and required surgery, a cast, two specialist visits and five physical
therapy visits. Three pediatrician visits per year for illness. Three generic
antibiotic prescriptions during the year.
SAMPLE FAMILY – “ACTUAL” CASE – PLAN 2 BCBSM HSA; $1,300/$2,600
Date Paid
(assume all
incurred on/after
July 1, 2014)
Copay
SAMPLE FAMILY – “ACTUAL” CASE PLAN 1
Service Received
Deductible
Cost
Number
Total
Cost
Cost
Annual premium cost share
Deductible
Remaining
$790
$2,600
7/10/14
Jan’s 90 day generic prescriptions
$55
$0
$0
$55
$2,545
7/21/14
Jan’s generic prescription
$30
$0
$0
$30
$2,515
7/21/14
Jan’s preferred brand name prescription
$240
$0
$0
$240
$2,275
7/23/14
Johnny’s specialist visit
$145
$0
$0
$145
$2,130
9/21/14
Jan’s emergency room visit
$595
$0
$0
$595
$1,535
9/27/14
Johnny’s surgery ($7,152)
$1,535
$0
$0 $1,535
$0
All remaining approved, in-network medical services covered at 100%
Annual Total Cost (including premium cost share, deductible and copays):
SAMPLE FAMILY – “ACTUAL” CASE – PLAN 2 BCBSM HSA; $1,300/$2,600
Date Paid
(assume all
incurred on/after
July 1, 2014)
Copay
SAMPLE FAMILY – “ACTUAL” CASE PLAN 1
Service Received
Deductible
Cost
Number
Total
Cost
Cost
Annual premium cost share
Deductible
Remaining
$790
$2,600
7/10/14
Jan’s 90 day generic prescriptions
$55
$0
$0
$55
$2,545
7/21/14
Jan’s generic prescription
$30
$0
$0
$30
$2,515
7/21/14
Jan’s preferred brand name prescription
$240
$0
$0
$240
$2,275
7/23/14
Johnny’s specialist visit
$145
$0
$0
$145
$2,130
9/21/14
Jan’s emergency room visit
$595
$0
$0
$595
$1,535
9/27/14
Johnny’s surgery ($7,152)
$1,535
$0
$0 $1,535
$0
All remaining approved, in-network medical services covered at 100%
Thru 6/30/15
Generic drug copay ($10 for 30 day)
$0
6
$60
$60
$0
Thru 6/30/15
Generic drug copay ($20 for 90 day)
$0
6
$120
$120
$0
Thru 6/30/15
Brand drug copay ($60)
$0
1
$60
$60
$0
Annual Total Cost (including premium cost share, deductible and copays):
$3,630
SAMPLE FAMILY – “ACTUAL” CASE – PLAN 3 BCBSM HSA; $2,000/$4,000
Date Paid
(assume all
incurred on/after
July 1, 2014)
Copay
SAMPLE FAMILY – “ACTUAL” CASE PLAN 1
Service Received
Deductible
Cost
Number
Total
Cost
Cost
Annual premium cost share
Deductible
Remaining
$-1,010
$4,000
7/10/14
Jan’s 90 day generic prescriptions
$55
$0
$0
$55
$3,945
7/21/14
Jan’s generic prescription
$30
$0
$0
$30
$3,915
7/21/14
Jan’s preferred brand name prescription
$240
$0
$0
$240
$3,675
7/23/14
Johnny’s specialist visit
$145
$0
$0
$145
$3,530
9/21/14
Jan’s emergency room visit
$595
$0
$0
$595
$2,935
9/27/14
Johnny’s surgery ($7,152)
$2,935
$0
$0
$2,935
$0
All remaining approved, in-network medical services covered at 100%
Annual Total Cost (including premium cost share, deductible and copays):
SAMPLE FAMILY – “ACTUAL” CASE – PLAN 3 BCBSM HSA; $2,000/$4,000
Date Paid
(assume all
incurred on/after
July 1, 2014)
Copay
SAMPLE FAMILY – “ACTUAL” CASE PLAN 1
Service Received
Deductible
Cost
Number
Total
Cost
Cost
Annual premium cost share
Deductible
Remaining
$-1,010
$4,000
7/10/14
Jan’s 90 day generic prescriptions
$55
$0
$0
$55
$3,945
7/21/14
Jan’s generic prescription
$30
$0
$0
$30
$3,915
7/21/14
Jan’s preferred brand name prescription
$240
$0
$0
$240
$3,675
7/23/14
Johnny’s specialist visit
$145
$0
$0
$145
$3,530
9/21/14
Jan’s emergency room visit
$595
$0
$0
$595
$2,935
9/27/14
Johnny’s surgery ($7,152)
$1,535
$0
$0
$2,935
$0
All remaining approved, in-network medical services covered at 100%
Thru 6/30/15
Generic drug copay ($15 for 30 day)
$0
6
$90
$90
$0
Thru 6/30/15
Generic drug copay ($30 for 90 day)
$0
6
$180
$180
$0
Thru 6/30/15
Brand drug copay ($30)
$0
1
$30
$30
$0
Annual Total Cost (including premium cost share, deductible and copays):
$3,290
TOTAL COST COMPARISON
Assume family coverage
Best Case
Plan 1 – BCBSM
Traditional
Worst Case
“Actual”
Example Case
$4,280
$16,280
$6,130
Plan 2 – BCBSM HSA
1300
$790
$5,290
$3,630
Plan 3 – BCBSM HSA
2000
-$1,010
$4,990
$3,280
HOW TO CHOOSE A MEDICAL PLAN
Some questions to consider before open enrollment:
•
•
•
•
What is the “actual” situation likely to be for you and your family
in the coming year?
•
What medical and prescription services were accessed in the last
year?
•
Was last year “typical”?
•
What assumptions are you comfortable making regarding medical
and prescription services you are likely to need in the next year?
Which of the “pick two” factors are most important to you?
Is there an opportunity to pay for medical expenses on a pre-tax
basis using an FSA or HSA?
What is your risk tolerance?
QUESTIONS?