Health Insurance
- 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 go for lower premiums and higher co-pays. But if you're older, have a chronic health condition or have young children who make frequent visits to the doctor, you're better off with higher premiums and lower co-pays. You also have to weigh the value of your health plan vs. 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.
- What is a lifetime maximum benefit?
A lifetime maximum is a cap on the amount of benefits available to a policyholder. The cap is designed to keep the cost of benefits affordable and to stabilize potential future costs. Many health plans cap lifetime benefits at $1 million and are most often applied to mental illness, drug and alcohol treatment, and organ transplants.
If a plan has a relatively low lifetime maximum cap, think carefully about how much risk you're willing to assume. Even if you're healthy, the expenses incurred from one severe car accident — including hospitalization and outpatient physical therapy — can easily exceed a $100,000 cap.
- What's best, an HMO, PPO or POS? And what are they?
There are several health-plan varieties, including traditional fee-for-service plans (FFS), health-maintenance organizations (HMOs), point-of-service plans (POS) and preferred-provider organizations (PPO). Each plan has its own features to consider before making your choice.
HMOs are the least expensive but also the least flexible. They require that you select a primary-care physician. You must obtain pre-authorizations for certain medical procedures and in order to see specialists. 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, although you can usually visit 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 plan pays. Most health plans that pay for prescription drugs have pharmacy benefit tiers that group certain medications together for pricing purposes. Brand-name drugs, usually in the top tier, are the most expensive; 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.