How to Pick the Right Health Insurance When You Start a New Job

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Whether you’re fresh out of college or upgrading to a new employment adventure, a new job comes with a lot of questions. We can’t answer all of them (we have no idea where your cubicle will be or if you’ll like your boss), but we can make picking the right health insurance at a new job a little easier.

To successfully pick a health insurance policy, you need to know how insurance works and what you need. Follow these guidelines to make the right choices for your health insurance at a new job.

What To Know About Your Health Insurance at a New Job

It might sound like a no-brainer, but you need to find out if your new employer offers health insurance. Don’t panic if they don’t. There are other options for health care (although employer plans are often the most convenient). In fact, there are four main ways people get health insurance: an employer, HealthCare.gov, Medicare or Medicaid.

If your employer offers health insurance, they likely contracted an insurance company to provide policies for their employees. The insurance company secures business from this deal and in turn provides lower costs. Plus, the employer often covers some of the monthly premiums for employees. In theory, employer-offered insurance policy is more affordable than buying insurance on the open market.

Next, comes the open market. Because of the Affordable Care Act, the U.S. government established a health insurance marketplace that allows everyone to buy insurance on the open market. Some states run state specific websites, but HealthCare.gov is a good place to get started. Sometimes figuring out the best policy can be difficult this way because of the sheer number of choices. Luckily, HealthCare.gov has free health insurance assistants who can help you find the best policy to fit your needs/budget. These assistants can also help find any tax credits you may be eligible for to lower your monthly premiums.

You also may qualify for federal (and state) programs. The government offers Medicare for adults 65 and older and Medicaid for low income families or individuals. Medicare is a federal program, the qualifications are standard. But Medicaid is a state run program, so qualifications will vary state to state.

Types of Insurance

Within each of these ways to get insurance, there are different types of plans.

In general, types of insurance policies are referred to by acronyms that are meaningless if you don’t understand them. Most of the differences boil down to whether or not you have access to a large or small network, if referrals are required, or whether or not you have out-of-network coverage. Take a look at the breakdown of each type to understand what you’ll be signing up for.

Terms to know:

  • HMO (Health Maintenance Organization): HMOs are health insurance policies with small networks and no out-of-network benefits (except emergency services). Before you can see specialists, you’re required to get a referral from your primary doctor who will send you to a doctor from your network. Using this small network often helps the HMO keep monthly premiums low. However, the small network can sometimes be restrictive — especially in rural areas — with fewer provider options.
  • PPO (Preferred Provider Organization): PPOs provide large networks and out-of-network coverage. They often have higher monthly premiums, but you’ll get lower costs if you use in-network services. You don’t need a referral to see specialists and normally have nationwide coverage.
  • EPO (Exclusive Provider Network): EPOs are not as common as HMOs or PPOs and are kind of a mix of the two. With an EPO, you have no out-of-network coverage but are also not required to have referrals to see specialists. They often cost less than PPOs, but more than HMOs.
  • POS (Point of Service): POS plans often require referrals but do offer out-of-network benefits. Choosing to stay in-network will cost you less overall, but you’re not left high and dry if you have to be out-of-network. Often, POSs will have multiple network sizes to choose from. You can pick a smaller network for a lower monthly price or a larger network for more.

Deciding which is best for you or your family will depend on your health care needs and what is available. Start by checking out which providers from the HMO are in your area. While it might be the cheaper option, it won’t matter if you can’t find the doctors you need. On the flipside, the PPO option might have a larger network, but the monthly premium might be too much for your budget.

What about a Direct Primary Care Network?

A direct primary care network is not insurance. Instead, it’s a financial arrangement between you and a health care professional that skips over insurance companies completely. You pay the doctor a monthly fee and then receive benefits like upfront, reasonable pricing and same-day visits in exchange.

The downside of paying for a direct primary care network is you still probably need to have insurance. This doctor subscription will cover you for basic illnesses but will leave you uncovered if you’re in an accident or need a specialist.

It might be worth looking into if your family often visits your pediatrician or family practitioner. But for most, it’s probably not worth the extra cost because you’ll need insurance anyway.

Important Health Insurance Terminology

In many ways, health insurance companies have a language all their own. To the untrained eye, a policy might just look like a jumble of random numbers and phrases. Understanding the policy terms means the difference between knowing what to expect and being surprised.

Claims

A claim is a bill from a health care provider sent to your health insurance. The health insurance company will then decide whether this claim is covered by your policy and how much you owe.

Coinsurance

Coinsurance explains what percentage of your health care costs you’ll still owe after you meet your deductible. For example, a policy with “20% coinsurance after the deductible” means you’ll pay 20% of the health care bills that occur after you paid your deductible (until you hit your out-of-pocket maximum).

Copay

A copay is a fixed amount you pay for a specific health care service. For example, your insurance may have a $50 copay for a visit to a primary care doctor. That means you can count on paying $50 for a basic doctor’s visit.

Covered Service

This is a medical service the health insurance company agrees to help pay for.

Deductible

Your deductible is the amount you pay before your insurance coverage starts to cover your costs. After you meet your deductible, you’ll probably pay coinsurance until you hit your out-of-pocket max. If you’re looking at a policy for more than one person, remember plans often have separate individual and family deductibles.

High-Deductible Health Plan

A high-deductible health plan has low monthly premiums and a high deductible. Basically, you pay less month to month but more for actual health expenses.

Low-Deductible Health Plan

A low-deductible health plan has a low deductible and lower health costs for services or procedures. It does, however, have higher monthly premiums.

In-Network

In-network means a provider or facility is part of your insurance’s contracted network. Often this means your insurance company has already negotiated discounts with this provider and your overall cost will be less.

Out-of-Network

Out-of-network providers or facilities are people or places that are not part of your health plan’s network. Depending on your plan, you could receive no insurance coverage — meaning you’re responsible for all the costs — or limited coverage with out-of-network doctors.

Out-of-Pocket Maximum

The out-of-pocket maximum is a limit to how much you might pay in a given year. It’s literally the maximum you can be charged. Be warned there are often different set limits for individuals and family and for in-network versus out-of-network charges.

Premium

The premium is the amount you pay each month for your health insurance plan. This amount is basically the fee you pay to keep your health insurance policy active.

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How to Actually Pick Your Plan

As you evaluate your health insurance at a new job, it’s time to turn introspective. There isn’t one perfect policy that works for everyone — it depends on your needs. Think about your overall health, your budget and your expected medical costs. All of these should influence which policy you choose. The questions below will help you narrow in on the best policy for your situation.

1.What Are Your Expected Medical Expenses this Year?

Start by looking back: How did you use your medical insurance last year? Maybe your child needs regular visits to an allergist or you find yourself needing urgent care more often than you expected. Looking at how you normally use health care can help you understand your spending for the next year.

Besides that, consider what other health expenses you’re planning for this year. Maybe you’re having a baby or have recently discovered a need for a surgery. You can plan for these expenses and see which insurance policy makes the most financial sense.

Remember high-deductible plans often cost you less month to month but can be expensive if you have a lot of medical expenses during a year. On the other hand, low-deductible plans cost you a lot upfront but might save you money during the year if you use it frequently.

Many insurance companies will provide examples of how much the insurance covers in common medical situations to help you calculate expected costs. These are just estimates but can be helpful in understanding how the policy works.

Some insurance companies even offer calculators where you can predict your medical needs. It’ll show how much you’ll owe with each policy over the year. This can help you balance paying more for your premium versus paying more for medical procedures.

2. How Financially Responsible Do You Want to Be For Unexpected Medical Expenses?

Obviously, the ideal answer to this question is “not at all.” However, that’s just not a reality in modern health care. Instead, you’ll want to examine each plan’s out-of-pocket maximum. While hopefully you’ll avoid paying that much, think, “Am I able to cover that cost if I have to?” Again, hopefully you won’t need to, but an unexpected accident or diagnosis can push you closer to that maximum than you expected.

Remember if you have more than one person on your health insurance policy, there is often a separate out-of-pocket max for each individual and the family. That means that while your spouse might have a surgery and hit their out-of-pocket max, you’ll continue paying for medical expenses for yourself until you hit the family out-of-pocket max.

3. Do You Have Any Specific Providers You’d Like to Continue Seeing?

Before signing up for a plan, you’ll want to check out the network coverage in your area. Consider how important the size and location of the network is for you. Some policies only cover local services (unless it’s a verified emergency situation) while others offer nationwide coverage.

Are you someone who mostly stays at home or do you travel often? This will make a difference on what kind of network you need to be safe.

You might also check to see if your favorite doctors are considered in-network on this plan. For example, if you love your family doctor, it might be worth checking if the doctor is still covered with this policy.

Even if you don’t have a favorite physician, searching the network can give you a better idea of how close in-network doctors are to you. If you live in a rural area, you’ll want to understand how far you’ll need to drive for your medical needs.

4. Do You Have Any Specific Needs You Want Covered?

Different plans offer different coverage, so checking that your needs are met beforehand is important. Personal needs you might check out include maternity coverage, infertility treatments, mental health therapy, hormone replacement therapy and more. Whether these services are covered vary from plan to plan. Plus, even if the service is covered, it’s important to understand any limits to coverage before you begin the year.

5. Is a FSA or HSA Important to You?

FSAs and HSAs are tax-advantaged savings accounts that allow you to put pretax money away for medical expenses. Your health insurance at a new job may offer them. They are similar with a few key differences.

An FSA is a flexible spending account that’s offered in addition to some health insurance policies. Basically, you pull a certain amount from your paycheck each month and deposit it into a savings account for medical expenses. You can use your FSA to pay for copays, deductibles, prescriptions and coinsurance. However, it can not be used for premiums. All the money in your FSA has to be used by the end of the year or you lose it. An FSA can be helpful to prepare for the year’s expenses, just make sure to plan ahead.

An HSA works similarly to the FSA but does not have the year time limit. In fact, your HSA money can follow you from job to job — it’s your personal account. You can even invest some of the money to generate more funds for medical expenses. The downside is HSAs are only offered on high-deductible plans.

Sometimes companies will deposit a small amount of money in your FSA or HSA to help cover medical expenses for the year. Although it’s not normally a lot, it can still be helpful in covering costs.

Finally, Pick Your Plan

Now that you understand the fundamentals of your health insurance at a new job, the only thing left is to pick your plan. Once you’ve secured the right one for you or your family, you can start your new job with confidence.

Contributor Whitney Hansen covers banking, credit cards and investing for The Penny Hoarder. She also writes on other personal finance topics. 

Frequently Asked Questions (FAQs) about Picking Health Insurance at a New Job

Can I Change My Insurance if I Decide I Don’t Like It?

Unfortunately, no. You can only change your health insurance policy during open enrollment or if you have a qualifying life event like getting married, having a baby or loss of coverage. You’re stuck with your plan for this year. But if you’re looking for more options for next year, check out our more complete answer to this question at Dear Penny.

What Do I Do for Health Insurance if My Company Doesn’t Offer it?

There are many ways to find health insurance, but if your employer doesn’t offer it, you’ll want to start at HealthCare.gov. This government-run website will show you the different insurance companies/policies you qualify for. If you’re still confused, you can reach out to one of the HealthCare.gov experts who can help you find the best policy for your needs. If you're self-employed, check out these other tips for finding affordable health care.

Should I Choose a High-Deductible or Low-Deductible Plan?

The short answer is: It depends. High-deductible plans offer low monthly premiums but higher deductibles and out-of-pocket maxes. They’re often good choices for people who are generally healthy and don’t expect huge expenses during the year. Low-deductible plans have high monthly premiums but lower deductibles and out-of-pocket maximums. This can be great if you have lots of medical expenses. But if you don’t end up using the benefit you’ll just be paying more month to month for your insurance.