Open enrollment season is around the corner. This is a key time of the year to think about the needs of your family. One main area to assess is the type of health insurance that best fits your needs. Depending on your employer you may have several options to choose from and some may vary wildly in cost to you.
The two main options your employer will likely offer are a consumer-driven health plan (CDHP) or a traditional health plan, and both are very different. Here are some things to consider as you choose between these two plan options.
The Changing Tide in Options
In years past many employers offered what’s considered a traditional, more robust, health plan. While you paid monthly premiums for such coverage, the employer paid the majority of the cost. In recent years, the premiums paid by consumers have risen year after year. Last year, individuals paid $6,251 for coverage and families paid $17,545, on average, according to the Kaiser Family Foundation 2015 report on employer health benefits.
CDHPs have risen in popularity as employers move to a more consumer-driven health system. The lower premium costs, however, are met with the downside of potentially higher out-of-pocket costs to pay for care. Many CDHPs mitigate this risk through offering a tax deductible saving option, the health savings account (HSA). Spurred by the savings, CDHPs with an associated HSA have nearly doubled from the 10 million who had them in 2010 to the 19.7 million Americans who had an CDHP last year, according to American’s Health Insurance Plans.
Reports show this trend will only continue as 71% of employers offered CDHPs in 2015, with another 7% adding that option in 2016.
Which Plan is Better?
It’s not always clear-cut which plan option is best to choose, assuming you have multiple options. The felt security of a traditional plan may seem best, but it may result in you paying more for coverage than you should, thus making a lower premium CDHP a justifiable alternative. The latter may seem inferior, but in many cases, it’s not.
Ultimately, it comes down to your specific needs. Assistant Vice President of global benefits and insurance programs at Unum, Joanne Abate offers some questions to consider when looking at both coverage options:
- Do you have chronic conditions?
- Do you have a family that frequently uses the healthcare system?
- Do you have high costs for maintenance drugs?
- Are you involved in extreme sports or dangerous activities?
The answers to those questions can be helpful in deciding which coverage option is best for you. That will differ from individual to individual. “Selecting the right medical plan is a personal choice, and the best choice depends on your age and stage in life, as well as your medical history,” adds Abate.
Don’t know what coverage option best meets the needs of your stage of life? Those who are younger, active and without children may be best served with an CDHP while those with children or older individuals to manage costs may want to consider a more traditional plan. Again, remember it will vary based on your needs so do your due diligence.
Filling the Gaps in CDHP
Another fact about a CDHP is that you may not have as full of coverage as you would with a traditional plan. There are two key ways employers help bridge the coverage gap:
- Health savings accounts
- Voluntary benefits
To be clear, an HSA can only be paired with an CDHP. Through an HSA you can set aside pre-tax dollars for future medical needs – and you can pull out those funds tax-free for qualified medical expenses. Anything you earn on funds you set aside in an HSA also grows tax-free. The IRS allows individuals to set aside up to $3,350 and families $6,750, for the 2016 tax year, for such future medical needs. In some cases, your employer may even contribute funds to your HSA.
If you feel that you lose out too much when selecting an CDHP, consider voluntary benefits. Voluntary benefits help complement CDHP benefits to provide fuller coverage. “Many companies will offer voluntary benefits as a way to help fill the gap between deductibles and coinsurance of an CDHP, or to round out coverage with traditional plans,” says Abate.
There are numerous such voluntary benefits available, such as:
- Critical illness
- Hospital indemnity
- Accident insurance
These are only examples and if there is a benefit you’d like to see speak with your Group Benefits department to ask about the possibility.
Choosing between an CDHP and traditional health plan can be overwhelming, but with some due diligence, it’s possible to find the plan that best fits your needs.