A shopping cart is unbalanced and bags are falling out. Two of the bags say "Health Insurance 2023"

Saving Money During Open Enrollment

Each year during open enrollment, you have the opportunity to review your health insurance plan and make sure it meets your needs and saves you money. Here are some important things to understand before making your selection for the year.

Dates and Deadlines

  • Marketplace: If you plan to purchase a 2023 health insurance plan from the HealthCare.gov Marketplace, open enrollment starts November 1, 2022 and runs through January 15, 2023. If you live in a state that runs its own Marketplace, then it’s open enrollment period may last longer.
  • Employer-sponsored health insurance: Open enrollment for 2023 plans through your employer typically takes place each year, often in the fall for plans that start in January. Dates and deadlines vary, so make sure you carefully review information sent out by your employer as soon as you receive it or it’s posted online.
  • Medicare: The information in this blog mostly applies to individual and employer-sponsored health insurance plans. However, if you are participating in Medicare open enrollment, it lasts October 15-December 7 each year. Visit our Medicare Materials & Resources for more information.

Types of Health Insurance Plans

There are two main payment systems when you receive medical care:

  • Fee-for-service: a health care provider is paid a fee for each service provided. With these plans, you can go to any provider willing to see you. You pay for a portion of your care, and the insurer pays the rest.
  • Managed Care: health care providers contract with a health insurance company to be a part of its network. If you go to a provider in the network, the provider has agreed to a certain payment rate for treating you (i.e., allowed amount). Regardless of what the provider bills, it’s that “allowed amount” that determines your final cost. You typically pay a portion of the allowed amount, depending on your plan.

Common Types of Managed Care Plans

  • Health Maintenance Organizations (HMOs): your health care services start with your primary care physician, and you usually need a referral before you can see any other health care provider, except in an emergency. For example, if you get a skin rash, you first go to your primary care doctor. If needed, that doctor will refer you to a dermatologist in your network. Generally, HMOs have smaller networks of providers, and providers outside of your network will not be covered by your HMO. While you may have less choice in providers, HMOs are often less expensive.
  • Exclusive Provider Organizations (EPOs): generally, you do not need to start with your primary care physician. Typically, EPOs have larger provider networks than HMOs, but will not pay for any services you get outside of the network.
  • Preferred Provider Organizations (PPOs): generally, you do not need to start with your primary care doctor. While most PPOs have some out-of-network coverage, staying inside your network means lower out-of-pocket costs for you. Typically, PPOs cost more than HMOs, but you have more choice and control.

When choosing a plan, you should consider your personal needs and the options available in your area.

Health Insurance Terms to Understand

There are a few other terms related to health insurance that you should understand.

  • Monthly premium: what you pay each month to have coverage – you pay these costs even if you never get medical care. It’s like paying for car insurance all year, but never filing a claim. Then there are costs that you have to pay when you get medical care, often called “out-of-pocket” costs. The specific amount of those costs will depend on your plan.
  • Annual deductible: the amount you have to pay out-of-pocket each year, before your health insurance policy kicks in. This fixed dollar amount could be $500 or $5,000. Some plans have a $0 deductible.
  • Co-payment: a fixed dollar amount you pay when you get medical care. For example, when you visit the doctor’s office you might have a $20 co-payment; if you go to see a specialist, you might have a $40 co-payment. You usually pay your co-payment at the time you get care.
  • Co-insurance (aka cost-share): a percentage difference in what the insurance company pays for your medical expenses and what you pay for your medical expenses. For example, if you have an 80/20 plan, the insurance company pays 80% of your medical expenses and you are responsible for 20% of your medical expenses, after paying your deductible.
  • Out-of-pocket maximum: a fixed dollar amount that is the most that you will have to pay for your medical expenses out-of-pocket during the year. Your out-of-pocket maximum will depend on your plan. It is a very important thing to find out! Generally, you reach your out-of-pocket maximum by paying your deductible, plus any co-payments that you make during the year, plus any co-insurance payments you make. So, it’s everything that you pay, except your monthly premiums. Once you reach your out-of-pocket maximum, your insurance pays 100% of your medical expenses for the rest of the year. Most insurance companies only count expenses towards the out-of-pocket maximum that are from in-network providers. Also, some employer-sponsored plans may carve out expenses from the out-of-pocket maximum (e.g., co-payments won’t count towards your out-of-pocket maximum).

Out-of-pocket Maximum Example

Mark was in an accident. He went to the emergency room and then spent a week in the hospital that is in his plan’s network. Mark ends up with a $102,000 hospital bill. His health insurance plan has an emergency room co-pay of $250, a deductible of $2,000, an 80/20 co-insurance, and an out-of-pocket maximum of $4,000. How much of that does Mark actually have to pay?

  • Mark pays his co-pay of $250 at the time of his emergency room visit, which leaves $101,750.
  • Then he has to pay the rest of his $2,000 deductible ($2,000-$250=$1,750), which leaves $100,000.
  • Then the insurer will pay 80% of the bill and Mark is responsible for 20% of $100,000, which is $20,000.
  • But his plan has an out-of-pocket maximum of $4,000. Because he has already paid his $2,000 deductible out-of-pocket, Mark only needs to pay another $2,000 to reach his $4,000 out-of-pocket maximum and the health insurance company will pay the rest.

Tips for Picking a Health Insurance Plan

Finding the right health insurance plan can feel overwhelming. There are a few key things to consider when picking a health insurance plan:

  • What will the plan actually cost me?
  • Are my health care providers and facilities included in the plan’s network?
  • Does the plan cover my prescription drugs and any pharmacies I use?
  • When comparing plans, it can be tempting to just choose the one with the lowest monthly premium. But, to figure out the total cost for the year, including your out-of-pocket expenses, you have to do some math:
    • (Plan’s monthly premium x 12 months) + Plan’s out-of-pocket maximum = Total annual cost)

Picking a Plan Example

  • Plan A is an HMO with a monthly premium of $25; an annual deductible of $2,500; a 70/30 co-insurance; and an out-of-pocket maximum of $7,000.
  • Plan B is a PPO with a monthly premium of $100; an annual deductible of $1,500; an 80/20 co-insurance; and an out-of-pocket maximum of $4,000.

At first glance, it may seem that Plan A is less expensive because of its low monthly premium. But you have to do the math!

  • Plan A: ($25 premium x 12 months = $300) + out-of-pocket maximum of $7,000 = Total cost of $7,300.
  • Plan B: ($100 premium x 12 months = $1,200) + out-of-pocket maximum of $4,000 = Total cost of $5,200.

After doing the math, Plan B is actually the more affordable plan if your medical expenses reach the out-of-pocket maximum. You also need to check if your health care providers and facilities are in the plan’s network. And then, check to see if the plan covers any prescription drugs you are taking.

If you aren’t a math person, we’ve made it easy for you to find out how much your plan will really cost you with our free, printable Health Insurance Plan Comparison Worksheet.

A Note About Prescriptions

Understanding prescription drug terms and determining if your plan will cover prescriptions you are already taking, is a key part of picking the right plan. For more information about prescription drug coverage, see our Quick Guide to Getting & Paying for Prescription Drugs.

More Health Insurance Information

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