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Wednesday, March 17, 2010

FY '11 Medical Plan Decisions Simplified

It's open enrollment month in our company and many people are trying to make a decisions regarding their medical plans for the fiscal year beginning April 1st. This year our Tennessee employees have a four-option choice; PPO vs. High Deductible Plan (HDP), and Blue Cross "P" network vs. "S" network.

With the various differences in premiums, co-pays, deductibles, HSA vs. FSA, etc... there is a lot to consider. The HDP has gained momentum due to favorable payroll deductions and some good feedback from people currently in the plan. The S network rates are cheaper, but that network does not include any HCA hospitals including some where several of our people live.

With a lot at stake, and a lot to sift through, here are some simple decision points you should consider if you work at Nelson. This is just my opinion and does not change any of the Open Enrollment information we've sent to our people. We have informational meetings going on and you should attend one of those if you're struggling with this decision.

1. FSA, HSA, or Neither. In my opinion "Neither" shouldn't be an option. If you're going to spend money on co-pays, deductibles, or coinsurance this year why not get the savings of deferring that money to yourself pre-tax? Since "Neither" is not a smart option, then the choice is FSA vs. HSA and that's simple. HSA accounts are only available due to (a stupid) federal law if you have the HDP. Choose the FSA if you choose the PPO; choose the HSA if you choose the HDP.

2. PPO or HDP. The HDP combined with an HSA saves you more money in almost every instance, but there's an important catch that I'll get to in a minute. Practically everything you spend on your medical costs in the new fiscal year counts towards the deductibles and maximum out of pocket expenses. When you reach the $8,800 out of pocket maximum the plan pays at 100%. The PPO maximum out of pocket is $6,000 but only the deductible and coinsurance count towards it. Co-pays do not count toward it, and continue on after it. You can spend $6,000 and still pay co-pays into infinity.

So why not go with the HDP in all cases? Since everything counts towards the deductible ($1,200 individual and $2,400 family by law) there are no co-pays. That means that every prescription you buy, every doctor's visit, any ER services, everything up to when you satisfy the deductible is at your expense out of pocket. You'll get that back through premium savings by year's end and you'll save money in most cases. However, if you aren't $2,400 liquid at the start of the year the HDP can get you into serious financial difficulty. If you can't afford that much out of pocket starting April 1st, the PPO may be your better option.

3. P vs S Network. The list of doctors in these two networks is almost identical; the difference in is hospital coverage. In the Nashville area only, Blue Cross has a negotiated relationship with the non-HCA hospitals. In exchange for HCA hospitals being excluded, the other hospitals offer a deeper discount to patients with S network coverage. If your doctors have privileges at Vanderbilt, Baptist and St. Thomas (or their related facilities) or if you're willing to change doctors then the S network will save you money. If your doctor only has privileges at local HCA hospitals (Summit, Centennial, Skyline, etc...) and you aren't willing to change doctors you should select the larger P network. If your doctors are all at covered facilities (mine are all at Vanderbilt) then you should take S as it makes no sense to pay more for network access that you don't use.

So there you have it. Decide on PPO vs. HDP depending upon your liquidity, then select an FSA or HSA depending on which plan you selected and take advantage of tax savings on your non-covered expenses. Select P vs. S depending on which hospitals you use and where your favorite doctors are allowed to practice. Feel free to email or call me at the office if you have further questions.

Jim

2 comments:

Larry said...

Thanks Jim- very helpful. This year was actually the 1st that i sat down and thought through it for the family- we have decided to change to the HDP as a family. Your team was very helpful with my questions as well-
thanks again.

Tod Shuttleworth said...

Signed up online this week. very simple and easy.