Choosing the Best Health Plan

Updated on October 22, 2008.

AS EMPLOYERS CONTINUE TO shift more of the financial burden to their employees, the cost of health care is projected to rise by 9% for the average worker from 2008 to 2009, according to benefits-consultant Hewitt Associates. If you're considering switching your health-insurance plan during open enrollment (which usually takes place in the fall), are starting a new job or are looking for insurance on your own, you'll want to compare how each plan stacks up. In addition to reviewing what will or won't be covered, you should have a sense of how much each option will cost you in out-of-pocket expenses.

The good news is that you're likely to have some choice over your plan. Approximately 30% of employers offer three medical plan options to their employees and another 28% of employers offer two options, according to 2007-2008 data from Hewitt Associates. Options include an HMO, a PPO (a preferred provider organization), a POS (point of service), an old-fashioned indemnity plan, and a traditional EPO (exclusive provider) plan. Our calculator can help you figure out which plan gives you the most bang for the buck. By entering the amount you paid in health-care costs last year and comparing it with the costs and reimbursement policies of the plans you're considering, you can see which plan makes the most sense — at least from your wallet's perspective.

But before you crunch the numbers, here are some tips on how to use this worksheet most effectively. First, if you're considering a PPO or POS plan — which provide a different reimbursement policy for doctors you see in-network vs. out — you should probably input the appropriate information for both situations in our calculator. (You can do so side-by-side, since our worksheet can handle two plans at once.) Typically, the way these policies work is that if you go to a doctor in-network, you'll pay a small dollar amount (known as a co-pay) somewhere in the vicinity of $20 per office visit. Should you go out-of-network, you'll be subject to coinsurance, which is usually 20% of the total bill after you've met the deductible.

You may also want to dig into your summary of benefits when estimating your health-care costs. This calculator assumes that the medical expenses you enter are reimbursable — and, unfortunately, that's not always the case. Physical therapy or mental-health sessions, for example, may be restricted to a certain number of visits annually. So make sure you read all the fine print before you make your final decision. Your actual out-of-pocket expenses could also be significantly greater than our calculator's estimation if the health plan rejects a claim or asks you to cover any amount above what the plan deems reasonable or customary.

And keep in mind that price isn't everything. When comparing an HMO with a PPO, the strict managed-care plan will always be more wallet-friendly. But often times you get what you pay for. So you may opt to spend a little more out of pocket for the freedom to see the doctor of your choice.