As a new insurance broker, you need to be able to discuss the differences in available health insurance plans, so you can better address the needs of your diverse clients. A “one size fits all” approach just does not work anymore. That’s because each employee is different – and each person wants to be able to choose the insurance plan that best fits his or her individual or family health care needs.
Here’s an overview of health plan types and health savings plans currently available:
HMO (Health Maintenance Organization) Plans
Often among the least expensive health plans, an HMO links coverage to doctors and other health care professionals who work or contract with an HMO. While HMOs generally have no deductible, they may significantly limit or not provide coverage for out-of-network care except in case of an emergency. An HMO may also have a limited service area, restricting membership to those who live within a specified geographic area. An HMO usually manages its patients’ treatment through an assigned Primary Care Physician, who acts as a gatekeeper for referrals and needed specialists’ care.
An HMO may be especially appealing to individuals who do not visit the doctor frequently, or who don’t object to a Primary Care Physician helping manage their care. HMOs may also be attractive for families that regularly need to use a doctor, but who want to limit their out-of-pocket costs. HMOs typically have lower premiums and office visit co-pays – and some plans offer high in-patient physician service benefits.
PPO (Preferred Provider Organization) Plans
Premiums for a PPO plan are typically higher than for an HMO plan, and a PPO requires members to pay an annual deductible for some services before the plan begins to pay. Most PPOs have both an in-network deductible and a separate deductible that applies to out-of-network services. Service co-pays are often higher for PPOs than for HMOs. However, PPOs are popular because they offer more freedom and flexibility when it comes to selecting a health care provider (like a doctor or hospital).
PPOs include benefits outside of a member’s home region (in contrast to an HMO). In-network benefits are typically more comprehensive. Because members don’t usually have a Primary Care Physician with a PPO, they can “self-refer” if they need to see a specialist. If they go outside of the preferred provider network, employees’ out-of-pocket costs will be greater, and they may have higher co-pays and an increased coinsurance percentage on out-of-network services (in addition to the separate deductible noted earlier).
A PPO is often a good choice for those who have a doctor or medical team that they want to continue to use, but who may not be part of an HMO plan network. This might include employees with unique personal or family medical needs, such as a chronic health condition like diabetes, arthritis, cardiovascular disease, cancer, etc.
EPO (Exclusive Provider Organization) Plans
An EPO is a managed care plan that offers coverage only when members go to specific providers in the EPO network. There are typically no out-of-network benefits with an EPO plan (although some plans may cover limited emergency services).
Someone who has few health care needs, or someone (with or without a family) who doesn’t mind a higher annual plan deductible (of $2,000 to $5,000, for example), might select an EPO. It could also be attractive to someone who rarely travels outside his or her home territory (so access to a broad health care network is not a requirement).
Point of Service (POS) Plans
A POS plan is often a sort of hybrid – a cross between an HMO and PPO. Members may require a referral from a Primary Care Physician to see a specialist, but they may also be able to get care out-of-network with a higher co-pay or increased coinsurance percentage.
A POS plan is less common than an HMO or PPO, but it can be right for some individuals, such as those who already have a favorite physician in the POS network or those wanting to see a health care provider outside of their immediate geographic area, such as a specialist for cancer or another medical condition.
High Deductible Health Plans (HDHPs)
An HDHP works differently than a POS or traditional PPO plan. It offers lower monthly premiums and includes a higher deductible. Members must pay their full deductible before their health insurance plans begins to pay. That means the full cost of office visits, diagnostic tests, and prescriptions are out-of-pocket for each member until his or her deductible amount (typically thousands of dollars each year) is met. (See the information below regarding how a Health Savings Account or Flexible Spending Account might help employees reduce their out-of-pocket costs and taxes in concert with an HDHP.)
A good candidate for an HDHP is someone who is younger and facing fewer health risks. It can also appeal to those who want a lower premium and have the financial ability to carry a high deductible. (In 2018, the maximum annual out-of-pocket expense limit for an HDHP is $6,650 and the minimum annual deductible is $2,700.) Those with a chronic health condition (like diabetes, cardiovascular disease, and cancer) who take regular medications may not want the large up-front costs associated with an HDHP.
While an insured person will have to meet the full HDHP deductible before his or her plan begins to pay, it is important to note the deductible does not apply to certain preventive health services established by the Affordable Care Act (ACA). Click here for more information.
HSAs and FSAs
While not health insurance plan types, two other resources for employees in an employer-sponsored health plan are a Health Savings Account (HSA) and Flexible Spending Account (FSA).
An HSA can only be used with a High Deductible Health Plan (described above). An HSA is a place where enrolled employees can set aside money on a pre-tax basis to help pay for qualified medical expenses. An insured person can use HSA funds for deductibles, co-payments, co-insurance, or other eligible expenses to lower his or her overall health care costs.
Someone with a self-only HDHP can contribute up to $3,450 to an HSA. The contribution limit for a family HDHP is $6,900 for 2018. (These amounts are up $50 and $150, respectively, from 2017.)
A health care FSA, sometimes referred to as a Flexible Spending Arrangement, lets workers put aside pre-tax dollars to pay for eligible health care expenses. Best of all, an FSA is not limited to those with an HDHP; a participant can be enrolled in any sort of health plan.
Under IRS rules, FSAs are limited to $2,650 per employer in 2018. If an employee is married, his or her spouse can contribute up to $2,650 to an employer-sponsored FSA, too. Funds can be used to pay for medical and dental expenses for the employee, a spouse, or dependent children, including prescription medications and over-the-counter medications with a doctor’s prescription. Reimbursements for insulin are allowed without a prescription.
Unlike an HSA, which allows funds to “roll over” from year to year, an FSA is a “use it or lose it” account for expenses incurred only in the plan year for which they are set aside. Employers are permitted to provide a “grace period” of up to 2½ months to use funds in an FSA, or they can choose to allow a carry-over of up to $500 to use in the year following the FSA plan year.
At the end of the year or grace period, all leftover funds are forfeited. That’s why it’s important for your clients not to put more money in an FSA than will likely be spent on co-payments, co-insurance amounts, eligible drugs, or other allowed health care-related costs.
Want to know more?
When you partner with Word & Brown, you get access to a deep roster of health insurance carriers, insurance plans, and services to support the needs of all of your clients. That includes great tools like our series of Health Care Quick Flicks, which can help educate your clients on things they need to know when shopping and comparing their health care options. These Quick Flicks are part of our library of broker resources – designed to help you attract and retain clients year after year. Click here for a playlist, and then click on the title you want to view.
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