Health Benefits
Your new residency, fellowship, or ‘real job’ programs, if they haven’t already, are probably beginning to mail out information about the benefits you will receive as their employee. There are often several choices to be made and making the wrong ones may force you to pay for services you’ll never use. Over the next couple of posts, I want to go through what your choices are and how you can make the best decisions to both take advantage of what your new program offers without overpaying.
Types of Health Insurance
The most discussed benefit of all these days is without a doubt health insurance. Being a physician, you understand how expensive procedures can be and why the need for insurance is great. You should also know from previous posts that over insuring isn’t always the best idea and can cost you money unnecessarily.
Consumer Driven Health Plans (CHDP) – HSAs and HRAs
These plans are part of a new wave of insurance plans brought about with the assumption that the free market works and educated consumers (patients) will make rational choices about their healthcare – opinions that I heartily agree with.
How HSAs Work
Health Savings Account (HSA) plans usually aren’t available or necessarily beneficial to residents or fellows but may be beneficial to practicing physicians. HSAs are made of two parts – the savings account and accompanying high deductible health insurance. The savings account part is basically just a tax-advantaged way to save money that can only be spent for health care purposes. The patient funds this account themselves and can invest it in nearly any manner they choose (restrictions apply depending on where the account is held). These funds are paid in by the account owner themselves. The health insurance part is the traditional insurance that one thinks of but with the twist of having a higher deductible that must be paid when care is received – thousands of dollars instead of the usual $10-$50 co-pay. When the patient receives care, they pay the first $x (the deductible) from their Health Savings Account and then the insurance kicks in to cover the rest.
The reason these accounts aren’t beneficial to residents and fellows is that you typically don’t earn enough money to take advantage of the tax benefits that come along with an HSA. Funding a Roth IRA and sticking with other types of health insurance would likely be the better solution for those periods of your life.
How HRAs Work
Similar to the HSA, HRAs have two components – the cash fund and the high deductible health insurance. The insurance component is nearly the same, but the cash portion is handled differently. Instead of being funded by the individual, your employer contributes a set amount to the fund. There is usually a bridge amount that the employee is responsible for between the amount in the account and the cost of the treatment before insurance kicks in. Take the following example:
Employer Funded Account: $1000
Bridge: $800
Insurance Starting Point: $1800
In this case, any health care during the year up to $1000 would be paid from the employer funded account with the patient paying nothing out of pocket. Any amount above the $1000 but below $1800 would be paid by the employee – money directly out of your pocket. Above the $1800, traditional insurance kicks in with the employee probably paying some sort of co-pay, maybe 10% or so.
Why I Like CDHPs
As I mentioned above, CDHPs are built on the idea that health care consumers can make rational decisions. Given only a set amount of ‘free’ money, you must make wise decisions of how to spend it. When you have skin in the game and may be force to pay for health care out of your own pocket, you’re more likely to question whether that MRI is really necessary or if it’s just a CYA step being taken. Having educated patients that research their treatments and ailments is a good thing I believe everyone can agree to. Traditional insurance encourages patients to blindly agree to every test that comes their way – they’re not paying, after all, the insurance company is!
The other things I like about CDHPs are the following:
- Preventative Care (e.g., annual physicals and exams, etc.) are performed with no cost to the patent
- Significantly lower premiums taken out of employees’ paychecks (Perhaps enough of a difference between traditional plans to nearly cover the Bridge amount)
- No co-pays
- Encourages you to be healthier
- Can visit any physician you like, though in-network physicians are less expensive
Traditional Health Insurance
How HMOs and EPOs Work
Health Maintenance Organizations and Exclusive Provider Organizations require you to first pick a primary care physician (PCP) that will be your go-to-person for any issue you may have. They will then refer you to a specialist if you need one, but you always have to go to the PCP first. You must always stay in-network, too, so your choice of physicians is more limited than with other plans.
When you receive care, you have to pay a co-pay, but your care will likely be totally covered depending on your plan. To receive this benefit, you’re going to have to pay higher premiums with each paycheck you receive.
How PPOs Work
Preferred Provider Organizations are on the spectrum between HMOs and the CHDPs. You’re free to visit the physician of your choice without referrals, but you have to pay a higher percentage of the bill for that privilege.
How to Choose
The biggest thing you need to do is evaluate how much care you think you’ll need versus the cost you’re willing to pay for that care. If you’re young and healthy and rarely visit a doctor, then you probably don’t need the insurance plan with all the bells and whistles that has the highest premiums. You’d likely be better off with a CDHP that takes care of your preventative procedures while insuring you against catastrophies.
If, however, you have a chronic condition that requires expensive prescription drugs throughout the year, you’ll probably need one of the robust plans that will pick up the cost of the meds for you. Read through the coverage amounts of the plans, do the math, and pick the amount of coverage you think you’ll need.
What We Did
Andrea and I still have our health insurance separate through our respective employers. I have a great HRA plan available that I take advantage of while she has a traditional plan. The belief in the market economy and the amount of money saved by paying the lower premiums over the past several years has really added up to be a great benefit. Unfortunately, Andrea’s residency program doesn’t offer a CDHP so she’s stuck with a plan that costs a little more per month but provides more comprehensive care (that goes mostly unused).
Related posts:
- Flexible Spending Accounts
- A Crash Course on Car Insurance for Residents and Medical Students
- Deducting Moving Expenses
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New Resident Guide
