Open Enrollment: Be Ready for Questions
1. What's the difference between an HMO and a PPO?
With a health maintenance organization (HMO) health plan, the group member has access to doctors and hospitals that are within the HMO network. In other words, he or she can go only to doctors that are within that network.
A preferred provider organization (PPO) health plan has its own network of providers, but it's less restrictive about visiting nonnetwork providers. With this option, the group member has more flexibility in choosing a doctor or hospital.
2. What's the difference between premium, deductible, coinsurance and out-of-pocket limit?
"Premium" is the monthly fee employees pay to maintain their health insurance coverage. This amount is taken out of their paychecks according to their pay frequency.
"Deductible" is the amount employees pay for health care services before the insurance company starts helping with the cost.
"Coinsurance" — which kicks in after the deductible has been paid — is the cost-sharing amount between the employee and the insurer. For example, with an 80/20 coinsurance, the insurance company covers 80% of the cost while the employee pays 20%.
"Out-of-pocket limit" is the maximum that employees will have to pay, out of their own pockets, for covered health care services during the year. It includes deductible, coinsurance and copayments — but not premiums, as employees must keep paying their premiums in order to maintain health coverage.
3. Why do health insurance premiums tend to increase every year?
As the cost to deliver health care services rises, so does the employer's and employee's share of the cost. For example, newer, more advanced technology helps providers diagnose and treat health conditions, while specialized drugs are vital to treating chronic illnesses and diseases. These treatments and diagnostic solutions are expensive, which explains the increased cost to both the employer and employee.
4. How do taxes impact employees' health benefits?
Employee benefits are deducted from wages either on a pretax or an after-tax basis.
"Pretax" means that premiums are taken out of employees' wages before taxes are withheld, thereby lowering their taxable income and increasing their take-home pay. Benefits offered under a cafeteria plan — such as medical, dental and vision insurance and flexible spending accounts — are pretax. Because the employee already received tax savings for pretax medical benefits through payroll deduction, he or she cannot claim those payments as a qualified medical expense on his or her tax return.
"After tax" means that premiums are deducted from wages after taxes are withheld. These deductions do not reduce taxable income, nor do they boost take-home pay. If the health benefits are not offered under a cafeteria plan, they are after tax. Employees can claim certain after-tax medical expenses as a deduction on their tax returns.
They can also determine whether a health benefit is pretax or after tax by examining their pay stub.
Keep in mind that your employees may have other questions. So, consider all possible inquiries, and be prepared to sufficiently answer them.