An Advisor’s Guide to Helping Clients Pick Their Employer Health Insurance

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Most people are reliant on their employers for their healthcare coverage, and oftentimes employers will give their employees a variety of health plans to choose from. But before employees can decide on the option that’s best for them, they need a solid understanding of their choices and how each choice stacks up against their entire household’s needs. 

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Unfortunately, selecting the right employer health insurance plan isn’t always as clear as it should be. As a financial advisor, there are actions you can take to help your clients through this important process. 

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Together we’ll review the basic plan options provided through employer-sponsored coverage. Then we’ll go over personal criteria your clients can run through to help them narrow down their choices. Finally, we’ll wrap up with continued actions you can take as an advisor in helping your clients navigate their healthcare needs. 

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Help Clients Understand Their Health Insurance Options

The plans issued by your client’s employer can take multiple forms, and it’s not always obvious how the plans differ. Let’s first cut through the jargon and get a simple, easy-to-understand overview of the main types of provider networks that are accessible through a health insurance plan:

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• Preferred Provider Organization (PPO): These plans have the most flexibility, as they don’t require your clients to get referrals for specialized treatment. Clients also don’t have to exclusively see in-network providers — but if they visit out-of-network providers, costs will typically be higher. With PPOs, it’s common to pay higher monthly premiums.

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• Exclusive Provider Organization (EPO): These plans are similar to PPOs, except that your clients will have to stay in-network for care. Clients usually won’t need referrals from a primary care doctor to see a specialist. The restrictions on using in-network providers can result in lower monthly premiums than many PPO plans. 

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• Health Maintenance Organization (HMO): This plan requires your clients to both stay in-network and get referrals for specialized treatment. Clients will need to select a primary care physician to coordinate all their care. HMOs typically offer the lowest monthly premiums. 

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• Point of Service (POS): This option combines some features of an HMO with a PPO. Your clients will have their healthcare coordinated through a primary physician, similar to an HMO, and they’ll need referrals to see specialists. However, this option also allows individuals to see out-of-network providers for a higher cost. 

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In-Network Requirements

A healthcare plan’s network consists of the doctors and healthcare providers who are contracted with the insurance company to provide medical services. In the case of HMOs and EPOs, your clients will have to remain inside the plan’s network in order for their insurance to help cover costs. 

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However, the Affordable Care Act has made exceptions to in-network-only coverage for qualifying emergencies. In these situations, your clients won't be subject to higher copayment or coinsurance rates if they receive out-of-network emergency care — but they should be aware of what actually qualifies as an emergency. 

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The same caution applies to the recent No Surprises Act that CMS put into action this year. Although the rule protects consumers from most balance bills, insurance companies can dictate what does and doesn’t qualify as emergency care and even necessary care.  

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POS and PPO plans offer your clients more flexibility in choosing their healthcare providers. With plans like these, coverage may still kick in even if your client sees an out-of-network provider. Keep in mind that in-network providers will be cheaper, and the flexibility to go out-of-network often comes at a higher cost. 

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Referral Requirements

Certain plan types, like HMOs and POSs, will also require your clients to get referrals from a primary care doctor before seeing a specialist or scheduling certain procedures. This can be beneficial for clients and their families, as they’ll have a doctor who is familiar with their medical needs and regularly updates their records.

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On the other hand, getting a referral can be seen as frustrating or time-consuming, and many people don’t like having to go through a primary care doctor just to see a specialist. With plan options like PPOs and EPOs, clients will have greater autonomy over who they can see and when. Again, this additional flexibility often comes at a higher cost. 

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Review Clients’ Personal Needs

Once your clients have an understanding of the plan options available to them, they’ll need to start narrowing them down. A useful starting point is to go over current and anticipated healthcare needs the client’s household will face in the next year or so. 

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Of course, not all needs can be predicted ahead of time. Carefully reviewing factors such as their medical history, their family medical history, present condition(s), and medication(s) needed, your clients can establish the must-have criteria they're looking for in a plan. 

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Review Clients' Network Needs

Regardless of the plan type selected, your client’s healthcare plan will have an established network of providers it's contracted with. It is always more cost-effective to stay in-network, but again, PPOs do provide some flexibility in capping out-of-network costs. 

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For some people, in-network restrictions can be a dealbreaker. If your client lives in a rural location where few or no local doctors are in-network, they’ll want to choose a different plan. 

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Furthermore, if they have a specific doctor they’d like to continue seeing, they’ll want to make a plan decision that ensures the provider they prefer is in-network. Some plans, typically PPOs, offer larger, national networks, too, which can be very convenient for clients who travel a lot or who have second homes in other states.

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Comparing the size and scope of plan networks is essential for your clients to consider when selecting their plan. They need to be aware of any limitations they’ll face in getting the services they need, as well as how much it may cost them if they go outside their plan’s in-network providers. 

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Consider the Costs

Once your clients are clear on the services they need and where they can get them, they can start comparing the costs of the plan options. But just like plan types, plan costs can be confusing. So let’s define the major costs on top of the monthly premiums your clients will be subject to paying:

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• Deductible: This is the amount your clients must pay on their own each year for medical services and medications before their insurance begins to pay for anything.
• Coinsurance: This is the percentage of medical costs your clients will be responsible for paying after meeting their deductible and before meeting their out-of-pocket maximum. 
• Copay: This is a flat fee your clients pay each time for a healthcare-related service like visiting a doctor or having a prescription filled. 
• Out-of-Pocket Costs: This is an umbrella term for the costs your clients must pay on top of their plan’s monthly premium. They include deductibles, coinsurance, and copays.

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Generally speaking, there’s an inverse relationship between monthly premiums and out-of-pocket costs. That is, the lower your plan’s premiums, the higher its out-of-pocket costs (and vice versa). This is why plans have different metal tiers: Bronze, Silver, Gold, and Platinum. With Bronze plans, premiums are lowest with out-of-pocket costs being the highest. The opposite is true for Platinum plans.

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As a general rule of thumb, if your clients anticipate high costs of care due to factors like expensive medications, managing a chronic illness, or an expected surgery, it can make more financial sense to go with a plan with a higher premium and lower deductible. If they’re healthy and rarely visit the doctor, higher out-of-pocket costs may be the way to go. 

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High Deductible Health Plans & Health Savings Accounts

It’s worth noting that all health plan types (PPOs, HMOs, EPOs, and POSs) can have high deductibles. If the deductible is high enough and the out-of-pocket maximums meet IRS requirements, your clients may be eligible for a Health Savings Account (HSA). 

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In 2022, the minimum deductible for a high-deductible health plan is $1,400 for an individual and $2,800 for a family. The corresponding out-of-pocket maximums are $7,050 for an individual and $14,100 for a family.

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HSAs can be a powerful tool in helping your clients save and pay for their medical expenses. Additionally, HSAs have numerous ancillary benefits that come into play once your clients reach age 59½. For instance, your clients can use their HSA savings as regular retirement income, or they can continue allowing their savings to grow tax-free to be used for medical costs as they age. You can read about the HSA’s huge tax advantages and other abilities here. 

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Introduce Healthcare Planning to Clients 

Choosing the right employer health insurance plan is a big part of your clients’ financial decisions. But as a financial expert, it can be difficult to provide them with accurate information on a subject as complex and ever-changing as healthcare. In the end, the savings and protections healthcare planning can provide are too valuable for you not to address. 

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We at Caribou see it as our responsibility to make understanding healthcare simple and seamless for financial advisors. Instead of feeling overwhelmed, you can feel confident about educating your clients on healthcare-related topics. If you want to learn more or are ready to introduce healthcare planning to your clients, click here to speak with our team. You can also learn more about the benefits of healthcare planning by reading the below case study about a Caribou client.

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