Graduating from college is an exciting experience. It's the one of the first times one feels like a real adult. No longer are they living within the shadow of their parents, or under the watchful eye of their university. Now, they can make their own decisions.
And choosing a healthcare plan is a big one. Picking a health insurance option can be overwhelming and complicated without the right information, especially if their parents have always taken control of their medical expenses. Well, we have that info. Here are a few things new grads need to look for so they don't start off adulthood on the wrong foot.
Look beyond the premiums
When you're examining your healthcare options, the first number you'll notice is the premium or the monthly payment. The premium is what you pay for having health insurance, but it's just the starting figure. Here's what else you should look at:
- Copay: This is how much you'll pay upfront when you visit the doctor's office.
- Coinsurance: This number shows what percentage of the bill will be your responsibility. This will be charged instead of or in addition to the copay.
- Deductible: The deductible is how much you'll pay by yourself before insurance kicks in 100%. You could have a deductible and a copay or coinsurance post-deductible.
- Out-of-pocket max: The out-of-pocket max is the most you'll pay in one year.
Grads also need to know how to pick the right doctor or hospital ahead of time. Every insurance plan comes with its own list of acceptable doctors and not every physician will be in the network. Some insurance plans, like HMOs, don't even cover out-of-network visits. That can turn a $50 appointment into a $500 burden.
Consider a high-deductible health plan
For most college graduates, this will be the first time they've had to pick a health care plan, previously relying on their parents. In the sea of health insurance jargon, it may be tempting to pick the cheapest plan. Fortunately, that's often the best choice.
Recent grads are mostly healthy which means they don't need an insurance plan that costs more than their student loans. To save the most money, they should consider a high-deductible insurance plan which will have the lowest premiums.
Because a 22-year old likely doesn't have the arthritis or blood pressure issues that a 50-year old does, they can afford to sign up for the cheaper plan. When they need to visit a doctor, they'll pay more, but the cost will even out over the course of a year.
A high-deductible plan also lets them contribute money to a health savings account (HSA). Contributions to an HSA are tax-deductible which will reduce how much they owe in taxes. Plus, HSA funds roll over from year to year, making it a rainy day fund for health problems.
This strategy only works if you're truly healthy. If you have a chronic health condition, like type 1 diabetes, you should probably go with a low-deductible plan.
Don't avoid picking one
It's easy to get overwhelmed when surrounded by pamphlets and employee handbooks. But don't procrastinate. Open enrollment for healthcare only lasts for a couple months after which it's too late to pick a plan. Plus, under the Affordable Care Act, you'll pay a steep penalty if you don't have health insurance. Talk to your HR rep if you're confused about your options.