Choosing a health insurance plan
during open enrollment

The open enrollment period for your health insurance plan comes once every year, usually during the fall. The corresponding paperwork typically generates as much enthusiasm as your yearly tax forms. But don't be tempted to just put a checkmark next to your current plan. With so many insurers and employers raising health insurance premiums and scaling back benefits, you need to know how your health plan stacks up against any others offered to you at work.

After all, you're stuck with your decision for another year. For example, if you don't know that your plan is reducing coverage for your brand-name prescription allergy drug, you'll be in for a bad surprise when the pharmacist asks you to hand over $180 for 100 tablets rather than your usual $25 co-payment. You won't be able to go back to your benefits administrator and ask to switch to a plan that will pay for your prescription.

The following information will help you make the best decision during the open enrollment process.

What types of changes can I make to my health insurance plan during open enrollment?

If you're not currently enrolled in a health insurance plan, you may enroll at this time. If you are enrolled, you may switch plans (if this an option), correct inaccurate information, or add eligible dependents, such as a spouse and children not previously covered.

It depends on your situation. If you're young and healthy, you can go for lower premiums and higher co-pays and gamble that you won't visit the doctor much. But if you're older, have a chronic health condition, or have young children who make frequent visits to the doctor, you're better off with higher premiums and lower co-pays. You also have to weigh the value of your health insurance plan versus price. If you go with a cheap health plan but it doesn't pay for the benefits you need, you are not getting good value for your health insurance dollars.

A lifetime benefit maximum is a cap on the amount of benefits available to a policyholder. The cap is designed to keep the cost of benefits affordable and to stabilize potential future costs. Many health plans cap lifetime benefits at $1 million. The better the benefits, the higher the premium. A health plan with a high deductible and a low lifetime maximum benefit is typically less expensive than a low-deductible plan without any maximum-benefit limits.

If a plan has a relatively low lifetime maximum cap, think carefully about how much risk you're willing to assume. Even if you're healthy, the expenses incurred from one severe illness — including hospitalization and physical therapy — could easily exceed a $100,000 cap.

Can I switch health plans without undergoing medical screening for pre-existing conditions?

Yes. This is the one time a year (unless you experience a "qualifying event," such as getting married or the birth of a baby) during which you may make changes to your plan without having to sit out any pre-existing condition exclusion period. Otherwise, late enrollees in group health plans may have to wait up to 18 months for coverage of pre-existing conditions. Read about the HIPAA law: Your rights to health insurance portability.

What's better, an HMO, POS or PPO? And what are they?

There are several health plan varieties, including traditional indemnity fee-for-service plans (FFS), health maintenance organizations (HMOs), point of service plans (POS), and preferred provider organizations (PPO). Each plan has its own features to consider before making your choice.

HMOs are the least expensive, but also the least flexible of all the health insurance plans. They require that you select a primary care physician (PCP) and obtain pre-authorizations before seeing a specialist, going to the hospital (except in emergencies) or having certain medical procedures. POS plans are more flexible than HMOs, but they also require you to select a PCP.

PPOs give policyholders a financial incentive — in the form of reasonable co-payments — to stay within the group's network of practitioners, but you can usually visit out-of-network specialists without pre-approval.

What is a drug formulary and what are pharmacy benefit tiers?

A formulary is the list of medications for which a health insurance plan pays. Most health plans that pay for prescription drug benefits have pharmacy benefit tiers that group certain medications together for pricing purposes. Brand-name drugs that are usually in the top tier are the most expensive, while generic medications are in the lower tiers and are the least expensive. Your prescription drug co-pay for a medication in the lowest tier may range from $5 to $10, while your co-pay for drugs in the highest tier may range from $25 to $50. Most health plans have three or four pharmacy benefit tiers, but some have several tiers.

What are FSAs?

A flexible spending account, or FSA, is a benefit plan that allows companies to give their workers the opportunity to pay for their out-of-pocket health and dependent care costs on a pre-tax basis that — over time — lowers payroll-related taxes for both the employer and employees.

There are also health savings accounts (HSA). Typically a high deductible health plan is paired with a health savings account. After you meet your deductible, there are no co-pays for doctors or prescriptions. This is where you can open a tax-deductible savings account for additional medical expenses and, if you don't take out money for medical expenses, you can earn interest on the account. But keep in mind that if you take out money for nonmedical expenses before age 65, you will be taxed with a 10 percent penalty.

How can I judge the quality of competing health insurance plans?

For those who have a choice of health plans, the most important factors are usually price and whether the family's doctors participate in the plan's network (if there is a network). However, there are other criteria to use.

Accreditation groups, such as the National Committee for Quality Assurance, measure plans using a variety of quality standards. Ratings companies, such as Standard and Poor's, A.M. Best and Moody's, give you a picture of a health insurer's financial strength. "Report cards" published by consumer groups, independent Web sites, and your state insurance department are good sources of consumer-satisfaction ratings. Here's how to judge the quality of a health plan.

Who can help me if I have questions?

Your human resources director or benefits administrator at work, and/or insurance company customer service departments, can answer most of your questions.

What about life insurance through work?

Your open enrollment period is also your opportunity to add group life insurance to your benefits. Group life is the cheapest way to secure life insurance coverage, but because you can't take it with you if you leave or lose your job, it's best to view group life insurance as supplement coverage to life insurance that you buy on your own.