Healthy Options

By Tammy Flanagan

December 7, 2007

Well, this is it. If you're going to make changes to your federal health, dental and vision coverage, Monday's the deadline. That's when this year's open season ends.

For you procrastinators out there, here's a quick look at your options for one of the most important decisions you face: Choosing a health plan. Types of Plans

For an individual, it helps to simplify the health insurance decision by breaking it down to three basic choices:

Once you choose one of these basic styles, you'll have fewer than 10 available plans to pick from -- and some Federal Employees Health Benefits Program participants will only have two basic choices, because the HMO option isn't available everywhere.

The Office of Personnel Management Web site provides a good overview of your health plan choices.

Fee-for-Service Plans

If you decide that fee-for-service coverage is for you, then choosing a plan involves selecting between high- and low-option coverage and picking a plan within one of those categories that makes the most sense.

If you are likely to need hospital care, ongoing physical therapy, drug treatment or other kinds of chronic care, you most likely will want to look at the high-option health plans, which provide fuller coverage with higher premiums. If you need high-option coverage, compare the plan brochures for coverage on the type of care that you normally use. For example, if you use a lot of prescriptions, check out the plan's mail order drug program to learn about the deductibles and coverage for name brand and generic drugs. Look at the formulary for the type of drugs that you are using to make sure they are covered.

Then look at the premiums. Sometimes the least expensive plan offers all the coverage you are looking for. If you are in good health and do not have many recurring medical expenses, your best choice may be the standard or basic option. (Be careful, though. In some cases -- as in the Blue Cross Blue Shield example above -- "standard" is the name for the high-coverage option.) Mail Handlers is changing its plans this year by removing the high option and offering a standard option and a new value option. (Mail Handlers also offers a high-deductible health plan).

If you have Medicare or other health insurance, look at the plan brochure for coordinating this coverage. Many fee-for-service plans will waive most of your deductibles and co-payments when Medicare becomes your primary coverage (usually after you are 65 and retired). Since most fee-for-service plans waive out-of-pocket expenses when Medicare pays first, sometimes even individuals with chronic health problems may want to choose the lower option health plan.

If you have Medicare and decide to drop to a lower cost FEHBP plan, be sure to look at the prescription benefits. Medicare Parts A&B do not cover outpatient prescriptions. Medicare Part D offers many prescription drug choices, but is generally not necessary if you choose your FEHBP coverage by carefully reviewing the prescription benefits of your health plan.

Most FEHBP fee-for-service plans offer preferred provider organization arrangements. Health plans have lists of participating PPO doctors and facilities on their Web sites. Two advantages of using a PPO are that it reduces your out-of-pocket expenses, and that providers generally will file your claims for you. Read your plan's FEHBP brochure carefully to find out about other benefits.

OPM provides a direct link to fee-for-service plans nationwide, along with their rates for 2008.

Health Maintenance Organizations

Health maintenance organizations involve contracts between insurance companies and doctors (or other providers). Unlike traditional fee-for-service insurance, care provided in an HMO generally follows a set of guidelines provided through the HMO's network of providers. They contract with an HMO to receive patients and in return usually agree to provide services at a discount. This arrangement allows the HMO to charge lower monthly premiums.

HMOs also try to gain an advantage over other insurance plans by managing their patients' care and reducing unnecessary services. To achieve this, most HMOs require members to select a primary care physician -- a doctor who acts as a gatekeeper, authorizing referrals to specialists or other doctors if deemed necessary. (Emergency medical care does not require such authorization.)

HMOs also manage care through something called "utilization review." Under this approach, the HMO makes recommendations on the amount of services to be provided by each doctor or health care provider. The idea is to ensure that unnecessary treatments are not being prescribed and that preventive care is being offered. Costly forms of care, diagnosis or treatment may not be covered. Experimental treatments and elective services that are not medically necessary are almost never covered.

Here are some advantages to HMOs:

Disadvantages to HMOs include:

Some HMO plans offer "open access," meaning that you won't need a referral to see a specialist and you can go outside of the plan network and receive benefits. Using the network doctors and providers will always save money, but sometimes you may wish to go outside of the network even though you may incur a higher out-of-pocket expense.

To find out if you have an HMO available in your area, enter your ZIP code into this OPM search tool.

High-Deductible Health Plans

Still new on the FEHBP scene, high-deductible health plans are intended to cover serious injury or illness and include benefits for preventive care. With the exception of such care, the plan deductible must be met before benefits are paid. The deductibles are high: $1,500-$2,000 for self-only coverage and $3,000-$5,000 for family. The maximum in-network out-of-pocket limits for this type of coverage are as much as $5,000 for self-only plans and $10,000 for self and family plans.

Here are some reasons why you might choose an HDHP plan:

Here are some potential downsides to the HDHP approach:

For more information, see the HDHP section of OPM's Web site.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

By Tammy Flanagan

December 7, 2007