Editor’s Note: This article is a part of a series on investing advice for recent college graduates, drawing on expertise from financial professionals, university faculty and of course, InvestorPlace’s very own analysts and writers. Today’s article on navigating first job health insurance comes courtesy of Marshall Staton, Director of Human Resources at Aeroflow Healthcare, a premier provider of durable medical equipment (DME). Read more “Money Moves for Recent Grads” here and check out Top Grad Stocks 2021 for our best stocks to buy for new graduates.
Young professionals entering the workforce are often uninformed when it comes to understanding employer provided benefits, which can cause them to make expensive yet easily avoidable mistakes when it comes to choosing health insurance. These costly mistakes inevitably lead to feelings of financial uncertainty and overall unhappiness.
In fact, a recent 2021 survey from Voya financial found that 33% of employees don’t understand the benefits they are personally enrolled in. And if we’re just talking about Millennials and other young workers, that number jumps to a whopping 54%.
That’s right: more than half of young professionals are paying money for insurance they don’t understand.
Employees’ health insurance literacy can also directly impact their productivity and the relationships they have with their employers. And as recent graduates begin their careers, those first few working relationships are imperative to their professional growth and financial stability.
To ensure a seamless transition from new graduate to working professional, let’s outline some guidelines graduates can use to navigate their employer provided benefits.
Understanding the Terminology
One of the most important steps graduates can take before walking into an employer benefits office is to clear any confusion about the glossary’s worth of terms used when discussing health insurance options. These terms include:
- Copay: The fixed price an employee must pay before receiving a given service.
- Premium: The amount an employee pays for health insurance each month.
- Deductible: The amount an employee pays for healthcare before insurance starts to pay.
- Coinsurance: The percentage of a covered health service that an employee pays after paying their deductible.
- Out-of-Pocket Maximum: The most you’ll ever spend on out-of-pocket medical expenses in a given plan year.
It’s important to understand the definition of each of these terms, their relationship with each other and their role in their associated healthcare costs, especially if choosing from different tiers of insurance. While a high-deductible, lower premium plan that covers routine doctors’ appointments may be preferred by recent graduates, those with preexisting health conditions may want to consider a plan with a higher premium and a lower deductible to ensure better coverage for doctor visits, medications and procedures.
What Kind of Plan Best Fits Your Healthcare Needs?
Typically used to receiving coverage from their parents’ health plans, new graduates often know little about the inner workings of the American healthcare system. It’s rarely as simple as making an appointment and showing up on time — there are factors to consider when finding providers and seemingly complex financial options like health savings accounts (HSAs) to understand.
One way graduates can stay educated and avoid any surprise medical expenses is by choosing doctors that are in-network and covered by their company’s plan. Beyond considerations around insurance when choosing a doctor, it is important to consider additional criteria, like their specific expertise and location, to ensure all of your needs are met. Young employees can often find in-network doctors through helpful search tools offered by their insurance provider.
One caveat young employees should be aware of is that just because a facility is in-network does not mean that every employee in that facility is in-network. In some cases, patients are treated by out-of-network doctors at in-network hospitals, only discovering after treatment that they have been billed at out-of-network rates. To avoid confusion and unexpected fees, ask each doctor you see whether they are in-network before receiving treatment.
Different Plans Have Different Financial Models
With insurance costs on the rise and coverage policies often changing, it’s crucial to understand how these payment models impact the amount a graduate will pay out of pocket, both for the plan as a whole and for any treatment or medications.
After mastering how to find services covered by insurance near them and learning their health insurance terminology, employees may graduate to options like a health savings account (HSA), a tax-advantaged account that lets employees invest money for future medical expenses that may not be covered by their health plans. HSAs must be paired with a high-deductible health plan (HDHP) and while these plans are typically great choices for healthy individuals who don’t go to the doctor often, an HDHP may not be the best option if you’re expecting large medical bills in a particular year. Although premiums are lower, it could be difficult to afford the deductible for a costly procedure, even with money in an HSA.
Particularly during the pandemic and all of the health challenges it has created, graduates will want a health insurance plan that brings them peace of mind. Health insurance can seem complex and intimidating, especially for young employees who are navigating it for the first time. To stay productive and begin your career on the right foot, don’t overlook your employee benefits and proactively work to make the most of your health insurance.