Choosing a Healthcare Plan - Dealing With Debt

This entry is part 3 of 4 in the series Guide to Employee Benefits

Making the Right Call for Your Health (and Wallet)

Your new job offers health benefits—congrats! But now you’re staring at acronyms, charts, and confusing terminology. PPO? HMO? HDHP? HSA or FSA?

Don’t worry. With a little clarity, you can confidently choose a plan that fits your health and your wallet. Let’s walk through what all this means—and how to choose wisely based on your own needs.

How Employer Healthcare Plans Work

An employer-sponsored healthcare plan is a group insurance policy your company offers. Because it’s “group rated,” it usually costs less than if you were to buy coverage on your own. Employers typically split the cost of the monthly premium with you.

Who Pays for What: Understanding the Premium Split

The premium is the monthly amount paid to keep your health insurance active. Employers usually pay a portion of the premium for you as a benefit. The portion good employers usually pay ranges from 70% to 80% of the cost of the premium. Employers consider this part of your total compensation. You pay the rest via payroll deduction.

Example:

Total monthly premium: $600
Employer pays 75% = $450
You pay 25% = $150

That $150 comes out of your paycheck pre-taxed every pay period. So, if you get paid twice a month, you’ll notice $75 being deducted each pay period for health insurance premium. But there are other costs beyond the premium to consider.

Understanding Deductibles, Copays, and Out-of-Pocket Maximums

Deductible: The amount you pay out-of-pocket each year before your insurance starts sharing the cost. You have choices and can choose a low deductible plan or a high deductible plan.
Copay: A flat fee you pay for services like doctor visits or prescriptions.
Coinsurance: Until you have met a 100% of your deductible, your insurer will pay 0% of your healthcare costs. After meeting your deductible, your insurer usually shares the cost with you at a defined percentage. That is called Coinsurance and is the percentage of the cost you are responsible for after meeting your deductible (e.g., 20% of a hospital bill).
Out-of-pocket maximum: The ceiling on what you’ll pay in total for covered care in a year. Once you hit it, insurance pays 100%.

HMO vs. PPO vs. HDHP: Comparing Plan Types

Type	Cost	Flexibility	Referrals?	Best For
HMO	Lower	Low flexibility	Yes	People who want lower costs and don’t mind using a set network
PPO	Higher	High flexibility	No	People who want choice of providers or see specialists often
HDHP	Lowest	Moderate	No	Healthy people who want to save on premiums and use an HSA

What Are HSAs and FSAs?

HSA (Health Savings Account) is a special savings account that you can put money into tax-free. A safety net used to pay health expenses. Some key characteristics:

Only available with an HDHP
Pre-tax contributions (lower your taxable income)
Tax-free growth and withdrawals for qualified (health) expenses
Unused money rolls over forever
Funds can be invested, like a retirement account

Why it exists: To help people with high-deductible plans manage healthcare costs and save tax-efficiently for future medical needs.

FSA (Flexible Spending Account)

Available with most employer plans (not just HDHPs)
Funded with pre-tax dollars
Covers qualified health expenses (copays, prescriptions, etc.)
Use-it-or-lose-it: Must be used within the plan year (some exceptions apply)

Why it exists: To help employees reduce taxes by setting aside pre-tax dollars for expected medical or dependent care expenses.

Preston’s Tips: Matching the Plan to Your Life

This is where your personal situation matters. Here’s how to choose wisely:

Tip 1: Look at the Whole Cost Picture

If your employer covers 80% or more of your premium, consider choosing richer benefits (like a PPO) if you or a family member uses healthcare frequently.

Example: A PPO costing you $150/month with employer paying $600 equals $7,200 in annual value. That’s meaningful.

Tip 2: Are You Healthy—or Health-Care Active?

Relatively healthy?
Rarely go to the doctor, few prescriptions?
→ HDHP + HSA could be a smart strategy.

Chronic condition (e.g., Type 1 diabetes)?
Frequent doctor visits, prescription meds, labs?
→ PPO or HMO with low copays/deductible may save money and stress.

Young kids or a growing family?
Expect ER visits, pediatricians, and urgent care.
→ Favor PPO for flexibility and provider options.

High medical use (e.g., ongoing cancer care, dialysis)?
→ Prioritize low deductible, low out-of-pocket max, and broad network access.

Tip 3: Leverage the HSA as a Financial Tool

Healthy and on a HDHP? Use the HSA not just for expenses, but as a long-term savings vehicle. Unused funds roll over year after year and grow tax-free—it’s a powerful wealth-building tool for healthcare.

Tip 4: Use FSAs Smartly

If you’re on a traditional plan, FSAs can reduce your taxable income and help cover recurring medical expenses. Plan ahead—only set aside what you’re confident you’ll spend each plan year to avoid forfeiting funds.

Final Thought

Choosing your healthcare plan is about more than just insurance—it’s about peace of mind, cost control, and smart planning for your unique health needs.

Take the time to:

Consider your medical usage patterns
Estimate your annual healthcare costs
Evaluate employer contributions and benefit tools (like HSAs or FSAs)
Ask questions if you’re unsure

At Dealing With Debt, we help people make confident, informed choices that lead to more stability—financially, emotionally, and physically. We’re here to reduce stress, build confidence, and create a stronger future—one benefit decision at a time.

Next Up: “401(k) Contributions: Your Future Self Will Thank You”