Ep 28: What Is English For "Health Insurance Options"?
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In this episode, we discuss the various health insurance options available during open enrollment.
We break down all the different insurance plans - including PPO, HMO, EPO, and HDHP plans.
We discuss the differences in premiums and coverage and the benefits of flexible spending accounts (FSA) and health savings accounts (HSA).
The conversation also touches on the implications of Medicare for those over 65 and considerations for ex-pats and retirees living abroad who are considering the HSA plan.
It's important to check with your provider about using the HSAs abroad.
It's essential to consider your length of stay in the US when choosing an HSA.
The speakers' views and opinions discussed in this episode should not be considered financial, tax, or legal advice. Consult your advisor for any legal, cross-border tax, and financial advice.
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Speaker 1 (00:06):
Welcome to the International Money Cafe Podcast, the show where we filter out the noise on cross-border taxes, finances, and life in the us. I'm your host, Jen Hams, certified financial planner, founder and owner of elgon Financial Advisors,
Speaker 2 (00:21):
And I'm your host, man, Nadi, enrolled agent, owner and founder of Amman Tax and Business Services. Join us on this journey as we explore the unique challenges faced by inbound outbound families and businesses on taxes, compliance, and financial planning. Let's get to the show.
Open Enrollment: Health Insurance Options
Speaker 1 (00:43):
It's open enrollment time, which means it is time for you to sign up for benefits for the upcoming year. And one of the questions that Melissa and I constantly get is we have all these different health insurance options. What do we sign up for? What do we select? How do we think about them? So welcome to a new episode of the International Money Cafe podcast, where in 10 minutes or less, we'll take a context in the cross-border space and walk you through exactly what that means.
Three Types of Health Insurance Plans
Speaker 2 (01:21):
Yes. So starting off, there are three major types of health insurance plans. One is the PPO, the HMO, and the EPO. So let's break that down. PPO stands for Preferred provider organization. HMO is the health maintenance organization, and the EPO is exclusive provider organization. So, do you want to help break that down for us further?
PPO (Preferred Provider Organization)
Speaker 1 (01:57):
Absolutely. And what I'll do, I'll rearrange them a little bit because the question of premiums comes up all the time, and I'm going to start with the highest in terms of premium, going all the way down to the lowest good idea. So the PPO right is the most expensive when it comes to premiums. The main differences, or what differentiates this plan is it has a network of doctors or healthcare providers that you can actually use at a sudden rate. You can go in and out of network, but it will cost you a little bit more, but you are able to, so you really do have more flexibility. You can go to any doctor without a referral from your primary doctor. And so if you want flexibility in your healthcare plan and you need to see lots of doctors who may be out of network or you need to see certain specialists, this may be the plan for you.
EPO
Speaker 1 (02:58):
Okay. The E-P-O-P-O, I love what you said. It's exclusive provider organization, and of course when you hear the word exclusive, you think, oh, is that going to be more? Actually, it's a little bit less. It only covers in network care, but the networks are a lot larger. This is ideal for somebody who travels a lot. So let's say Mary travels to a bunch of restaurants or offices and she has something like asthma or something where she may need to see a doctor at any point. This might be the plan for her.
HMO
Okay. The last one, H-M-O-H-M-O has a group of doctors that you can see for a very specific payment, which allows it to keep rates lower for everybody, hence the lower premiums. But you need your PCP, your primary care physician to make a referral and you cannot be covered out of network. So if you're going to be out of network with this, you may need to find or consider a different program.
Speaker 1 (04:07):
So what I typically tell people is if you have fewer medical needs, you don't need to see a lot of specialists, but you do want to keep your PCP look at the plan and make sure that your PCP is in the program. And then if there are, you can go ahead and sign up for that. Okay. There's another one. Actually, before I talk about that. There's one special feature of the three of them.
FSA (Flexible Spending Account)
The PPO, the HMO, the EPO, this is the flexible spending account. A flexible spending account allows you to cover, let's say, out of whatever the insurance company does not cover for you in 2024, the marks that you can put into the flexible spending account is 3,200. The beauty about this is it's not subject to fed social security or Medicare tax, but it's a use it or lose it kind of account. Some companies will give you three months or so to use the money, or if there's anything left, we always have the emphasis or that you can actually use for that. Do you want to talk about the next one, mana?
HSA
Speaker 2 (05:24):
Yes. Yes. So the one that I like is the HSA for very obvious reasons. Again, the HSA is kind of connected to another plan. Let's talk about that one first. It's called the HDHP. Now the HDHP stands for high deductible Health plan, and that can be A PPO or HMO or EPO. The features of it are that there is a higher deductible, so therefore there is a lower premium and that is beneficial because it has an HS a or a help savings account. Now, the HDHP slash HSA would be good for you. If you were, let's say you were single relatively healthy and did not have to go to see a doctor a lot, then this could be a good plan for you. It may not be a good option if you have young kids and they're in school, and so you may have to go to a doctor a lot.
Biggest Advantage of HSA
Speaker 2 (06:35):
But the biggest advantage of an HSA or a health savings account is that you can contribute money into it, which is tax deductible. In fact, even better is it comes with a feature that's called a triple tax benefit. So what's a triple tax benefit is that the contributions are tax deductible. The distributions are tax free if used for qualified medical expenses, and the growth in this fund is tax free, so it can grow tax free, and you don't lose it if you don't use it. Unlike an FSA plan, the contribution limits to the HSA are if you are single, it's 4,150, and if you are contributing for a family plan, it's 8,300 for 2024. At this time, we do have the 2025 numbers, which are 4,300 if you are single and 8,550. If you are contributing to a family plan, you do get a thousand dollars additional in catch-up contributions if you are over 50 years old.
Eligibility for Medicare
Speaker 2 (08:00):
So an employer may also be able to contribute to the HSA, but the max is still capped at these numbers that we just talked about. And another thing with the HSA is when you turn 65, so basically when you turn 65, you will be eligible for Medicare. Now, if you do not apply for Medicare, then you can continue to contribute to an HSA as long as you have an HSA eligible plan. But if you do get on Medicare part one, then you do need to stop contributing to the HSA. I know Jay, that there was something about medical expenses with the HSA after you turned 65, right?
Speaker 1 (08:54):
Yeah. So what I was going to say is the interesting one that you mentioned about 65 is on paper you are right, you can continue contributing, but people really should sign up for Medicaid part A when they get to 65, which is why really at 65, even though you still have access to it, you probably, as you pointed out, want to stop. But yeah, once you get to 65 and you've signed up for Medicare, you can't contribute anymore. You can use the HSA for other expenses that may not be medical, but you have to pay taxes and not pay the penalty because before 65, if you use the HSA for anything that's not medical expenses, you end up paying taxes on the growth as well as the 20% penalty for using that account.
Speaker 2 (09:50):
Exactly. One other thing though, I forgot to mention, is for the contributions you can contribute into the HSA all the way up to your tax filing deadline, right?
Speaker 1 (10:02):
Oh yeah. Yes,
Speaker 2 (10:03):
Yes, yes.
Speaker 1 (10:05):
Which is fantastic. Yes. So there's also something else when you're doing the HSA, remember I talked about the FSA, the flexible spending account, there's what's called a limited purpose FSA, which you can use if you have an HSA. And for this mainly you'd use it for something like dental or vision expenses. And so what I'll say to people is if you're going to do the HSA, you're probably better off maxing out the HSA. You have the high deductible. You can't use the limited purpose for high deductible, so it may be worth just putting your money into something else. Now, the other thing I wanted to point out is, although we are up on time, if you're on our work visa, we do have these constant discussions about should I be doing the HSA or not? And what it comes down to is how long are you going to be in the US If you're going to be here, let's say 10 years, and we are able to make use of it and it fits your situation, why not?
Speaker 1 (11:10):
But the bigger question is, when you go back to your home country, how's your home country going to tax you? If there are no benefits to it, if you're going to tax you punitively that we may consider keeping it. But again, this is a discussion that we need to have based on your specific situation. And then of course, if you're retiring abroad, we know for example, if you are overseas, you can not use Medicare. You have to come back to the US to use it. There are limited cases where you may be able to use the HSA, but usually the best thing is check with your provider before you attempt to use the account. Anything else you want to add or should we go ahead and conclude because we are up to 12 minutes?
Speaker 2 (11:55):
Yes. Let's go ahead and conclude. And dear listener, remember, it is going to be open enrollment season soon. So if you benefited from this episode or you think that somebody will also benefit from this episode, please feel free to share this with them. And please go check out our website. We have a handy dandy free download for you about staying compliant with your foreign assets. And as always, thank you for listening. Bye.
Speaker 3 (12:29):
Thank you for listening to the International Money Cafe podcast. The content is for informational and educational purposes only, and should not be used as a substitute for professional advice. Seek the advice of your qualified service provider with any questions you may have regarding your cross order finances and tax needs.