This is the third in a series in which Penn State Employee Benefits staff explain key concepts, terms and processes to help faculty and staff better understand and use their health benefits.
Previous articles: How does health care work? | Key terms to help with plan selection
Each November during the Employee Benefits Open Enrollment period, Penn State employees log into ESSIC in order to make changes to their benefits elections for the upcoming calendar year. Some will increase their life insurance or add Accidental Death and Dismemberment (AD&D), and many will renew or change their flexible spending account or health savings account contributions, but only a few will change their health plan election. There may be a number of reasons why someone stays with the same health plan year after year, but there is strong evidence that many stay with the same plan because they do not know enough about the individual plans to feel like they are able to make a well-informed decision.
While the two Penn State plans, the PPO Blue and the PPO Savings, share the same provider network and cover the same medical services, they differ in the way a plan member’s out-of-pocket expenses are structured (see article number two, Understanding your Benefits: Some Key Terms to Help with Plan Selection). Having an understanding of these expenses and how they relate to Penn State’s two plans can help in making the right health plan selections.
Following are some comparisons of the specific costs associated with the two Penn State plans:
Payroll Contribution: The health care payroll contribution for both plans is calculated as a percentage of the employee’s annual salary. For example, a non-Teamster employee who is enrolled in the PPO Blue plan contributes between 1.81 percent of salary (for an Individual plan) and 5.61 percent of salary (for a Family plan). Conversely, that same person’s payroll deduction for the PPO Savings plan would be 0.52 percent and 1.6 percent for an Individual and a Family plan respectively. Members of the Teamsters’ Union have different payroll contribution rates as per their contract. In addition, the health care payroll contribution is divided among four tiers: Individual, Two-Person (Employee and Spouse or Same-Sex Domestic Partner), Parent and Child/Children, and Family.
To see the premiums of all enrollment tiers for each plan, and for Teamsters and non-Teamsters, please go to http://ohr.psu.edu/benefits/insurance/health/ .
By comparing payroll deduction costs for the two plans, an employee can determine the annual cost of his or her portion of the premium for each plan. For example, an employee with an annual salary of $50,000 would pay a premium of $2,805 per year for family coverage if enrolled in the PPO Blue plan, or $800 per year if electing the PPO Savings plan.
Deductible: For both plans, the plan member pays the full cost of all medical care until the deductible for the plan year has been met. The medical expenses that count toward the deductible are calculated from the “allowed amount” of the provider’s charge, also referred to as the “discounted rate.” For members of the PPO Blue plan, the deductible is $250 for an employee with an Individual plan, $250/$375 for an employee with a Parent and Child/Children plan, and $250/$500 for an employee with a Family plan. The deductible for the latter two tiers can be described as follows: When the first person accrues $250 in allowable medical expenses during the plan year, that person’s deductible has been satisfied, and any remaining medical expenses for the first person will be covered at 90 percent. Any additional medical expenses accrued by other individuals on the plan will count toward the group’s total deductible, which is $375 for Parent/Child and $500 for Family. Once the entire group has reached the higher deductible listed, the deductible for that year has been satisfied.
The deductible for the PPO Savings plan is slightly different: For an employee with an Individual plan, the deductible is $1,300 per calendar year, and for an employee who enrolls in a Two-Person, Parent and Child/Children, or a Family plan, the deductible is $2,600.
Coinsurance: With both the PPO Blue and PPO Savings plans, once the deductible has been satisfied for the plan year, Penn State pays 90 percent of any of the remaining claims while the employee is responsible for the other 10 percent. The 10 percent of allowable medical expenses that the employee pays is called coinsurance. When a person’s co-insurance payments reach a certain pre-determined level, that employee has reached the out-of-pocket maximum for that year, and any remaining claims for that year are paid at 100 percent. The coinsurance out-of-pocket maximum for the PPO Blue plan is $1,000 for an Individual plan, $1,500 for Parent and Child/Children, and $2,000 for Family coverage. For the PPO Savings plan, the coinsurance out-of-pocket maximum is $3,000 for Individual coverage and $6,000 for Two-Person, Parent and Child/Children or Family. In addition, it is important to understand that any monies put toward the deductible do not count toward satisfying the out-of-pocket maximum.
Prescription Drug Plan: The prescription drug plan for both plans shares the same providers and covers the same medications, but the out-of-pocket expenses are different. Members of the PPO Savings plan pay the discounted rate for all prescription medications (along with any other medical care) until their deductible is reached. Once the deductible has been satisfied, the plan member pays 10 percent co-insurance on the discounted rate for any remaining medications.
The PPO Blue plan has a separate prescription drug payment schedule, which may be viewed at http://ohr.psu.edu/benefits/insurance/health/ppo-blue/prescription-coverage/ . Plan members pay a specified co-insurance rate for medications that are in different categories, such as generic, brand-name formulary, and brand-name non-formulary. In addition, co-insurance rates are different for retail pharmacy drugs (31-day supply or less) and those from a mail-order pharmacy (90-day supply). Out-of-pocket costs associated with prescription drugs do not count toward the plan deductible, but once any member reaches $1,000 in prescription drug co-insurance charges during a plan year, coverage is at 100 percent for that person up to the out-of-pocket maximum.
Co-payments: A co-payment is a fixed payment that a plan member pays each time that person receives medical care. Co-payments do not count toward the deductible, nor do they count toward that person’s co-insurance out-of-pocket maximum. While there are no co-payments associated with the PPO Savings plan, the PPO Blue plan does have co-payments associated with it. The co-payments vary with the type of provider used: The co-payment is $10 for a general office visit, $20 for a specialist visit, and $100 for an emergency room visit (if not admitted). The $10 co-payment is waived for Penn State employees and their insured dependents who visit a Centre County Hershey Medical Group Provider for a general office visit. To see a list of Hershey Medical Group providers in the University Park area, go to http://ohr.psu.edu/pshmg/.
Choosing a health plan is a highly individual matter. In determining which plan is best for them, a Penn State employees should take into account a variety of factors including his or her payroll contribution for each plan, as well as that person’s medical care utilization, health status and health risk factors, and willingness to “price shop” for medical care.