The Lawyer's Guide to Health Insurance

The end of the year is usually the beginning of open enrollment for employer benefits. This guide explains common insurance types lawyers will see — HMO, PPO, and POS — along with the different costs of insurance like premiums, deductibles, coinsurance, and copayments, plus considerations around FSAs and HSAs. Making medical insurance choices without this understanding can leave lawyers without adequate protection or paying too much for too much insurance.

Without your health, you have no wealth. Health care costs are the number one cause of personal bankruptcy — one 2007 study found 62% of all bankruptcies were medical expense related, and surprisingly, 75% of those medical debtors had health insurance. Still, uninsured Americans were about twice as likely to file for medical bankruptcy as insured ones. Due to their high career earning potential, lawyers have even more wealth to lose from medical expenses.

Types of medical insurance

HMO (Health Maintenance Organization): Only covers in-network care (except emergencies). Requires a primary care doctor as a gatekeeper for referrals to specialists. Typically the least expensive option, best for lawyers who stay in one geographic area.

PPO (Preferred Provider Organization): The most flexible plan type. No gatekeeper — you can see any in-network or out-of-network provider (with a higher cost for out-of-network). Best for lawyers who value flexibility in choosing their doctors.

POS (Point of Service): A hybrid of HMO and PPO. Still requires a primary care gatekeeper and referrals, but insurance will still pay for out-of-network referrals that come from that gatekeeper.

Cost considerations

Premium: the monthly cost to keep insurance active — doesn't count toward service costs.

Deductible: the amount you pay out of pocket before insurance starts paying. A higher deductible means a lower monthly premium. This resets every year.

Copayment: a fixed fee paid at the time of service (e.g., $30 for a primary care visit), usually not counted toward the deductible.

Coinsurance: a percentage of costs you pay after meeting your deductible — for example, a $1,000 deductible plus 10% coinsurance on a $2,000 surgery means paying $1,100 total.

Out-of-pocket maximum: the most you'll pay in a year across deductible, copayments, and coinsurance combined (premiums don't count toward this).

HSA (Health Savings Account)

Only available with High Deductible Health Plans (HDHP — in 2021, an individual deductible above $1,400). The HSA is valuable for three reasons: contributions are investable and grow like a 401(k) or IRA, many employers offer a match, and it is the only triple tax-advantaged account in the U.S. — contributions are pre-tax, growth is tax-deferred, and qualified withdrawals are tax-free. You can open an HSA even if your HDHP doesn't offer one directly, but you cannot open one without an HDHP.

FSA (Flexible Spending Account)

Lets you set aside pre-tax money (up to $2,750 in 2021) for medical expenses, but funds are "use-it-or-lose-it" by year-end, unless your employer offers a grace period (2.5 months) or a small carryover (up to $550). FSAs work best for lawyers with predictable medical expenses, like ongoing prescriptions.

Choosing the right coverage

Every lawyer's ideal plan is different, but keep in mind: it is too risky to go without health insurance; keep enough in your emergency fund to cover at least the deductible, ideally the full out-of-pocket maximum; avoid an HMO if seeing specialists without a referral matters to you; verify a plan covers any specific medication or procedure you need; and many young, healthy lawyers benefit from contributing to and investing in an HSA, especially with an employer match.

Choosing an employer health care plan is rarely easy, and many lawyers don't have access to a second opinion when deciding. Developing Financial offers an employer benefit analysis covering all benefit options, including health care.