Navigating healthcare benefits after military service

Understanding health insurance after military separation

As service members transition to civilian life, they'll discover that civilian benefits are different from military benefits. Instead of TRICARE, you'll need to compare your options for health insurance after military separation and consider things like deductibles, Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs).

If you're leaving the military, take the time now to get familiar with civilian benefits so you know what to expect.

Health insurance: Protecting your health and finances

Health insurance helps you stay healthy with often offering low cost or free preventive benefits and also helps protect you from high medical costs.

Medical bills are a major cause of financial problems, even bankruptcy, in the United States. Health insurance can act as a financial safety net if you have a serious illness or injury. While health insurance can also be expensive, employers often help pay for some of the cost by offering health insurance as part of your benefits package.

At the basic level, health insurance works by sharing risk. Instead of paying the full cost of medical care yourself, the insurance company covers a significant part when the conditions of your plan are met.

Understanding health insurance can be like learning a new language. Here's a breakdown of common terms:

• Premium: The monthly payment you make to have health insurance coverage.
• Deductible: The amount you pay out-of-pocket for medical expenses before your insurance starts to pay.
• Coinsurance: The percentage of medical costs you share with the insurance company after you've met your deductible.
• Out-of-pocket maximum: The most you'll have to pay for covered medical expenses in a year. After you reach this amount, the insurance company pays 100% of covered costs.

To make sure you get the coverage you need, get familiar with the basics of health insurance.

How health insurance works

To better understand how health insurance works, let’s look at an example using a health insurance plan with the following terms:

• Premium: $150 per month or $1,800 yearly
• Deductible: $1,500
• Coinsurance: 10%
• Out-of-pocket maximum: $3,500

Let’s say that you have a medical emergency and your hospital bill totals $8,000. Let’s also assume you this is your first medical expense of the year. Here's how much you’ll pay for your hospital visit:

• You pay the $1,500 deductible.
• You pay 10% of the remaining $6,500 ($8,000 - $1,500), which is $650.
• Your total cost is $2,150 ($1,500 + $650). The insurance company pays the rest.

Later in the year, you need surgery, and the bill comes to $20,000. Since you've already met your deductible, you only pay coinsurance, or 10%, until you reach your out-of-pocket maximum of $3,500. But since you already paid $2,150 toward your out-of-pocket maximum with your first hospital visit, you’ll pay $1,350 for this surgery.

This is the value of having insurance. When you add up the premiums you paid for the year and your out-of-pocket expenses, or $1,800 + $3,500, you have paid $5,300 for health care bills totaling $28,000 (your $8,000 ER visit and your $20,000 surgery).

Choosing a health insurance plan

In the military, you don’t need to worry about shopping around for insurance because you have access to TRICARE. But as a civilian, it’s important to find the right coverage for you and your family by exploring different policies. If you’re moving from active duty to the Reserve or National Guard, you’ll need to decide between TRICARE Reserve Select and civilian health insurance.

Dental and vision insurance: Taking care of your teeth and eyes

Dental insurance often works like a discount plan. It helps lower the cost of dental care, such as cleanings and braces. Many employers offer discounted dental insurance to their employees. But if you’re considering getting a policy on your own, check your options.    

Vision insurance is similar, often covering eye exams and providing an allowance for glasses or contacts. Many employers also offer discounted vision insurance to employees, but you can also get a policy on your own. You may be able to save by shopping around.

Not sure you really need dental or vision insurance? You could pay the market rate for services like teeth cleanings or eye exams out of pocket, but dental and vision insurance help make preventative care more affordable.

Life insurance: Protecting your loved ones

Many employers offer group life insurance, similar to SGLI. It provides a payment to your beneficiaries if you pass away. However, just like you lose SGLI when you leave the military, if you leave your civilian job you’ll also likely lose your employer-sponsored group life insurance.

Disability insurance: Income protection when you can't work

If you’re injured on active duty, your benefits and pay continue until you’ve recovered and can return to work. But it does not work this way as a civilian. Disability insurance can provide financial support you need while you recover.

Short-term disability covers you for a limited time, while long-term disability provides coverage for more extended periods. Your employer might offer disability insurance, or you can purchase your own policy.

There are two main types of disability insurance policies: "own-occupation" and "any-occupation." An own-occupation policy pays benefits if you can't perform your specific job, while an any-occupation policy only pays if you can't work in any job.

Both short- and long-term disability have different time periods before they kick in, known as the elimination period, and can pay different amounts of your salary. For example, your employer might offer short-term disability with the following benefits:

• Week 1: You must use your saved vacation days.
• Weeks 2 to 6: You get 100% of your salary.
• Weeks 7 to 10: You get 80% of your salary.
• Weeks 11 to 26: You get two-thirds of your salary.
• After 26 weeks: Long-term disability benefits kick in and pay 60% of your salary.

Benefits are scaled the longer the disability period lasts, in part to incentivize your return to work and reduce the risk of fraudulent claims.

The bottom line

Civilian benefits are different from what you experienced in the military. But making a successful transition to civilian life is about knowing what you need and understanding what options are available. Take time to understand the ins and outs of your policies, and make sure you know how much you're financially on the hook for and what financial benefit each policy gives you. Then, make the decision based on what’s best for you and what provides protection for your financial situation.