Navigating healthcare benefits after military service

I can remember it like it was yesterday: clocking in at USAA for the first day of my new civilian job — a mere 10 days removed from my last U.S. Air Force active-duty station. I was sitting at the computer to sign up for my new civilian benefits, reading terms like “deductible,” “PCA” and “FSA.” It seemed like a foreign language. If you don’t fully understand the financial impacts of these decisions, like I didn’t, then you aren’t alone.

As service members transition to civilian life, they’ll discover that civilian benefits are different from military benefits. Take time now to learn and be more prepared than I was. Here are some of the benefits you’ll likely see with health insurance after military separation.

Health insurance

Health Insurance can not only help you live a healthy life, but also help you avoid some of the financial problems that can be an unfortunate side effect of health issues. Medical expenses are a leading cause of bankruptcy in the United States, but health insurance can provide catastrophic financial protection.

With health insurance, you put some of your money aside and the health insurance company puts a lot more of their money at risk. Your employer probably even subsidizes some of the cost as a benefit of your employment.

When you have a medical emergency, if you're sick or if you need some form of medical care, health insurance takes some of the cost off your shoulders. It transfers some risk from us to the insurance company.

Learning all about health insurance may be like learning a new language. It may be beneficial to first get familiar with the basics. Check out our guide: Key health insurance terms and costs.

To better understand how health insurance works on the civilian side, let’s consider an example where a health insurance plan has the following components:

• Premium: $150 per month
• Deductible: $1,500 for an individual and $5,000 for a family
• Coinsurance: 90% for in-network providers and 10% after meeting deductible
• Out-of-pocket maximum: $3,500 per person or $8,500 for family

Let's say you’re single and need to visit the ER. Your hospital bill comes out to $8,000. How much will you pay?

If you haven’t had any out-of-pocket costs this plan year, you’ll pay your individual deductible of $1,500, and 10% of the rest of the bill up to the individual out-of-pocket maximum of $3,500.

Breakdown:

Deductible: $8,000 bill – $1,500 deductible = $6,500 remaining

Coinsurance: 10% of $6,500 = $650

You pay: $1,500 + $650 = $2,150

Insurance pays: $8,000 - $2,150 = $5,850

In this case, you used $5,850 of the insurance company’s money. Your individual deductible is now also met for the plan year. That  means if you later need other medical services, you’ll pay according to your plan’s coinsurance rate until you hit your out-of-pocket maximum.

Let’s say that several months later you go to the ER again and need surgery. The ER and surgery bill comes out to $20,000. You would pay 10% of the costs up to your individual out-of-pocket maximum of $3,500. You’re responsible for $1,350, and the rest is paid by your health insurance plan.

Breakdown:

Deductible: Already met

Coinsurance: 10% of $20,000 = $2,000 would be what you would pay. Remember, you have an out-of-pocket maximum of $3,500; therefore, you now focus on your remaining out-of-pocket maximum.

Your remaining out-of-pocket maximum: $1,350, which is $3,500 – $2,150 or what you paid for your previous care

What you pay: $1,350

Insurance pays: $20,000 - $1,350 = $18,650

In short, with insurance, you paid $3,500 for two health care visits that cost a combined $28,000. That’s the value of having insurance for medical care.

This is different from how TRICARE PRIME works, which is why military members need to learn it as we transition to civilian life. It’s also a reminder of two important lessons you should learn in civilian life: First, have money set aside in your emergency fund to cover your deductible. And second, shop around for health care.

When I was active duty and we needed a prescription, we went to the base pharmacy. I didn’t pay anything and didn’t need to shop around. However, it’s important to understand that civilian pharmacies — and doctors and hospitals — can charge different amounts for the same prescription or medical care.

I learned this lesson when I filled one prescription for my daughter, and it cost $40 at one pharmacy. I filled it again later that year at another pharmacy, and it only cost $7. An app like GoodRX can help analyze the cost of different prescriptions at different pharmacies.

Learn more about how to get health insurance when leaving the military. Also, as you are considering how to shop for health insurance, check out these 5 steps to find the health insurance that is right for you. If you’re moving from active duty to the Reserve or National Guard, read this article to help you make your decision between TRICARE Reserve select and civilian health insurance.

Dental insurance

Dental insurance is different from health insurance in that it’s more like a dental discount plan: You get the dental care you need but at a discount or a negotiated rate.

Some plans may work similarly to health insurance with deductibles, copays and an out-of-pocket maximum; however, they may be harder to find or more expensive than the dental discount style of plans.

Dental insurance will also have a specific named benefit or an amount that the plan will pay for things like braces. Anything above that amount will come out of your pocket. I’m experiencing this right now with my kids: My plan includes a $1,500 lifetime maximum for orthodontia. The rest of the cost of their braces is on me.

While we often talk about the limits, there are some important benefits. Dental insurance often covers the basics, like two cleanings and exams per year with dental X-rays. When I think of using these benefits, a famous saying comes to mind: “An ounce of prevention is worth a pound of cure.”

Of course, you can choose to not have dental insurance and pay the market rate your local dentist charges. That’s something you need to decide for yourself. For my family, each time open enrollment comes around, I run the numbers and each time, dental insurance wins out. However, your family might come to a different decision, so do the analysis for yourself.

Many employers offer discounted dental insurance to their employees. But if you’re considering getting a policy on your own, check out USAA’s dental insurance options.

Vision insurance

Vision insurance works much like dental insurance. Usually, your preventative care — an annual eye exam, for example — is covered, and you get an allotment that you can use for glasses or contacts.

My whole family wears glasses and contacts, so having vision insurance saves us money in the long run. That decision could be different for your family, so run the numbers for yourself. 

Staying within the allotment provided by your plan helps contain vision costs. I remember when my son first got his glasses, our vision insurance gave us $125 for frames. I went to the store and found the $125 price line and told my son he could have any frame in that row and the cheaper rows.

But what if you live in a sunny location and need something special like anti-glare coating? It might not be in the “standard” offering, but you might get it a discount with your insurance. Adding it to your glasses with your insurance might cost $40, but it might be $65 without.

Many of us will get discounted vision insurance through our employers. But if you’re considering getting a policy on your own, check out USAA’s vision insurance plans.

Want to learn more about dental and vision insurance? Check out this article devoted to how dental and vision insurance can keep your health and wealth protected.

Group life insurance

Group life insurance is a benefit offered by many employers and similar to Service Members Group Life Insurance, or SGLI. Just like SGLI, you can’t take it with you when you leave your employer. SGLI doesn't follow you to your civilian job, and group life insurance at one company won’t follow you to another.

It’s so important that we devoted an entire article to this topic. Check out Group life insurance: Understanding coverage and options.

Disability insurance

When I was active duty, if I were injured and couldn’t work, I would be put on a DD 689 or individual sick slip. All my benefits and pay continued until I felt better and could return to work, even if that meant months. It’s very different on the civilian side. If you’re sick or injured and can’t work, you could be facing a financial risk. Disability insurance can be your safety net.

There are two types of disability insurance. They’re based on how long you expect to be out of work: short-term and long-term disability.

Short-term disability is financial support when you’re expected to recover from an illness or injury in a short time frame. Long-term disability covers you in the event of a life-changing ailment or injury that’s going to prevent you from doing your job for a much longer period — or entirely. 

Your employer might offer disability insurance as part of its benefits package and also might offer additional insurance you can purchase. You can also buy your own private disability policy.

Both short- and long-term disability have different time periods before they kick in, called an 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 up 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 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. Additional disability insurance that can cover the gap might be something to consider. An emergency fund would also help cover your reduced income during this time.

Another key aspect of disability insurance to understand is this idea of “own-occupation” versus “any-occupation” policy. Basically, does my disability keep me from doing the exact job I was before the disability, or does it keep me from doing any job that is in line with my education or expertise?

Let’s look at this example to explain the difference:  

A surgeon is in a car accident. Their hands are shattered, and they’re unable to operate anymore. If they have an own-occupation policy, the policy will continue to pay out as long as they can’t be a surgeon.

However, what if they can do another job that is in line with their education or expertise? For example, the surgeon could teach at a medical school. An any-occupation policy would only pay out if they couldn’t work at all within a job that’s in line with their education or expertise.

Each policy type can vary, along with the elimination period, benefits schedule and qualifications. Review your insurance options with a professional, whether you’re getting health care coverage through your employer or directly through an insurance provider or broker.

As you can see, 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.