Health insurance is a very important issue that all of us should consider. Most of us don’t take necessary actions to ensure we have the proper health insurance protection for ourselves and our loved ones. After an overview of the importance of selecting the right health plan, you can learn about 5 steps to choose the health insurance policy that works for you.
Step 1: Choose your health plan marketplace
The majority of people who have health insurance do so through their employer. If you fall into this category, you will not need to use the government’s insurance exchanges or marketplaces. In essence, your company is your market.
If your employer provides health insurance and you want to look for another plan in the exchanges, you can. However, plans on the market are likely to be much more expensive. This is because most employers pay a portion of their employees’ insurance premiums, and the plans have lower average total premiums.
If your job doesn’t provide health insurance, shop on your state’s public marketplace, if available, or the federal marketplace to find the lowest premiums. Start by going to HealthCare.gov and entering your ZIP code during open enrollment. You’ll be sent to your state’s exchange if there is one. Otherwise, you’ll use the federal marketplace.
You can also buy health insurance directly from an insurer or through a private exchange. You will not be eligible for premium tax credits, which are income-based discounts on your monthly premiums, if you choose these options.
Step 2: Compare types of health insurance plans
While shopping, you’ll come across some alphabet soup; the most common types of health insurance policies are HMOs, PPOs, EPOs, or POS plans. The type you select will influence your out-of-pocket costs and the doctors you can see.
When comparing plans, look for a benefit summary. Online marketplaces typically include a link to the summary as well as the price near the plan’s title. A provider directory listing the doctors and clinics in the plan’s network should also be available. If you’re going through your employer, request a summary of benefits from your workplace benefits administrator.
Comparing health insurance plans: HMO vs. PPO vs. EPO vs. POS
|Plan type||Do you have to stay in network to get coverage?||Do procedures & specialists require a referral?||Snapshot:|
|HMO: health maintenance organization||Yes, except for emergencies.||Yes, typically.||Lower out-of-pocket costs and a primary care physician who coordinates your care, but less freedom to choose providers.|
|PPO: preferred provider organization||No, but in-network care is less expensive.||No.||There are more provider options and no referrals required, but the out-of-pocket costs are higher.|
|EPO: exclusive provider organization||Yes, except for emergencies.||No, typically.||Lower out-of-pocket costs and usually no required referrals, but less freedom to choose providers.|
|POS: point of service plan||No, but in-network care is less expensive.||Yes.||More provider options and a primary care physician who coordinates your care, with referrals required.|
When comparing different plans, consider your family’s medical needs. Consider the amount and type of treatment you’ve previously received. Though no medical expense can be predicted, being aware of trends can help you make an informed decision.
If you choose an HMO or POS plan that requires referrals, you must usually see a primary care physician first before scheduling a procedure or seeing a specialist. Many people prefer other plans because of this requirement. However, due to the restrictions, HMOs are generally the least expensive type of health plan.
If you don’t mind your primary doctor selecting specialists for you, POS and HMO plans may be better. One advantage is that you will have less work to do because your doctor’s staff will coordinate visits and handle medical records. If you decide to go out of network with a POS plan, make sure to get a referral from your doctor ahead of time to reduce out-of-pocket costs.
If you prefer to select your own specialists, you might prefer a PPO or an EPO. An EPO may help you keep costs low if you can find providers in the network; this is more likely in a larger metro area. If you live in a remote or rural area with limited access to doctors and care, a PPO may be preferable, as you may be forced to go outside of the network.
What about an HDHP with a health savings account?
A high-deductible health plan can be any of the above types — HMO, PPO, EPO, or POS — but must follow certain rules to be “HSA-eligible.” These HDHPs typically have lower premiums, but you pay more out-of-pocket expenses, particularly at first. They are the only plans that allow you to open an HSA, a tax-advantaged account that you can use to pay for health-care expenses. If you’re interested in this arrangement, make sure you understand HSAs and HDHPs first.
Step 3: Compare health plan networks
When you visit an in-network doctor, your costs are lower because insurance companies negotiate lower rates with in-network providers. When you go out of network, the doctors’ rates aren’t set, and you’re usually on the hook for a larger portion of the bill.
If you have preferred doctors and want to continue seeing them, make sure they are listed in the provider directories for the plan you are considering. You can also directly ask your doctors if they participate in a specific health plan.
If you don’t have a favorite doctor, look for a plan with a large network to give you more options. A larger network is especially important if you live in a rural area, as you are more likely to find a local doctor who accepts your insurance.
If possible, eliminate any plans that do not have local in-network doctors and those that have very few provider options in comparison to other plans.
Step 4: Compare out-of-pocket costs
Out-of-pocket expenses are nearly as important as network costs. The summary of benefits for any plan should clearly state how much you will have to pay out of pocket for services. The federal marketplace website, as well as many state marketplaces, provide snapshots of these costs for comparison.
This is where knowing a few health insurance vocabulary words comes in handy. As a consumer, you are responsible for the deductible, copayments, and coinsurance. The total amount you can spend out of pocket in a year is limited, and it is also listed in your plan information. The lower your premium, in general, the higher your out-of-pocket costs.
The goal of this step is to narrow down options based on out-of-pocket expenses. A plan that pays a higher percentage of your medical costs but has higher monthly premiums may be preferable if:
- You see a primary care physician or a specialist on a regular basis.
- You frequently require emergency treatment.
- You regularly take expensive or brand-name medications.
- You are expecting, planning to have, or have small children.
- You are about to undergo surgery.
- You’ve been diagnosed with a long-term illness, such as diabetes or cancer.
A plan with higher deductibles and lower monthly premiums may be the better option if:
- You simply cannot afford the higher monthly premiums for a plan with lower out-of-pocket expenses.
- You’re in good health and don’t need to see a doctor very often.
Step 5: Compare benefits
You’ve probably narrowed your options down to a few. Return to the summary of benefits and see if any of the plans cover a broader range of services. Some people may have better coverage for physical therapy, fertility treatments, or mental health care, while others may have better emergency coverage.
If you skip this quick but important step, you may miss out on a much better plan for you and your family.
Once you’ve narrowed your options down to two, it’s time to answer any remaining questions. In some cases, only speaking with a person will suffice, so contact the plans’ customer service lines. Prepare your questions in advance, and keep a pen or computer nearby to record the answers.
Here are some questions you could ask:
- I take a specific medication. How does this plan address that?
- Which medications for my condition are covered by this plan?
- What maternity services are available?
- What if I get sick while traveling abroad?
- How do I begin signing up, and what documents will I require?
A final tip: Don’t forget to discontinue your old plan, if you have one, before the new one starts.
Checklist: Choosing a health insurance plan
Here’s a quick summary of the steps above:
- Go to your marketplace and compare your plan options.
- Determine whether an HMO, PPO, EPO, or POS plan is best for you and your family, as well as whether you want an HSA-eligible plan.
- Plans that exclude your doctor or any local doctors from the provider network should be avoided.
- Choose whether you want more health coverage with higher premiums or lower premiums with higher out-of-pocket costs.
- Make certain that any plan you select will cover your regular and necessary care, such as prescriptions and specialists.
Health insurance can be a complicated topic. There are many factors to consider when choosing the right plan for you and your needs, and it can seem difficult to navigate all of the information out there. If you follow these steps, you’ll greatly increase your chances of choosing the right health insurance plan for you, but don’t forget that it’s always worth talking to an expert about which option will work best for your specific situation.