How to Choose Health Insurance: A Quick Financial Guide
When it comes to choosing health insurance, the range of options out there (and their potential costs) can seem like a tall mountain to climb – all the more so if it’s one of your first times.
Medical insurance is too important for your health and your pocketbook to skip checking out which plan is the best fit for you.
Even if you have chosen health insurance before, it never hurts to brush up on the basics. With the specifics of many plans changing from year to year, make sure that what you are choosing for coverage suits your current situation.
Given its place as a major line item in most budgets, choosing the appropriate policy – at the right price point – can be one of the most significant decisions (and investments) we make with our money each year.
Here's a quick guide to follow as you shop for health insurance.
- Mark Your Calendar
Most people with health insurance are covered by policies arranged by employers. Look out for open enrollment - usually late in the calendar year - for your chance to make policy changes without penalties.
Those without employer-provided coverage shop for insurance through state or federal insurance marketplaces set up by the Affordable Care Act (ACA). In 2020, the period to purchase coverage from ACA exchanges at HealthCare.gov is November 1 to December 15.
Find Your Match
Today, health insurance companies in the U.S. offer more choices than ever. Generally, the differences between health plans come down to:
- How much you will pay each month (premium)
- How much you will pay before your policy kicks in (deductible)
- The choices of doctors and health systems you can see (“in-network”)
- Whether you or your primary doctor chooses your specialists
Get What You Pay For
Like with any purchase, being cost-conscious is smart and saving money where you can is just common sense. Still, when it comes to buying health insurance, the least expensive option may not be the best for your health needs.
Buying health insurance starts with asking yourself a handful of key questions: How much can you afford to pay each month? How often do you expect to go to the doctor? Do you want to keep your preferred physician, no matter what?
For example, healthy young people are generally considered good candidates for high-deductible health plans (HDHP) that have lower monthly premiums; the higher costs associated with these plans do not kick in for policyholders who rarely visit a doctor.
- Anticipating your costs and health needs will point you toward a plan that fits your budget, while offering the best options and protections for those covered.
- Tip: It may help to calculate your health costs from the recent past to get a ballpark idea for the year ahead.
- Where you live can be a consideration: Some plans may be more attractive in rural or more populous areas.
If you have a question - especially if something is confusing - reach out to the help desks offered on ACA exchanges and by nonprofits that help people with insurance questions.
You may have heard that an ounce of prevention is worth a pound of cure. A little bit of research in choosing your health plan is worth the peace of mind of knowing it will work as expected.
“Given its place as a major line item in most budgets, choosing the appropriate policy – at the right price point – can be one of the most significant decisions (and investments) we make with our money each year.”
Insurance is your protection from the potentially high costs of extended hospital stays, surgeries and tests. Know what yours is made of.
Be sure to take advantage of any services included in the cost of your plan, such as a yearly checkup or certain age-related screenings. Stay on top of these offerings, which can change from year to year.
All plans offered on ACA exchanges must provide at least 10 basic benefits, including prenatal and newborn care, emergency services, and prescription drugs.
Keep your eye out for these key aspects of policies you’re considering.
Summary of benefits. These snapshots of each plan’s costs and coverage make it easy to comparison shop. Quickly, you can focus on which plans to examine in more detail – and which to eliminate from contention.
Provider network. It's easy to see which health professionals and facilities are in each policy’s network through searchable online directories.
Prescriptions. If you take medications, check how they're covered by your new plan. Prices for drugs can vary widely, depending on the policy; some plans could require the purchase of generic brands or require scripts to be filled by mail in 90-day supplies.
Dental and vision. Most policies in the U.S. do not include dental or vision coverage. These plans can be purchased through a separate provider or as a supplemental add-on to your current policy.
Speak the Language
The more familiar you are with the terms you will encounter, the more comfortable you will feel picking a policy - and using it well.
Premium. This is the monthly cost for your plan. Generally, a lower premium will come with a higher deductible.
Deductible. This is the amount you will pay for medical services before your insurer starts to chip in. Once you've "met the deductible", your policy may still require you to contribute to bills through coinsurance and copays.
Health Savings Account (HSA) - If you choose with HDHP, you may be eligible to open an HSA. This special account allows you to save earnings tax-free to pay for medical expenses - usually with a debit card.
Flexible Spending Account (FSA) - Available only through employer plans, these accounts are similar to HSAs; yet, unlike an HSA, only a limited amount of funds can roll over to the next year.
Copay. This is the cost you pay each time you visit a doctor, receive care or fill a prescription. Copays do not count toward your deductible.
Coinsurance. This is the percentage you must pay toward medical bills after your deductible has been met.
Alphabet soup. There are many types of insurance policies, such as HMO, PPO, EPO and others; each type offers a different structure of costs and care. It's easy to get hung up on terminology. Focus on how each specific policy - not its type, per se - may best fit your health needs.
Health and Wealth
No matter your age or level of prior experience purchasing a policy, keep in mind that taking care of your health should be supportive of your financial wellness – not the opposite.
With a little prep and planning, you will be well prepared for choosing a cost-effective plan that serves all covered by your policy. Here’s to your health – and a safe year ahead.