How to Choose Your Health Insurance Plan

What’s your budget?

Chances are, you want the best bang for your buck regardless of your needs and budget. So when picking a plan, ask yourself the following questions:

• Would I rather pay higher monthly premiums in exchange for lower costs when receiving healthcare?

• Would I prefer lower monthly premiums and higher out-of-pocket costs when receiving healthcare?

The monthly premium is the minimum cost you can expect to pay for insurance. The premium does not count toward your deductible or out-of-pocket maximum, but ensures that your coverage remains active. In the event of a lapse in payment, you may experience an interruption in coverage. So it’s important to keep up with your health plan payments.

If you have few health concerns and predict needing only basic care, it might make the most sense to choose the plan with the lowest monthly costs. If you have a chronic health condition and visit a healthcare professional frequently, it might make more sense to choose a plan with a higher monthly cost. You’ll be spending more to have insurance, but you’ll then spend less on visits and services.

If you choose a plan with lower monthly costs and make a medical appointment, you can generally expect to pay a copay or set dollar amount at the time of your visit. You may be billed later for the balance of charges after your insurance has covered their portion of the costs. 

In other cases, you may be responsible for coinsurance, which is a percentage of the total cost of the visit. This may be processed before or after your appointment. 

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Lastly, if you have a high-deductible health plan (HDHP), you are typically required to pay the full price upfront for covered medical services (except preventive care) until you meet your deductible.

What major life events are you anticipating?

Considering your upcoming life events as you choose your insurance will help ensure all your needs are covered.

Start by asking yourself questions like:

• Will you be aging out of your parents’ insurance soon?

• Do you have kids or are you thinking about starting a family?

• Are you moving to a new state?

• Do you expect any changes in employment?

• Do you plan to retire soon? 

• Will your income make you eligible for premium subsidies through an Affordable Care Act (ACA) health insurance marketplace?

Health insurance when you turn 26

Per the ACA, young adults may remain on a parent’s health insurance until they turn 26 (and longer in some states). If you are aging out of parental coverage soon, it’s important to think ahead so you’ll know how to access a new health plan. Here are a few questions to consider: 

• Do you have a job that offers health insurance?

• Will you need to look into an ACA marketplace plan? 

• What health plans do you qualify for based on your income? 

If you see a certain healthcare professional or have specific medications covered under a parent’s plan, you’ll want to look into alternatives that have similar benefits and a coverage network that includes the doctors and hospitals you prefer. You could also consider an HDHP. This can be a lower-cost option with an affordable premium that can meet your basic health needs and cover preventive care without meeting the deductible.

Insurance for pregnancy and family planning needs

If you are in the process of family planning, it’s helpful to compare coverage for different services, including: 

• Fertility care

• Prenatal care

• Labor and delivery

• Postnatal services

• Inpatient services 

Picking a plan with a lower deductible or out-of-pocket maximum might make sense. That’s because your insurance will pay more of your care costs sooner. Once again, paying higher monthly premiums upfront means paying less for services later.

Another important note for any parent is that not only will your children have health coverage through your medical plan, but basic pediatric dental and vision care for your little ones is typically covered.

Insurance for young adults

If you are young and healthy, or on a budget, an HDHP may be a good choice. These options are often referred to as catastrophic plans, since you must meet the high deductible before your insurance will cover any services (other than preventive care).

If you have an HDHP, you can also take advantage of the following benefits to save money: 

• Contribute money to a health savings account (HSA).

• Become a member of a direct primary care practice.

• Get discounts on prescription medications using GoodRx.

And in most states, as mentioned earlier, you can also remain on a parent’s plan until at least age 26, which can help reduce your costs for coverage.

Moving to a new state

If you are moving to a new state, you might want to consider a preferred provider organization plan (described in more detail below). This health insurance option allows you to easily access care in a new location. You can use search tools provided by your insurance company to see in-network healthcare professionals and facilities in various states. 

Moving is considered a qualifying life event, which means you can adjust your coverage outside of the open enrollment period. If you do have a region-exclusive plan, you’ll be able to select new coverage upon establishing residency.

Health insurance in retirement (Medicare)

Most people ages 65 and older join Medicare. It’s a good idea to make a list of your ongoing healthcare needs before you retire. This will help you make an informed decision and choose the best options when you decide to enroll in Medicare.

Insurance for married couples or domestic partners

If you’re getting married soon or have a domestic partner, you’ll have to figure out how insurance will work for both of you. You could have separate coverage, or you could decide which of your plans offers the best benefits at the best price for family coverage.

Changing jobs

When you change jobs, your new employer’s health insurance options may or may not offer comparable benefits and networks as your old one. If you have a gap in coverage while switching jobs, you can continue health insurance through COBRA (explained more later) or a short-term policy during that time.

Surgery

You should carefully review your plan’s summary of benefits and coverage. This will help you determine how much of the cost of your procedure is likely to be covered. You’re much more likely to meet your deductible if you’re anticipating surgery or a hospital stay. Comparing plans to project how much you’ll be expected to pay out of pocket for a particular procedure can help you choose the best fit.

Prescription medications

If you have certain prescriptions, you’ll want to check the formularies associated with the plans you’re considering. Formularies often base your cost-sharing on tiers. The following items are usually on higher tiers, and therefore will cost you more out of pocket:

• Brand medications

• Newer medications

• Medications for rare conditions

Specialists and preferred healthcare professionals

If you have a medical condition that requires visits with specialists, you need to make sure your services will be covered. This is one situation where choosing a plan with a specific network type (see section below for more details) can make the most sense for your needs. 

With an HMO, for example, you’ll need to see your primary care physician and get a referral before your insurance will cover any costs associated with seeing a specialist. This adds another layer to the process of seeking healthcare, and you will likely have fewer choices for both general doctors and specialists. 

With a PPO, you can go directly to a specialist and typically have a wider range of available physicians and other healthcare professionals in your area. It’s important to check what doctors and facilities are in-network and see if and how those visits will be covered.

Preventive care and preexisting conditions

Not all insurance plans cover preventive care services at 100% for preexisting conditions. However, any plan that follows the ACA guidelines — and most do — will cover all preexisting conditions. That means your health will not impact your eligibility or premium costs.

Some plans do not have to follow ACA guidelines. These include short-term (temporary) health plans and grandfathered plans sold on or before March 23, 2010.

HMOs

When you get your healthcare through an HMO, it basically means that you must always see a primary care physician first. They will then refer you to other specialists to receive the care you need.

Here’s how an HMO works:

• Cost-efficient: They have fewer healthcare professionals in-network and no out-of-network benefits, with the exception of emergency services. 

• Special contract agreements: Your healthcare professionals work in facilities specific to your insurance company and are contracted solely with that company.

• Provider network: Finding healthcare professionals through an HMO is straightforward because options are limited. This is one way you realize savings.

• Location: HMOs are also more geographically limited. So if you were to see a doctor out of state while on vacation, your insurance might not cover this as the care would be considered out of network.

PPOs

PPOs have larger healthcare networks and provide out-of-network coverage. This means there are more covered healthcare professionals and facilities available to you. Here are some other features of a PPO plan: 

• Higher monthly premiums: You can expect to pay more for PPO premiums than you would for HMO premiums. 

• Nationwide, direct network: You’ll have the option to see healthcare professionals and facilities nationwide, and can go directly to a specialist. A primary care physician’s referral is not required. 

• Lower network coverage costs: In-network coverage will cost you less out of pocket. 

If you’re looking for more freedom and options when it comes to care, and you’re willing to pay more for it, a PPO may be right for you.

EPOs

Exclusive provider organization (EPO) plans are less common and offered by fewer insurance companies. EPOs typically provide more flexibility than HMOs, but cost less than PPOs. An EPO functions as a hybrid of an HMO and PPO. For instance, they don’t have out-of-network coverage, but you don’t need a referral to see a specialist.

POS

Point of service (POS) plans are a similar hybrid. These plans often (but not always) require a referral to see a specialist, but provide out-of-network benefits. However, going with in-network doctors will still cost you less.

You can use a plan’s search tools to narrow down your options of covered healthcare professionals and facilities. This will help you see which are in-network and how close they are to you.

Individually purchased insurance

You can purchase family and individual plans from an ACA marketplace or directly through an insurance broker. The marketplaces — also called exchanges — were established by the ACA to make affordable health insurance available to more people. 

Some states choose to run their own marketplace, while others use the federal one, which is accessed through HealthCare.gov.

Employer-sponsored insurance and COBRA

Many Americans receive health insurance through their employer. If your employer offers coverage, they may also pay for some or all of the cost of your premiums. You may also have several different plan options from which to choose.

If your job status changes and you lose your employer-sponsored health insurance, COBRA can help you continue your coverage with the same health plan. COBRA health insurance allows people to keep the plan that was offered by their former employer, but typically comes at a much higher premium — often because you are now paying the full cost.

Medicare

Medicare is a federal health insurance program available to people who are 65 or older. Younger people with permanent kidney failure, long-term disabilities, or amyotrophic lateral sclerosis (ALS) may also qualify for Medicare.

There are several different parts of Medicare. Each covers a different aspect of your healthcare: 

• Part A is considered original Medicare and covers hospital and inpatient care, such as skilled nursing and hospice.

• Part B is also considered original Medicare and covers outpatient care such as doctor visits.

• Part C is Medicare Advantage. These private plans replace Part A and Part B, have some hearing, vision, and dental benefits not included in original Medicare, and typically include prescription coverage.

• Part D provides prescription drug coverage for people with original Medicare and those whose Medicare Advantage plans don’t cover prescriptions.

Medicaid

Medicaid is a government insurance program that provides health coverage to families and individuals with low incomes. While the federal government sets certain guidelines, states have the flexibility to administer the program. Therefore, the Medicaid program can vary widely by state.

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