Key takeaways:
It’s important to assess your healthcare needs to determine the best health insurance plan for you and your family.
There are many health plan options available, including health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point of service (POS) plans.
Understanding the details of each plan— including the deductible, copayments, and coinsurance — can help ensure you get the best coverage for you and your family.
The basics
Choosing the right health insurance plan can be confusing and overwhelming. There’s no shortage of companies, plans, and networks to evaluate and consider. And there’s no universal “best” plan. Everyone has different needs when it comes to medical care, which means that the best plan for you is the one that meets your unique situation.
Some of the most important questions to ask when choosing health insurance include:
What is my current financial situation?
What are my future financial responsibilities or goals?
Am I expecting any major life changes in the next year, such as having a baby, getting married, or retiring?
Do I have a chronic condition or health concern that requires medical specialists or prescription medications?
Search and compare options
How you answer each of these questions will determine how you should start narrowing down your health coverage options.
In this guide, we’ll walk you through everything you should consider as you begin the process of choosing a health insurance plan. You can jump to the information most relevant to you by using the table of contents navigation.
What factors should I consider when choosing health insurance?
Below are four factors you should consider when deciding on a health plan:
Budget
Life events
Medical needs
Network type
What’s your budget?
Chances are, you want the best bang for your buck regardless of what your needs and budget are. 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 bare minimum cost you can expect to pay for insurance. The premium does not count towards 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 a lapse in coverage — so it’s important to keep up with your health plan payments.
Read more like this
Explore these related articles, suggested for readers like you.
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 your provider frequently, it might make more sense to choose a plan with a higher monthly cost since you know you’ll be using more coverage to receive care and will 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 at the time of your visit. You may be billed later for any additional services administered after your insurance has covered their portion of costs. This could include:
Testing
X-rays
Procedures
In other cases, you may be responsible for coinsurance, which is a portion of the total cost visit. This may be processed before or after you see a provider.
Lastly, if you have a high-deductible health plan (HDHP), you may be required to pay the full price upfront for any medical services until you meet your deductible.
What major life events are you anticipating?
Considering your upcoming life events as you choose your insurance will help you make sure 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 qualify you for subsidies through the health insurance marketplace?
Health insurance when you turn 26
Per the Affordable Care Act (ACA), young adults may remain on their parents’ health insurance until they turn 26. If you are aging out of insurance 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 a health insurance marketplace plan?
What health plans do you qualify for based on your income?
If you see a certain provider or have specific medications covered under your parents’ plan, you’ll want to look into plans that cover the same things or have the same network coverage. If you don’t, then consider a high-deductible health plan. This can be a lower-cost option that can meet your basic health needs.
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
Postnatal service
Delivery services
Inpatient services
Picking a plan with a lower deductible or out-of-pocket maximum can make sense because your insurance will pay more of your provider 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 will also be covered.
In addition, most health plans only charge monthly premiums for the first three children under the age of 21 or 19, depending on the carrier. This means if you have four or more kids on the plan, your monthly premium costs will effectively be capped.
Insurance for young adults
If you are young and healthy, or on a budget, a HDHP may be a good choice. It can provide a lower-cost option that can still give you peace of mind while meeting your basic health needs. These are often referred to as “catastrophic plans,” since you must meet the high deductible before your insurance will cover any services.
If you have an HDHP, you can 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 network.
Get discounts on prescription drugs using GoodRx.
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 provider search tools provided by your insurance company to see who’s in your care network.
Moving is considered a qualifying life event, which means you can adjust your coverage outside the open enrollment period. If you do choose a region-exclusive plan, you’ll be able to select new coverage upon establishing residency.
Health insurance in retirement (Medicare)
If you’re 65 or older and retiring soon, you may be able to sign up for 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
If you are getting married soon, you’ll have to figure out how insurance will work for both you and your partner. You could each have separate coverage, or you could decide which of your plans offers the best coverage at the best price.
Changing jobs
When you change jobs, your new employer’s health insurance options may or may not have comparable benefits and networks as your old one’s.
If you have a gap in coverage while switching jobs, you can continue health insurance through COBRA (explained below) or a short-term policy during that time.
What are your current medical needs?
As you choose a new insurance plan, it’s important to consider your current healthcare needs. If you plan for the care you know you’ll need, you’ll be able to select a plan that offers optimal coverage based on your budget.
Start by asking yourself questions like:
Do you need to have a certain procedure done within the next year, such as surgery?
Do you have existing prescriptions for medications that you’d like covered?
Do you have a medical condition that requires frequent visits to the doctor or hospital?
Do you need to see specialists regularly?
Do you have a pre-existing condition or think you might need preventive care?
Surgery
You should carefully review your plan’s summary of benefits and coverage. This will help you determine cost and plan selection, and 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 can help you choose the best fit.
Prescription medications
If you have certain prescriptions you’ll need to fill, you’ll want to check the formularies associated with your drug plan. 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 rarer conditions
Specialists
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 self-refer to a specialist and typically have a wider range of available providers in your area. In addition, if you have specific providers you want to continue care with, this is another great opportunity to check what providers are in-network and see if those visits will be covered.
Preventive care and pre-existing conditions
Not all insurance plans cover preventive care services at 100% or pre-existing conditions. Preventive care includes things like screenings, check-ups, and shots. Pre-existing conditions are health conditions you had before your health coverage started.
However, any plan that follows Affordable Care Act (ACA) guidelines will cover all pre-existing conditions. That means your health will not impact your eligibility or premium costs. So you may want to consider a more comprehensive plan if you need the following:
A specialist to treat a chronic condition
Expensive medications
Routine healthcare visits
Some plans do not have to follow ACA guidelines. These include short-term (temporary) health plans and grandfathered plans sold before March 23, 2010.
What network type is best for your needs?
When choosing health insurance, you have to consider the type of insurance network you sign up for. The most common network types are health maintenance organizations (HMOs) and preferred provider organizations (PPOs). Less common plan types include exclusive provider organizations (EPOs) and point of service (POS) plans.
Here are some of the characteristics of each plan.
HMOs
When you get your healthcare through an HMO, it basically means that you must see a primary care physician first who will refer you to other specialists to receive the care you need.
Here’s how an HMO works:
Cost-efficient: They have smaller provider networks and no out-of-network benefits, with the exception of emergency services.
Special contract agreements: Your providers all work in facilities specific to your insurance company and are contracted solely with that company.
Network of providers: Finding providers through an HMO is straightforward since there is generally a more limited range of options — this is where the savings comes in.
Central location: HMOs are also more geographically limited to your home location. So if you were to see a doctor, say, out of state on vacation, your insurance wouldn’t cover it since that would be considered out of network.
PPOs
PPOs have larger provider networks and out-of-network coverage, meaning there are more providers you can see in more locations. Here are some other features of a PPO plan:
Higher monthly premiums: You can expect to pay more in premiums for a PPO than an HMO health plan.
Nationwide network of providers: You’ll have the option to see providers nationwide, and can self-refer to a specialist, meaning no doctor’s referral is 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, a PPO may be right for you.
EPOs
Exclusive provider networks (EPO) are less common and offered by carriers such as UnitedHealthcare and Anthem. EPOs typically provide more flexibility than HMOs, but cost less than PPOs. They function as a sort of hybrid of an HMO and PPO. They have no out-of-network coverage, but you do not need a referral to see a specialist.
POSs
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. POS plans also sometimes have two in-network options: a smaller in-network and a larger in-network.
You can use insurance companies’ provider search tools to narrow down your options. This will help you see which providers are in-network and how close they are to you.
Regardless of which network you choose, any services deemed as an “emergency” anywhere in the U.S., as well as internationally, will always be treated as in-network. So if you’re on an HMO or EPO, you'll still be covered if the unexpected happens while you’re away from home.
When to enroll
No matter what coverage type you select, you will have a specific time period to enroll. This is called open enrollment.
During open enrollment, you will be able to do the following:
Select the health plan that best meets your needs.
Change your health plan option.
Renew your plan for the upcoming year.
Open enrollment typically runs from November through January, depending on your health plan and state. This is when you’ll select your health plan for the following year.
If you experience a qualifying life event, you’ll be able to adjust your insurance coverage outside of the open enrollment period.
If you start a new job that offers health insurance, you’ll have a period of time after your start date to enroll in a new plan.
How to sign up for health insurance
Knowing what to look for as you choose your health insurance plan is one thing. Figuring out how to get it is another. Here are some of the options you can explore:
Purchase a plan directly through the health insurance marketplace.
Receive coverage through an employer.
Enroll in Medicare.
Find out if you qualify for Medicaid.
Here’s a brief look at each of those choices.
Individually purchased insurance
You can purchase family and individual plans directly through the health insurance marketplaces. These marketplaces — also called “exchanges” — were established by the Affordable Care Act to make affordable health insurance available to more people.
Some states choose to run their own marketplace, while others run on 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 cover some or all of the cost of your premiums. They may also give you several different plan options to choose from.
If your job status changes and you lose your employer-sponsored health insurance, you can continue your coverage with the same health plan through the Consolidated Omnibus Budget Reconciliation Act, commonly referred to as COBRA. COBRA allows people to pay a higher premium to keep their original plan.
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 healthcare benefits through Medicare.
There are several different parts of Medicare. Each covers a different aspect of your healthcare:
Medicare Part A: covers inpatient, skilled nurse, and hospice care
Medicare Part B: covers outpatient doctor visits and care
Medicare Part C (Medicare Advantage): allows you to enroll in private plan options that offer benefits not available through original Medicare
Medicare Part D: provides prescription drug coverage
Medicaid
Medicaid is a government insurance program that provides health coverage to low-income families and individuals. While the federal government sets certain guidelines, states have the flexibility to administer the program. Therefore, the Medicaid program can vary widely by state.
The bottom line
When choosing a health insurance plan, it’s important to compare your options. Ask questions and seek guidance when needed. Keep in mind that the best plan for you is the one that meets your individual healthcare needs and budget.
Why trust our experts?
References
Center on Budget and Policy Priorities. (2020). Policy basics: Introduction to Medicaid.
HealthCare.gov. (n.d.). Grandfathered health plan.
HealthCare.gov. (n.d.). People under 30.
HealthCare.gov. (n.d.). The marketplace in your state.
