10 Things to Know Before You Pick a Health Insurance Plan

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In 2020, 91.4% of Americans had health care coverage for some or all of the year, leaving 8.6%, or 28 million people, without coverage, according to the U.S. Census Bureau. If you're thinking about getting insured or switching coverage, choosing a plan is an important decision because it will influence the doctors you can see and your out-of-pocket costs.

How Do I Choose the Best Health Insurance Plan?

Deciding on the best health insurance plan can feel complicated because there are so many factors to consider and tons of fine print to read. To help you choose the right policy, we've outlined 10 things to do while comparing options.

  1. Make a Health Plan for the Coming Year
  2. First, consider your past and expected health needs. Think of each doctor visit or prescription need you had recently or will have again. Also, consider whether you will need surgery or dental work, or plan to have a child. With these medical needs in mind, you can estimate the cost of plans that provide adequate coverage so you can make better comparisons.

  3. Review the Total Cost of Each Plan
  4. When comparing health insurance costs, people tend to focus on the premium alone. Premiums are the amount you pay each month or annually for insurance—but they don't illustrate every factor that goes into a plan's value. Here are the other factors that affect how much you'll pay for health care:

    • Deductibles: This is how much you'll have to pay out of pocket before insurance kicks in to cover a portion of the medical costs.
    • Coinsurance: This is the percentage you may still have to pay for health care services after you've met your deductible.
    • Copayment (copay): This is a fixed amount you may have to pay for care, lab tests and prescriptions after you've met your deductible.
    • Out-of-pocket maximums: This is the maximum out of pocket you'll have to pay per year for covered services. Once you hit the max, insurance will start paying for 100% of covered care.

    Generally, the lower your premium, the more you have to pay out of pocket when medical costs arise. This applies whether you choose from insurance options with your employer or look at a Bronze, Silver, Gold or Platinum plan within the health care marketplace. Before choosing a plan, make sure you understand what your financial responsibility is for different medical events with each option.

  5. Compare Networks and Health Plan Types
  6. A network is a group of doctors, providers and hospitals contracted to provide care under specific health plans. The type of plan you choose could limit you to, or exclude you from, providers within certain networks. It's important to know which networks a doctor works with before making an appointment. If not, you could be surprised to find out that you're solely responsible for bills.

    Here's an overview of the types of plans you could consider:

    • Health maintenance organizations (HMOs): A health insurance plan where you may be limited to in-network doctors, and there is minimal coverage (or none at all) if you see out-of-network doctors unless there's an emergency.
    • Preferred provider organizations (PPOs): A health plan where you have the freedom to see doctors out of your network without getting a referral, but it generally costs more than if you see in-network doctors.
    • Exclusive provider organizations (EPOs): A health plan that only provides coverage when you see in-network doctors and specialists.
    • Point-of-service (POS) plans: A health plan where it costs less to see in-network providers, and you must get a referral from primary care to see specialists.

    When choosing a policy, weigh the pros and cons of each type of plan to see which would better serve your needs.

  7. Vet In-Network Providers
  8. If you choose a plan with a limited network, consider contacting the insurance company to see which medical providers are in your network. This way you can ensure that there are highly rated providers nearby that you can go to. And if you have a trusted doctor that you want to stick with, confirm that they are in-network before committing to a health plan.

  9. Is a High-Deductible Health Plan Right for You?
  10. A high-deductible health plan (HDHP) offers a lower premium compared with other insurance plans, but the deductible is also higher—which means you could pay significantly more out-of-pocket for medical care.

    To help cover out-of-pocket costs, an HDHP can be paired with a tax-advantaged health savings account (HSA). HSA contributions are tax-deductible, and withdrawals aren't taxed as long as you use the money for qualifying medical expenses—this can include contacts, breast pumps, dental treatments and much more.

    If you rarely see a doctor and don't take regular prescriptions, low premiums could save you money, and regularly contributing to an HSA could cover costs as they arise. But if a medical emergency happens, you may end up paying more for your medical bills.

  11. Review Prescription Coverage for Each Plan
  12. A "formulary list" outlines the prescriptions that the plan covers. Insurance providers may categorize drugs and their costs in different tiers. The lowest tiers are the less expensive, generic version of drugs. The higher tiers are for higher-cost, brand-name or specialty drugs that typically have higher copays. Determine where your prescriptions fall on the various lists to compare what you might have to pay out of pocket for your prescriptions with each plan.

  13. Find Out About the Dental and Mental Health Coverage
  14. Some insurance plans cover dental work and some don't, and this is important to know upfront in case you plan to go in for cleanings or other procedures. The mental health services covered by insurance providers can also vary. If you see a therapist or other mental health professional, be sure to review the terms to see what coverage might be provided.

  15. See if You Qualify for Federal Aid
  16. If you have a health insurance marketplace plan and have an income between 100% and 400% of the federal poverty level, you may qualify for a premium tax credit. This tax credit could be taken in advance to lower your premium throughout the year, or you may be able to receive it as a refund at the end of the year.

    Silver plans from the health insurance marketplace may also qualify for a cost-sharing reduction or "special savings'' that reduces your deductibles, copays, coinsurance and yearly out-of-pocket costs. You can find out whether you qualify for the tax credit or cost-sharing savings when you fill out the application for health insurance on the marketplace website.

  17. Think About Preventative Care
  18. Health care isn't all about providing you coverage for medical emergencies—preventive care and wellness programs can keep you healthy. Coverage for regular checkups, immunizations, mammograms, OB-GYN care, blood work and colonoscopies is also worth checking.

  19. Ask for Help
  20. You don't have to compare health insurance alone. If you need help sizing up insurance plans, you can speak with an agent, broker or assister found through HealthCare.gov or your state's marketplace. Also, the human resources department at your job may be able to answer questions for you about employer-provided health care plans.

The Bottom Line

It's important to take your time when choosing a health insurance policy because choosing one that doesn't offer the right protection could leave you shouldering more of the financial burden than expected when you need care or prescriptions.

Note that the 2022 open enrollment period for the health insurance marketplace ends on January 15, 2022, unless you qualify for special enrollment. Our article on how to prepare for open enrollment gives you the rundown on the different plan tiers and what information you need to sign up.