Health insurance is probably top of mind if you’ve recently experienced a change in job status, navigated a major life event like marriage or the birth of a child, or aged out of your ability to use your family’s coverage. But how well do you understand health insurance and how it works?
Here’s everything you need to know about health insurance and how to go about finding the best and most affordable one for you.
What Is Health Insurance?
Health insurance is a plan that covers your medical expenses for preventative health screenings, illnesses and injuries, procedures, prescriptions and more. Oftentimes, you can enroll in a plan through your employer, but there are individual health insurance plans available as well that you can select and pay for yourself.
Health care can be confusing and expensive, but having health insurance coverage can help you avoid surprise medical expenses in emergencies or unexpected accidents. It can also lower the cost of your prescriptions, surgeries and routine doctor visits, as well as provide peace of mind.
When selecting a health insurance plan, It’s important to understand all your available options before making a decision. Here’s a breakdown of things to consider when determining the best health insurance plan for you.
What Types of Plans Are Available?
The first step in choosing a health insurance plan is deciding how you want to enroll. There are several ways to enroll, including enrolling in an employer-sponsored plan, an individual or family plan, or a federal government plan like Medicare.
Employer-Sponsored Plan: This coverage is a benefit employers typically provide to their employees. Nearly 49% of Americans receive health insurance from their place of work, according to the Kaiser Family Foundation. These plans are also referred to as group health insurance.
If you proceed with your employer, you’ll likely be offered a few different health insurance plans to consider.
Individual or Family Plan: You opt in and pay for these plans yourself by visiting your state or federal marketplace, connecting with private insurance companies directly or going through a broker. If you’re a student or self-employed, this type of plan might be for you. The marketplace is home to Affordable Care Act (ACA) plans.
Federal Government Program: Medicare is a national health insurance plan specifically for people at least 65 years old. Medicare operates differently than most other insurance plans and has different enrollment periods than employer-sponsored plans and individual or family plans.
Once you’ve decided on a route, consider which health insurance plan best meets your needs. You will have several plans to choose from, so think about what’s most important to you—like having access to care outside of your plan’s network of physicians and hospitals or having the flexibility to choose your specialists without a referral, for example.
Below are the most common types of health insurance plans in the marketplace.
HMOs are typically the least expensive plans because of the number of restrictions they carry. If you’re healthy and only visit your primary care physician for annual or necessary visits, an HMO plan might fit your needs.
If you’re looking for more freedom and control in choosing your health care providers and specialists, an EPO or PPO plan might be more suitable even though it may cost you more money in the long run. “With broader networks, you have more doctors and hospitals, which lends itself to higher costs,” says Kenneth White, a national managed care practice leader for Willis Towers Watson in Florida.
To look at health insurance holistically, you need to understand a few key words. Before comparing out-of-pocket costs, learn what your copayments, deductible and coinsurance would be.
Copayment is a fixed rate you pay for a covered health care service at the time of care. For example, after you see your primary care physician, you’re asked to pay your copay.
Deductible is the amount you pay for covered services before your insurance plan starts to pay its share.
Coinsurance is the percentage of costs of a covered health care service you’re required to pay after you’ve paid your deductible. Let’s say your coinsurance is 25% and your allowed amount (the maximum amount a plan will pay for a covered service) for a particular doctor visit is $100. If you’ve already hit your deductible, you only have to pay 25% of the visit fee, or $25.
How Much Does Health Insurance Cost?
The cost of health insurance can vary significantly. Some factors that affect the price include deductibles, copayments, coinsurance, monthly premiums and your out-of-pocket maximums, along with personal choices about the plan and coverage options.
What to Consider When Searching for Affordable Healthcare
It’s easy to go for the lowest monthly price when selecting a health insurance plan, but there are a few things you should consider before doing so. Step back and assess you and your family’s health care as a whole so it doesn’t cost you more in the future. Look into annual costs and premiums, metal categories if considering ACA plans, health savings account (HSA) or flexible spending account (FSA) options and out-of-pocket costs.
Annual Costs and Premiums
The first thing you’ll likely notice when purchasing insurance is the annual cost, or the sum of your monthly premiums. “The principal cost associated with coverage is the premium—the amount you pay every month for the coverage, which could be subsidized by your employer or the government,” says White.
In the insurance marketplace, ACA plans are separated into four “metal” categories, which indicate how costs are split between you and your health insurance plan.
Bronze: You pay the lowest premium every month, but you also have a high deductible, so when you seek care, you have higher costs because it’ll take more to reach your deductible. This metal plan is ideal if you just want coverage for worst-case scenarios. Your health insurance pays 60% of your health care costs and you pay the remaining 40%.
Silver: This monthly premium is slightly higher than bronze plans, but your costs are lower when you seek care. Your health insurance pays 70% of your health care costs while you contribute 30%.
Gold: If you routinely visit your physician or need care, consider a gold plan, which has a higher monthly premium but lower point-of-care costs. Your health insurance pays 80% and you pay 20%.
Platinum: This plan features the highest monthly premium, so if you’re frequently in need of care, you can rest assured that most of your care will be covered with minimal point-of-care costs when you use any services.
HSA vs. FSA
With a health savings account (HSA), you can reduce your overall health care costs by saving pre-tax money in a health-specific savings account. With an accompanying debit card, you can then use these funds to pay for deductibles, copays, coinsurance and qualified medical expenses. An HSA cannot be used to pay monthly premiums associated with your health insurance plan.
You can keep an HSA regardless of your employment status and, after you turn 65, you can treat it like a retirement account, using the funds however you want without penalty.
HSAs only come with high-deductible health plans. The federal government decides what’s considered a high deductible each year. You can find the minimum deductible required for an HSA, as well as the maximum benefit of the savings account, here. If an HSA is important to you, look for an “HSA eligible” label when shopping. Medicare and Tricare plans are not HSA eligible.
Meanwhile, a flexible spending account (FSA) is a similar benefit provided alongside health insurance plans offered through your employer. You fund your FSA with pre-tax dollars from your paycheck and use a paired debit card when you want to use the funds on qualified medical expenses. One drawback to FSAs is the amount you save is unlikely to roll over from one year to the next. In other words, if you don’t use it by a certain date, you lose it.
You’re unlikely to qualify for both of these benefits simultaneously.
It’s generally more affordable to see in-network providers than out-of-network providers. If you’re going out of network to see a preferred provider or visit a preferred facility, know that they don’t have a contract with your health insurance plan provider and will likely cost more—sometimes even full price.
To keep costs low, either pick a plan that includes your preferred care providers in its network or choose a more forgiving and flexible plan when it comes to out-of-network coverage.
This amount is the most you could possibly have to pay for health care services in a single year. Your deductible, copays and coinsurance for any in-network services all count toward this maximum. Monthly premiums, payments for services not covered and out-of-network visit costs don’t contribute to your out-of-pocket maximum.
Once you hit your maximum, your health insurance plan kicks in to cover 100% of your costs for the remainder of that year. So if you’re trying to find the most affordable health care plan, pay close attention to the out-of-pocket maximum and how much it could possibly support you.
Where to Call for Help
Selecting a health insurance plan can feel overwhelming, but you don’t have to do it alone. There are a few ways you can go about getting expert help.
Contact the Marketplace Call Center if you’re choosing your own individual or family plan for answers to any questions and assistance with enrollment.
If you’re selecting a plan through your employer, ask your human resources department if they can offer you assistance.
If HR can’t provide the help you need, ask them to direct you to an insurance agent or broker who can guide you through the process from start to finish.
You can also find an agent or broker yourself by searching for local organizations within your state or ZIP code.