What to Know Before Committing to a Health Plan
No matter how much you love shopping, there's at least one item that may prove much trickier than others to cross off your list: health insurance. You can't simply toss it in your cart and drop it on the conveyor belt at checkout. Rather, choosing the right plan for your family involves research (learning the lingo doesn't hurt either). And since choosing the wrong plan could be a costly mistake, there's an inherent level of pressure thrown in the mix too.
Are you ready for the good news? If you keep in mind a few key factors while shopping for insurance, the process isn't nearly as perplexing as it seems at first glance. Here are five important considerations.
1. How do you want to access your care?
One of the first things confronting you on your quest to find health insurance will be a slew of letters: HMO, POS, PPO, EPO... eesh! What does it all even mean? Well, each of these acronyms represents the most common choices when it comes to selecting health insurance. Here's how it breaks down.
HMO, or Health maintenance organization: Many people opt for HMOs because they can be one of the most affordable options. They generally have lower monthly premiums and lower cost-sharing compared to other plans. The trade-off is network restrictions — you can choose a primary care physician, but you typically need referrals for specialists. All routine care is usually covered by doctors within the HMO's network, meaning no care out of network is covered. In short, you'll want to make sure you like the network prior to committing.
PPO, or preferred provider organization: This is a network of medical doctors and other health care providers who work with insurance companies to give care at a lower cost. Though the insurance company may pay for some out-of-network costs, they’ll usually pay more when you stay in-network. Ultimately, though, PPOs are less restrictive than HMO or POS plans.
2. Consider the difference between high deductible and traditional health plans
High Deductible Health Plans often have lower monthly premiums and are a growing choice for people who don’t have regular medical issues. While High Deductible Health Plans may have higher out-of-pocket costs until the deductible is met, the monthly cost of coverage is typically lower, so people seeking non-preventive care less frequently can often save money with these plans. It’s important to know what the deductible amounts are for these kinds of plans and have a plan for how to pay that amount should you need to. Traditional plans generally have lower out-of-pocket costs for care like non-preventive doctor's visits but higher monthly premiums.
An additional benefit of High Deductible Health Plans is that they may also make you eligible for a Health Savings Account (HSA). An HSA lets you can set aside pre-tax dollars and use them toward eligible health care expenses. An HSA provides a triple-tax advantage — tax deductible contributions to the account, tax-free dividends and accumulation of interest, and tax-free distributions for certain medical expenses. And, the HSA has no 'use it or lose it' rule, so you get to keep any remaining money even if you change plans, change employers, or retire.
3. Not every plan covers prescriptions
If you take prescription drugs, knowing whether they are covered under the health insurance plan you choose is critical. It could make a huge difference in monthly out-of-pocket costs (think $10 vs. $1,000 to fill your prescription). Before you decide on a plan, make sure you pore over the insurance company's Prescription Drug List to see what exactly is covered.
4. A low premium doesn't necessarily make a plan the most cost-effective
Pull out your calculator, because shopping for health insurance involves its fair share of number-crunching. Sure, picking the plan with the lowest premium sounds good, but before signing on the proverbial dotted line, you'll want to devote some thought into how things like copays (a fixed dollar amount for a covered health service, like $30 for a doctor's visit), your annual deductible (the dollar amount you have to pay for covered health care services before your health insurer or plan starts to pay) and coinsurance (your share, calculated as a percentage, of the health care costs for a covered service) can drive up the cost of that low-premium plan. Don't forget to factor in how much savings you'll need to deal with those extra expenses.
5. It can pay to "shop" around
As any avid shopper knows, you get the best deal when you're willing to go the extra mile and comparison-shop. This is especially true in the case of health insurance when it comes to your employer's plan. While it's nice to have health insurance offered through your place of employment, you could potentially save money by seeking out a policy of your own.
That said, it's important to look at more than the cost of copays and premiums. A health plan may offer additional benefits that are important for a certain stage in your life, such as exercise incentives, smoking cessation programs or maternity or diabetes programs.