How to Choose Health Insurance

Feb 1, 2023




You usually have limited time to select the right health insurance plan for you and your family. However, rushing or choosing the wrong coverage can lead to costly consequences. This guide will help you find affordable insurance, whether it is through a state, federal or employer-sponsored marketplace.

Step 1: Choose your health insurance marketplace

What you have available will determine how you shop for insurance.

Your employer may offer health insurance.

Most people who have health insurance can get it through their employer. If your employer provides health insurance, you only have to use the marketplaces or government insurance exchanges if you are looking for another plan. Plans in the market will likely cost more than plans offered through employers. Because most workers are required to pay a portion of their insurance premiums, employers tend to be the ones paying.

If your employer doesn’t offer health insurance

You can search the online marketplace for your state or the federal market to find the best plan for you. Go to HealthCare.gov, and enter your ZIP code. If there is one in your state, you will be sent to it. You’ll instead use the federal marketplace.

These are income-based discounts that you get on your monthly premiums. You can also buy health insurance directly from an insurer or through a private exchange. These options will not allow you to receive premium tax credits.

Step 2: Compare different types of insurance plans.

You’ll face many alphabet soups when searching for the best insurance plan. There are three main types of health insurance plans: HMOs (PPOs), EPOs (EPOs), and POS plans. The type of insurance you choose will determine how much you pay out-of-pocket and which doctors you have access to.

Comparing health insurance plans: HMO vs. PPO vs. EPO vs. POS

[table https://www.nerdwallet.com/article/health/choose-health-insurance]

See a list of benefits.

Online marketplaces often provide a link for the summary of benefits. This explains all details about the plan’s coverage and costs. It would help if you also had a provider directory that lists all the clinics and doctors as part of the plan’s network. Ask your employer benefits administrator to provide a summary of benefits if you are going through them.

Assess your family’s medical requirements.

Consider the type and amount of medical treatment you have received. Although it is impossible to predict all medical expenses, knowing trends can help you make informed decisions.

Think about whether you would like a referral system for care.

Referrals are required for

HMOs are the most affordable type of health insurance. Referrals are required for HMOs and POS plans. You must see a primary physician before scheduling a procedure or visiting a specialist. Many people choose to switch plans because of this requirement. Still, you can limit your options to only those providers they have contracted with.

HMO and POS plans have the advantage of having one primary doctor who manages your medical care. This can help you be more familiar with your medical needs and ensure continuity in your medical records. To reduce your out-of-network costs, you should get your doctor’s referral before choosing POS plans. Except in an emergency, you cannot leave an HMO’s network. )

Plans without referrals

An EPO or PPO might be better for you if you prefer to see specialists without needing a referral. EPOs don’t usually require a referral. However, some do. EPOs can help you keep your costs down as long as providers are in-network. This is easier to do in larger metropolitan areas. A PPO may be a better option if you live in a remote or rural area and have limited access to healthcare. You might have to leave your network.

How about an HDHP and a Health Savings Account?

High-deductible health plans, or HDHPs, can be insurance, including HMO, PPO, and EPO. However, these HDHPs must follow specific rules to be eligible for HSA. These HDHPs have lower premiums but higher out-of-pocket costs, particularly initially. These plans are the only ones that allow you to open an HSA (health savings account), a tax-advantaged account that you can use for health care expenses. This arrangement is worth looking into if you are interested.

Step 3: Compare health plan networks

The “network” of medical providers and facilities your health insurance covers is what you use to get your care.

Why is the network important?

Because insurance companies negotiate lower rates for in-network providers, the cost of an in-network appointment is lower. Out-of-network doctors may have differing rates, and you will be responsible for a more significant portion.

Are you a fan of doctors?

You can continue to see your existing medical providers if they are listed in the provider directory for the plan that you’re interested in. You can ask them directly if they are on a specific health plan.

Is an extensive network important?

It’s a good idea if you don’t have a preferred physician. If you live in rural areas, a more extensive network will give you better chances of finding a doctor who accepts your plan.

It would help if you eliminated any plans without local in-network physicians. It is also a good idea to eliminate programs with limited provider options.

Step 4 – Compare out-of-pocket costs

Another essential consideration is out-of-pocket expenses (other than your monthly premium). The summary of benefits for a plan should clearly state how much you will have to pay out-of-pocket for services. These costs can be compared using the federal online marketplace and many state marketplaces.

Get your terms for health insurance.

It is helpful to understand the definitions of some key terms in health insurance:

  • Copay: You pay this flat fee, usually $20, for each procedure or service you receive from your health care provider.
  • Coinsurance is the percentage of a medical cost you pay, such as 20%. The rest is covered under your health insurance plan.
  • Deductible: This is the amount that you pay for covered medical services before your insurance begins paying.
  • Maximum out-of-pocket: This is how much you will pay each year from your pocket for covered health care. Your insurance will spend the rest once you have reached this limit.
  • Out-of-pocket costs exceed a plan’s expense, including copays and coinsurance.

Premium is the monthly cost of your health insurance.

More coverage, higher premiums

Generally speaking, the higher your premium, the lower your out-of-pocket costs like copays or coinsurance, and vice versa. It may be worth considering if you are looking for a plan that covers more of your medical expenses but pays higher monthly premiums.

  • A primary doctor or specialist is someone you see frequently.
  • Emergency care is often needed.
  • You regularly take brand-name or expensive medications.
  • Are you expecting a child, planning to have one, or are you a parent?
  • Planned surgery is coming up.
  • A chronic condition like diabetes or cancer has been diagnosed.

Lower premiums and higher out-of-pocket

A plan with lower out-of-pocket expenses and monthly premiums may be a better option.

  • A plan with lower out-of-pocket costs and higher monthly premiums is not something you can afford.
  • You are in good health, and you rarely visit a doctor.

Step 5: Compare benefits

This step will likely narrow down your options to just a few choices. These are some considerations:

View the scope of services

To see if the benefits are more comprehensive, go back to the summary of benefits. Some plans may offer better coverage for mental health care, fertility treatments, or physical therapy. Others might provide better emergency coverage.

You could miss out on an excellent plan for you and your family if you skip this critical step.

Answer any questions

Sometimes, calling customer service at the plan may be the best way to get answers. You can write down your questions ahead of time and keep a pen or an electronic device to record them.

These are some examples of questions you might ask:

  • I take a particular medication. What is the coverage for this medication?
  • What drugs are covered by this plan for me?
  • What are the maternity services covered?
  • What happens to me if I get sick when I travel abroad?
  • How can I sign up, and what documents do I need?