If you’re lucky enough to have employer-provided health insurance, that narrows your options down to the plans your employer offers. If you don’t have coverage through your job, perhaps an organization or association you belong to will allow you to purchase health insurance through them at a group rate.
Another option is to check your local Obamacare health insurance marketplace to see if you qualify for an advance premium credit, which would allow you to lower your premium costs. Even if you don’t qualify for the credit right away, buying your health insurance through the Marketplace means you can qualify for it when you file your taxes for the year.
If you can’t, or don’t want to, get health insurance from any of these sources, you’ll need to buy a private plan. It will give you the widest range of options, but it will probably be much more expensive.
Deciding what type of policy to buy
Health insurance policies come in a variety of basic types, although you may not have access to all of these options through your preferred source. Health Maintenance Organizations (HMOs) are a very common type of health insurance policy. With an HMO, you must use in-network health care providers and you must get a referral from your primary care physician to see a specialist.
Preferred Provider Organizations (PPOs) are also quite common. A PPO health insurance policy has a network, but you’re not limited to in-network care, although using network providers is cheaper, and you don’t need referrals to see specialists.
Exclusive Provider Organizations (EPOs) are a hybrid of HMOs and PPOs. You must join the plan’s network, but you do not need referrals to specialists. Finally, Point of Service (POS) plans are a less common option that is essentially the opposite of an EPO. You are not limited to the POS plan network, but you do need a referral to see a specialist.
Of the four common types of plans, an HMO or EPO tends to be cheaper than a PPO or POS with the same level of coverage. However, if network coverage is poor in your area, or you don’t feel comfortable limiting yourself to network providers, it may be worth paying a little more to get a PPO or POS policy.
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High Deductible vs. Low Deductible
All things being equal, the higher a plan’s deductible, the lower the monthly premiums. A high deductible means you’ll have to pay for a lot of health care expenses yourself before the insurance policy kicks in, but if you have few or no medical expenses in any given year, these plans can be a bargain. Very low medical expenses mean you probably won’t exceed your deductible, even for a low-deductible plan, so getting a high-deductible plan keeps your insurance costs as low as possible while protecting you in the event something catastrophic happens.
If you decide to go high-deductible, your best option is to get a health savings account (HSA)-enabled plan and finance it with at least the equivalent of a year’s deductible. An HSA plan clearly covers the biggest weakness of a high-deductible health insurance policy, namely that you’d have to fork out a lot of money on a major medical expense before the insurance would pick up. If you have a full year’s deductible hidden in your HSA, you can use that money to fund your share of expenses, while simultaneously enjoying the triple tax advantage an HSA offers.
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Coverage Comparison
There are two main factors that affect how well a particular plan will cover your medical expenses: the plan’s network and its coverage policies. Even if you choose a plan with out-of-network options, like a PPO, it’s best to use in-network providers as much as possible because doing so will lower your costs. And the rules a given health insurance policy uses to decide what’s covered and what’s not, and how much the copays will be, can make a big difference in how helpful a particular policy really is for you.
For example, if there is a fairly expensive drug that you take every day, you will definitely want to get a health insurance policy that includes that drug on its formulary. If you travel a lot, stick to plans that offer good out-of-area treatment options. And if you already have a primary care doctor, you’ll definitely want to choose a plan that includes your doctor in its network.
Find the best deal
If you’re stuck between two or three different policies and can’t decide which one to choose, try this exercise. Multiply the monthly premium by 12 to get a plan’s yearly cost, then add the plan’s out-of-pocket maximum. The result is the most you would end up spending on health care if you had one or more major medical expenses during the year. Do this calculation for each plan you’re considering, and then compare the results. The plan with the lowest total is probably the best deal for you.
