How to Pick a Health Insurance Plan
Here's everything you need to know about the different types of plans you're likely to come across as you shop for health insurance.
Sometimes picking a health insurance plan is a snap--mainly because you're given just a single option.
That's certainly true of some Americans who get health coverage through an employer. It's also true of some who get it from their state exchange or marketplace.
A lot of people, though, have to choose between at least a couple of possibilities when they go to buy or select a health plan.
If you're in that boat and you need a bit of help deciding which one to go with, this article is for you.
In it, we'll discuss the different types of plans you're likely to see while shopping for health insurance or otherwise weighing your coverage options. We'll also discuss some of the things you need to know if you want to pick the health plan that's best for you and your current situation.
Job-Based Health Insurance Options
A huge number of Americans get health insurance through an employer. In fact, according to the Kaiser Family Foundation's latest figures, job-based plans now cover half of U.S. adults.
That percentage is even more eye-opening when you remove the over-65 population from the picture. (Medicare and Medicaid cover almost all of these folks.)
How many people are we talking about here? Time reports that over 177 million Americans had employment-based health plans in 2015. That represented an increase of three million from 2013, so if a similar leap took place between 2015 and now, there could be as many as 180 million people in the U.S. with health insurance that's tied to a job.
Considering how many U.S. companies offer health insurance to employees, it probably shouldn't be surprising to hear they often differ wildly in what they offer and how they offer it.
For example, some employers present new hires with just a single plan. Others allow new hires to select from a range of health plans.
People who find themselves in that second situation usually are offered one or more of the following types of "managed care" plans:
Health Maintenance Organization (HMO)
A hallmark of HMO plans is that they limit coverage to care provided by physicians, labs, hospitals, and more that are “in network,” or that have contracts with the insurance company.
In other words, you're usually on your own when it comes to paying for unauthorized or out-of-network care. At best, you'll have to pay for more of that care than you would if you got it through an in-network provider.
Why might you choose an HMO over one of the plans highlighted below? One reason is their out-of-pocket costs tend to be pretty low as long as you don't venture outside your plan's network for care.
The main thing you'll be responsible for is a monthly premium. Besides that, you'll likely only have to pay a small copayment or co-insurance when you go to see your physician or otherwise seek medical assistance.
Preferred Provider Organization (PPO)
If you’re looking for health insurance that offers a bit more freedom, consider a PPO plan.
Like HMOs, PPOs push you to use care providers who are part of their network. Unlike HMOs, however, PPOs are far more flexible about allowing you to receive out-of-network care.
For example, your insurer might reimburse you for 80 percent of in-network costs but just 60 percent of out-of-network ones if you have a PPO plan.
Another reason to consider a PPO plan over an HMO (if you're given the choice): PPOs rarely require referrals. And that's true whether you stay within your plan's network or go outside it.
Point of Service (POS)
Combine the components that make up the HMO and PPO plans explained above and you've basically got a POS plan.
On the one hand, POS plans are like HMOs in that they often ask you to name an in-network doctor who will serve as your primary care provider moving forward. They also require you to get a referral to see a specialist. On the other hand, POS plans are like PPOs, too, in that you can go out of network to receive care. You'll pay less, though, if you use an in-network doctor, clinic, lab, or hospital.
Exclusive Provider Organization (EPO)
Think of EPOs as even more restrictive HMOs. If you want your plan to cover health or medical services or treatments, you have to go to an in-network doctor, specialist, lab, or hospital.
Go outside that network, and you'll probably have to pay the entire bill. This may even be true in emergency situations, where costs add up quickly.
On a more positive note: most EPO plans don't make you find and name a primary care physician or provider.
To learn more about HMOs and PPOs in particular, read our article, "HMO vs. PPO: What do those letters mean?"
Beyond Plan Types
Unfortunately, selecting a plan type often is just one of the decisions you have to make if you get health insurance through an employer.
Just as important: deciding how much you'll pay out of pocket for one of those plans.
Thankfully, you can come to that decision a lot easier by focusing on a few components or figures. They are:
Premium--what you pay per month to maintain or access your plan.
Deductible--how much you have to pay before your plan kicks in and covers some or all of the rest of your healthcare costs.
Copayment (or Copay)--the set amount you pay for specific services (like doctor visits), treatments, or drugs.
Co-insurance--the amount you pay for covered services and treatments. Usually this is a percentage rather than a set or fixed amount.
Note: plans often tie copays and co-insurance costs to out-of-pocket maximums. What that means is some plans only make you pay co-insurance costs until you reach a certain amount. Or they'll only charge you copays until you reach a certain amount.
It's important to look closely at a plan's copayments and co-insurance costs before you settle on a particular plan--again, assuming you're given a choice.
It's also important to look closely at the premiums and deductibles associated with any health plan placed in front of you. Don't just pick the one with the lowest premium or the lowest deductible. In most cases, plans with low premiums have high deductibles. And plans with low deductibles typically have high premiums.
Exchange or Marketplace Insurance Options
Most Americans who can't get health insurance through an employer get it from the marketplace--also sometimes called the exchange--set up by the Affordable Care Act (aka the ACA or Obamacare).
As is the case with job-based health plans, you have to make a few decisions when choosing between marketplace plans.
When it comes to buying a marketplace plan, though, you don't just choose one of the plan types detailed above. You also have to choose a "metal" level or category.
These categories determine how you and your health insurance plan share the costs of your healthcare. For instance, if you select a bronze marketplace plan, you'll pay the lowest monthly premium of the four metal-level offerings, but you'll also pay the highest out-of-pocket costs when you go to receive care. The opposite is true of platinum marketplace plans.
Here's a bit more information about your main marketplace health insurance options:
As explained above, bronze plans have the lowest monthly premiums of the marketplace's metal-level offerings. But they also come with the highest out-of-pocket costs.
In particular, healthcare.gov warns that the deductibles tied to bronze plans can total thousands of dollars per year. That means you might have to spend a lot of your own money on medical care before your plan kicks in and helps out.
If you choose a silver marketplace plan, you'll pay a monthly premium that's slightly higher than you would if you'd gone with a bronze plan. And you'll pay a bit less out of pocket when you go to receive care.
Silver plan deductibles are lower than those of bronze plans, too.
Gold marketplace plans usually have fairly high monthly premiums and fairly low out-of-pocket costs.
Are you looking for a health plan with a low deductible (meaning you won't have to spend much before the plan takes over and covers the rest)? This may be the option for you, assuming you can afford the higher premiums.
As you probably expected, you'll pay the highest monthly premiums and lowest out-of-pocket costs if you select a platinum marketplace plan.
The health insurance marketplace also sells catastrophic plans. Only certain Americans can buy them, however.
If you're under the age of 30 or you're eligible for a hardship or affordability exemption, though, you might want to consider a catastrophic plan. They promise low monthly premiums, but high deductibles and other out-of-pocket costs. In fact, you'll have to pay for quite a lot of your healthcare costs before the plan lends a helping hand. But once that happens, the plan often pays for all covered services. You don't even have to cover copays or co-insurance at that point.
How are you supposed to choose between these metal plans? A good rule of thumb is if you rarely see a doctor or need medical assistance, a bronze plan may be your best bet. You'll only have to pay a low monthly premium, and you'll be protected from serious illnesses or injuries. If you need a lot of care, though, and you can afford the high premiums, consider a gold or platinum plan. They'll cover most of your medical bills.
One last note: if you qualify for a cost-sharing reduction, you have to pick a silver marketplace plan to take advantage of it.
Need some more information before you make a decision? This article should help: "Which Type of Obamacare Plan is Right for You?"
Individual Health Insurance Options
If you don't have access to health insurance through an employer and you don't want to buy it from the federal or state marketplace, your only real option is to get it directly from an insurer. (Unless you qualify for Medicaid or Medicare, of course.)
Many Americans go with an "off marketplace" health plan even if they have access to job-based insurance coverage. That's because some job-based plans are prohibitively expensive. Others don't provide enough coverage or the right kind of coverage.
Although buying a health plan directly from an insurance company can be a good idea in these and other situations, you have to be careful. Specifically, you have to make sure whatever plan you enroll in is considered "qualifying health coverage." (Another name for this is "minimum essential coverage.")
All job-based and marketplace plans meet this requirement. Most individual health plans bought outside the marketplace meet it, too, but not all of them do.
Should you buy health coverage directly from an insurer (or from an agent or broker), make sure it counts as qualifying health coverage. If it doesn't, you may pay a fine or penalty.
Other Important Health Insurance Coverage Information
Something else you should look at as you weigh your health insurance options is what a particular plan does and doesn't cover in terms of services and treatments.
For example, most plans pay for a wide range of preventive care. To learn more about the kinds of check-ups, shots, screenings, and tests employer-sponsored, marketplace, and other health plans tend to cover in this area, read our article, "Health Insurance and Preventive Care."
Most forms of health insurance help pay for prescription drugs, too. Not all job-based, marketplace, or other health plans cover the same medications, however. Nor do they all cover them to the same extent. Learn more about this here: "Will My Health Insurance Pay for My Prescription Drugs and Medications?"
Check out the following articles, too, if you want to know more about how various kinds of health insurance plans cover different types of care:
- Does My Health Insurance Cover Physical Therapy?
- Does My Health Insurance Cover Weight-Loss Treatments?
- Health Insurance and Infertility Treatment Coverage
- Health Insurance and Abortion Coverage: Do Health Plans Pay for an Abortion?
- What Kinds of Mental Health Care Does Health Insurance Cover?
- Will My Health Insurance Pay For Prosthetics?
- Your Guide to Alternative Medicine and Health Insurance
Still not sure which plan is right for you? Check out this article: "11 Questions That Will Help You Pick the Right Health Insurance Plan."
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