Factors to Consider When Choosing Health Insurance

Get Health Insurance - Selecting a Health Plan. DNY59@iStockphoto

Why Do I Need Health Insurance?

It is important to get health insurance for yourself and members of your immediate family. Insurance helps to protect you from high health care costs, especially those related to chronic medical conditions or the need for hospitalization.

You should get health insurance for the same reason that you have auto insurance or homeowners insurance - to protect your savings and income. But you also need health insurance to ensure that you'll have access to high-cost medical care if and when you need it. For hospitals that accept Medicare (which is most hospitals), federal law requires them to assess and stabilize anyone who shows up at their emergency departments, including a woman in active labor. But beyond an assessment and stabilization in the emergency department, there is no requirement that hospitals provide care to people cannot pay for it. So a lack of health insurance can end up being a significant barrier to receiving care.

How Do I Get Health Insurance?

Depending on your age, job status, and financial condition, there are many ways that you can get health insurance, including:

  • Health insurance provided by an employer. Large companies in the U.S. are required to provide affordable health insurance as an employee benefit, and many small employers also offer coverage to their workers. You will likely be required to pay some portion of the monthly premium, or cost of the health insurance, particularly if you add your family to your plan.
  • Health insurance that you purchase on your own. If you are self-employed or work for a small company that does not provide health insurance, you will need to buy it on your own. You can get it through the health insurance exchange in your state, or directly from an insurance company, but premium subsidies (to lower the amount you have to pay for your coverage) and cost-sharing subsidies (to lower the amount you have to pay when you need medical care) are only available if you get your coverage through the exchange.
  • Health insurance provided by the government. If you are 65 or older, disabled, or have little or no income, you may qualify for health insurance paid for by the government, such as Medicare and Medicaid.

    If you have no health insurance or health insurance that is not adequate, you will be responsible for paying all your health care bills. The Patient Protection and Affordable Care Act (ACA), which was enacted in March 2010, assures that most Americans have access to affordable health insurance.

    There are some exceptions to that, however. Some are a result of design flaws in the ACA, including the family glitch and the fact that premium subsidies are capped at 400 percent of the poverty level, resulting in unaffordable coverage for some people with income just a little over that limit. But some are a result of regulations, court decisions, and resistance to the ACA, including the Medicaid coverage gap that exists in 18 states that have refused to accept federal funding to expand Medicaid. 

    How Do I Choose a Health Plan?

    There are many factors to consider when choosing health insurance. These factors may be different if you are choosing one of several employer health plan options or buying your own health insurance.

    Do your homework before you buy any health insurance policy! Make sure that you know what your health insurance plan will pay for... and what it will not.

    Employer-Sponsored Health Insurance


    If your employer offers health insurance, you may be able to choose among several health insurance plans. Most often, these plans include some type of managed care plan, such as a health maintenance organization (HMO) or a preferred provider organization (PPO). If you choose an HMO, the plan will only pay for care if you use a doctor or hospital in that plan's network. If you choose a PPO, the plan will usually pay more if you get your health care within the plan's network. The PPO will still pay a portion of your care if you go outside the network, but you will have to pay more.

    Your employer may offer a number of different health plans that cost more or less depending on the amount of out-of-pocket costs you have each year. These costs may include a copayment each time you see your doctor or get a prescription filled as well as a yearly deductable, which is the amount you pay for healthcare services at the beginning of each year before your health insurance kicks in.

    In general, a plan that requires that you use a network provider, has a high deductable, and high copayments will have lower premiums. A plan that allows you to use any provider, has lower deductibles, and lower copayments will have higher premiums.

    If you are young, have no chronic disease, and lead a healthy lifestyle, you may consider choosing a health plan that has high deductibles and copayments, since you are unlikely to need care and your monthly premiums may be less.

    If you are older and/or have a chronic condition, such as diabetes, that requires many doctor visits and prescription drugs, you may consider a health plan with low deductibles and copayments. You may pay more each month for your share of the premium, but this may be offset by less out-of-pocket costs throughout the year. Crunch the numbers to see how much you might be expected to pay in out-of-pocket costs (pay attention to the maximum amount here, if you think you're going to need a lot of medical care), and add that to the total premiums so that you can compare multiple plans. You don't want to just assume that a higher-cost plan (or, depending on the situation, a lower-cost plan) will work out better.

    To learn more about your health plan options, meet with a representative of your human resources department or read the materials supplied by the health plan. If both you and your spouse/partner work for companies that provide health insurance, you should compare what each company offers and choose a plan from either company that meets your needs. Be aware, however, that some companies include a surcharge if your spouse has access to their own employer's plan but decided to be added to your plan instead. Here's more about the ins and outs of health insurance for spouses.

    Individual Health Insurance 

    If you are self-employed, your employer does not provide adequate health insurance, or you are uninsured and do not qualify for a government health insurance program, you can buy health insurance on your own.

    You can buy health insurance directly from a health insurance company, such as Anthem or Kaiser Permanente, through an insurance agent who represents an insurance company, or through the health insurance exchange in your state. Consult with your insurance agent who may be able to help you find health insurance that fits your needs.

    Since cost is often the most important factor when choosing a health plan, your answers to the following questions can help you decide which plan to purchase.

    • How much is the monthly premium (after any applicable premium subsidy, if you're eligible for one. In 2018, subsidies are available to individuals earning up to $48,240, and to a family of five earning up to $115,120).
    • How much will I have to pay before the health plan kicks in?
    • How much is the copay for doctor's visits and prescription medications?
    • If I choose a PPO, how much will I have to pay if I use doctors or hospitals outside of the PPO's network?
    • What is the most I'll have to pay in out-of-pocket costs if I end up needing a lot of care? This is capped on all ACA-compliant plans at $7,350 for a single individual in 2018.
    • Does the health plan have a drug formulary that includes the medications I use?
    • Is my doctor in the health plan's provider network?

    Beware of Non-ACA-Compliant Plans

    All individual major medical health plans with effective dates of January 2014 or later are required to be compliant with the ACA. This applies in every state, and it applies to plans sold inside the exchange as well as plans purchased directly from health insurance companies.

    But there are lots of plan options that aren't ACA-compliant. And sometimes those plans are marketed with questionable tactics, leading consumers to believe that they're purchasing real health insurance, when they actually aren't.

    If you're looking at short-term plans, limited benefit plans, accident supplements, critical illness plans, medical discount plans, or any other type of non-compliant plan, you'll want to pay very close attention to the fine print, and make sure you understand what you're actually buying. Be aware that these plans don't have to cover the ACA's essential health benefits, don't have to cover pre-existing conditions, can limit your total benefits in a year or over your lifetime, and generally have a long list of coverage exclusions.

     

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