How to Choose the Best Health Insurance Plan for You

The Essential Questions to Consider

Chances are, you have health insurance: According to a 2018 report by the United States Census Bureau, more than 90 percent of Americans do. But do you fully understand all the terms of your plan—which conditions, procedures, and medical tests it covers? The financial details? Your options regarding choice of doctors?

Unless you've had experience using your health insurance for significant medical treatment, you may have paid little attention to the details of your coverage—whether you have Medicare, are covered by your employer, or had to shop for your own insurance: The many choices can be overwhelming and the minutiae of individual plans confusing.

Even so, it's important to understand everything about your health insurance plan. What's more, knowing how your plan works before you need to use it is key: You don't want to find yourself trying to translate the details of your coverage during a sudden illness or emergency.

Sources of Health Insurance Information

Roughly half of Americans get their health insurance from an employer, about a third of the U.S. population has coverage under Medicaid or Medicare, and about 6 percent have coverage purchased from a health insurance marketplace or exchange or from an off-exchange plan (major medical coverage purchased directly from an insurance company that's compliant with the Affordable Care Act).

No matter where your coverage comes from, there are resources to help you select the best plan for you and your family, complete the enrollment process, and use your health insurance when you need it.

If you have health insurance through work, reach out to the human resources department at your company: Don't be shy about asking as many questions as necessary: It's the job of this department to help you understand the health plan options that are part of your benefits.

If you're shopping for insurance on your own (because you're self-employed, for example), brokers are available to help you online, over the phone, or in person at no charge. They can help you compare plans both on and off the exchange.

If you know you want to enroll in the health insurance exchange, there are navigators and certified counselors available to assist you.

Marketplace Search TIp

To find the exchange in your state, go Healthcare.gov and select your state. If you're in a state that has its own exchange, you'll be directed to that site.

If you work for a small company that doesn't have a human resources team, you have several sources of information to turn to:

  • The health insurance carrier
  • The broker who helped your employer choose the coverage (ask your manager to direct you)
  • Your state's small business health insurance exchange
  • Your employer's third-party payroll/benefits company, if there is one

For Medicaid or the Children's Health Insurance Program (CHIP), your state agency can help you understand if you or your family is eligible for any benefits and what they are, and also help you to sign up. You also can enroll in Medicaid or CHIP through your state's health insurance exchange.

If you're eligible for Medicare, you can use your State Health Insurance Assistance Program as a resource. There also are brokers nationwide who help beneficiaries enroll in Medicare Advantage plans or supplemental coverage for Original Medicare.

Decisions, Decisions, Decisions

In some cases, insurance plan options are limited (if an employer offers only one option, for example). But most people have a few choices. Your employer may offer a range of plans with varying coverage levels and monthly premiums. If you buy your own health insurance, you can select from any plan available in the individual market in your area (on or off-exchange, although premium subsidies are only available in the exchange).

If you're eligible to enroll in Medicare, you'll have the option of picking a Medicare Advantage plan or sticking with original Medicare and supplementing it with Medigap and Part D prescription coverage (there are some counties where Medicare Advantage plans are not available).

For all coverage types other than Medicaid/CHIP, annual open enrollment periods apply. Special enrollment periods, however, are available if you experience certain qualifying life events, like involuntary loss of coverage or marriage. There's no one-size-fits-all when it comes to health insurance. The plan that will be best for you depends on a variety of factors:

Do you have a pre-existing condition? Thanks to the Affordable Care Act, no insurance provider can turn someone away because they have a chronic disease or other medical problem when they apply for coverage (a practice called medical underwriting), although under certain conditions Medigap plans may be medically underwritten.

However, if you have a pre-existing condition you'll want to consider what you need from your insurance in order to manage it, since benefits, out-of-pocket expenses, prescription medications and treatments covered, and provider network vary considerably from one plan to another.

Consider this:

If one member of your family has pre-existing conditions or is anticipating significant medical expenses in the coming year, consider enrolling the family in separate plans, with more robust coverage for the person who'll need more healthcare during the year.

Do you take any prescription drugs? Be sure to check the formularies (medication lists) of the health plans you're considering. Health plans divide covered drugs into categories, generally labeled Tier 1, Tier 2, Tier 3, and Tier 4 (sometimes there's also a Tier 5). You may find one plan covers your drugs in a lower-cost tier than another or that some plans don't cover your medication at all. 

Drugs in Tier 1 are the least expensive, while those in Tier 4 or 5 are mostly specialty drugs. Drugs in Tier 4 and 5 are generally covered with coinsurance (you pay a percentage of the cost) as opposed to a flat-rate copay. Given the high sticker price on specialty drugs, some people end up meeting their plan's out-of-pocket maximum very early in the year if they need expensive Tier 4 or 5 drugs.

Some states, however, have implemented limits on patient costs for specialty drugs.
If you're enrolling in Medicare, you can use Medicare's plan finder tool when you first enroll and each year during open enrollment. It will let you enter your prescriptions and help you determine which prescription plan will work best.

Are you currently receiving medical care from a particular physician or hospital? Provider networks vary from one carrier to another, so compare the provider lists for the various plans you're considering. If your provider isn't in-network, you still may be able to use that provider but with a higher out-of-pocket cost or you may not have coverage outside the network at all.

In some cases, you'll need to decide whether keeping your current provider is worth paying higher health insurance premiums. If you don't have a particularly well-established relationship with a specific doctor, you may find that selecting a plan with a narrow network could result in lower premiums.

Will you or a family member on your plan need expensive medical care in the coming year? If you know you have an upcoming surgery, for example, or you're planning to have a baby, it may make sense to pay higher premiums in trade for a plan with a lower out-of-pocket limit: You may get a better value from a plan with a lower total out-of-pocket limit, regardless of how much the plan requires you to pay for individual services prior to meeting that out-of-pocket limit.

For example, if you know you're going to need a knee replacement, a plan with a total out-of-pocket limit of $3,000 might be a better value than a plan with a $5,000 out-of-pocket limit. Even if the latter plan offers copays for doctor visits, the former plan counts your doctor visits towards the deductible.

It would ultimately be a better deal to pay the full cost of your doctor visits if you know that all of your healthcare spending on covered services will cease once you hit $3,000 for the year. Getting to pay a copay—instead of the full cost—for a doctor's visit is advantageous in the short-term. But for people who are going to need extensive medical care, the total cap on out-of-pocket spending may be a more important factor.

Do you travel a lot? You may want to consider a preferred provider organization (PPO) with a broad network and solid out-of-network coverage. This will be more expensive than a narrow-network health maintenance organization (HMO), but the flexibility it offers in terms of allowing you to use providers in multiple areas might be worth it.

Consider this:

If you're enrolling in Medicare, your travel plans will probably make Original Medicare—plus supplemental coverage—a better choice than Medicare Advantage, since Medicare Advantage has limited provider networks that tend to be localized.

How comfortable are you with risk? Do you prefer to spend more on premiums every month in exchange for lower out-of-pocket expenses? Is having a copay at the doctor's office—as opposed to paying for all care until you meet your deductible—worth higher premiums? Do you have money in savings that could be used to pay for your health care costs if you opt for a plan with a higher deductible?

These are questions that don't have a right or wrong answer, but understanding how you feel about them is a key part of picking the health plan that will provide you with the best value. The monthly premiums will have to be paid regardless of whether you use a million dollars worth of healthcare or none at all. But beyond the premiums, the amount you'll pay throughout the year depends on the type of coverage you have and how much medical care you need.

All non-grandfathered plans cover some types of preventive care with no cost-sharing—meaning there's no copay and you don't have to pay your deductible for those services. But beyond that, coverage for other types of care can vary substantially from one plan to another. If you select the plan with the lowest premiums, be aware that your costs are likely to be higher if and when you need medical care.

Do you want to be able to contribute to a Health Savings Account (HSA)? If so, you'll need to make sure that you enroll in a High Deductible Health Plan (HDHP) that is HSA-qualified. These plans cover preventive care before the deductible, but nothing else. HSA-qualified plans have minimum deductible requirements along with limits on maximum out-of-pocket costs.

You or your employer can fund your HSA and there's no "use it or lose it" provision. You can use the money to pay for medical expenses with pre-tax dollars, but you can also leave the money in the HSA and let it grow. It will roll over from one year to the next and can always be used—tax-free—to pay for qualified medical expenses even if you no longer have an HSA-qualified health plan.

A Word From Verywell

Health insurance is essential but it also can be frustrating and complicated. Regardless of whether you have a government-run plan, coverage offered by your employer, or a policy that you bought for yourself, a solid understanding of how health insurance works will serve you well. The more you know, the easier it will be for you to compare plan options and know that you're getting the best value from your health insurance coverage. And rest assured that help is always available if you have questions.

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Article Sources

  1. United States Census Bureau. US Census Bureau. Health Insurance Coverage in the United States: 2017. Published Sept. 12, 2018.

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