How to Choose Health Insurance
With the implementation of health reform (a.k.a. Obamacare or the Affordable Care Act), millions of Americans are facing the decision of what health insurance plan to buy. Some people have no prior experience shopping for insurance and others want to improve their shopping skills. HealthPocket has created this quick guide to explain how to choose health insurance wisely, because wise decisions can mean thousands in annual savings.
1) Document Your Healthcare Needs
If you're healthy, single, and rarely see a doctor, this is a short task. You are interested in an affordable plan with a quality network of providers who are located near where you live or work. Fees when you use medical services, such as deductibles and copayments likely mean less to you because you don't expect to use medical services frequently. Premiums, on the other hand, are important to you because you don't want to spend a lot for something you don't use frequently. At the same time, you want to know you have insurance to protect you from an unexpected major sickness or accident.
The quality of doctors and hospitals in the plan's network is always important even if you are healthy. An unexpected diagnosis of a serious medical condition will make you very grateful that you selected a health plan with high quality medical facilities. If you do not know what doctors and medical facilities are the best in your area, you can talk to friends for recommendations as well as review web sites that provide information on doctor quality.
If you see the doctor frequently, you will likely want to document your desire for:
- A health plan that has your existing doctors and preferred hospital in network. If you would consider changing doctors in exchange for a lower premium, use a doctor & hospital quality comparison web site to evaluate the doctors and hospitals in a plan's network of providers
- A health plan that covers your medications. If you take prescription drugs, you need to write down the name of the drugs in order to check a health plan's formulary to see if your drug is covered. A formulary is a list of drugs for which a health plan will share costs. Uncovered drugs are normally paid entirely by you. A drug plan's formulary can be accessed from the Plan Details page for a health plan on HealthPocket.com or by visiting the plan's web site. When comparing the costs of different health plans, you should always consider your drug co-payments along with the premiums
- An affordable deductible. Because you pay the deductible out of your pocket, a higher deductible is usually associated with a lower monthly premium to the insurance company. Determining the maximum amount you could afford to pay out-of-pocket for a deductible is an important way to understand how to budget for health care expenses.
2) Decide What Healthcare Provider Network You Want
Whether you use medical services infrequently or frequently, you need to document what type of provider network type you want. Provider network types are one of the most under-examined issues in choosing a health plan. Most plans offer a health maintenance organization (HMO) option or a Preferred Provider Organization (PPO) option.
HMOs and PPOs are both types of managed care plans where the plan has a network of doctors and healthcare providers from which to choose. Both HMOs and PPOs will offer you their lowest out of pocket payments for services received from inside the plan's network of healthcare providers. However, PPOs are likely to pay for some portion of the costs of a specialist outside the plan's network while a HMO may make you pay the full cost of this care. This can be a critical issue if you develop a medical condition where the best care is outside the plan's network of providers. PPOs also have the advantage of allowing you to see an in-network specialist without a referral from your primary care physician while an HMO requires this referral.
Point-of-Service (POS) plans have traits of both HMOs and PPOs. Like HMOs, they have a primary care physician that must be used for specialist referrals. However, like a PPO the POS plans may cover a portion of the medical costs for an out-of-network healthcare provider.
3) Compare All Health Plans In Your Area
With your insurance needs documented and your healthcare provider network choice made, you can now compare health plans in your area. Because health plans are connected to specific doctors and hospitals, not every plan is available in every area. By using a comparison site like HealthPocket you can see which plans are available in your area and compare the plans' benefits against your list of insurance needs.
Once you find a plan that meets your needs, you'll need to enroll. The health plan requires an application form to be completed and submitted before you can get insurance coverage. Once the application has been reviewed and approved, you will be notified and provided with an insurance card and also an effective date for when plan's health insurance coverage begins for you.
Starting in 2014, qualified health plans cannot reject you or increase your premium amount due to pre-existing conditions or poor health.
Choosing an Obamacare Health Plan
Starting in October 2013, consumers can shop for Affordable Care Act (a.k.a Obamacare) health plans that begin coverage on January 1, 2014. These plans have common Essential Health Benefit standards for coverage. The Obamacare plan types differ by the amount of medical costs they will cover.
There are four main types of Obamacare health plans:
These 4 types of health plans all share the same Essential Health Benefit standards that determine the minimum services that the health plan must cover. The plans primarily differ from one another on the percentage of medical costs covered by insurance compared with the percentage you pay out of pocket and the premium amount charged by the plan.1
In order to make the right choice among the four options, you first need to limit your comparison only to those plans that meet your requirements regarding deductible, doctor/hospital options, and a provider network type (i.e. HMO, PPO, or POS). You then need to estimate how frequently you expect to use medical services in the coming year. If you rarely use medical services, you can immediately begin comparing premiums. If you use medical services often and/or take medications, you need to examine the cost of these drugs and services within the plan and add it to the premium amount. Once you have the total costs of premiums plus other out-of-pocket costs, you can make an informed comparison among plans.
To learn what a plan's fees are for various medical services, click on the "Plan Details" link within a plan in HealthPocket's plan comparison tool.
1Other differences can exist among the plans but actuarial value (i.e. percentage of medical costs covered) and premium are the two most fundamental differences.