How to Choose Your Health Insurance

Choosing health insurance
••• Eric Audras/ONOKY/Getty Images

Choosing a health insurance policy that offers the coverage you need can be difficult. The Affordable Care Act (ACA) has also changed the process since it's important to make sure that your plan meets the requirements laid out in the ACA.

Your employer may offer numerous insurance plans. Worth noting: All of these should meet ACA requirements. That's why it's important to carefully consider your options before determining which plan to use. Here's how to find a plan that works for you.

Consider Your Coverage Limits

The first thing to consider is how much each plan will pay to cover your expenses. A good plan will have no lifetime benefit maximum. While these limits may seem high at first glance, if you were to deal with a catastrophic health event like cancer, you may be surprised at how quickly you will reach that limit.

Keep in mind that most new laws have prohibited lifetime benefit maximums, except for those that are grandfathered in or are for non-essential spends. 

Don't Forget Out-of-Pocket Expenses

Consider the amount of your annual deductible, as well. Remember, your deductible is the amount that you will be required to pay out-of-pocket before your insurance will kick in. Some insurance plans will even have you pay the deductible before they will cover routine office visits. Others require a co-payment for office visits and do not count that amount towards the deductible.

Also, consider how much your copayments and coinsurance are. Your copayment is the amount you're required to pay after you've paid your deductible. For example, you may have a copayment of $40 each time you visit your general practitioner.

Your coinsurance is the amount of each bill you are responsible for after you've paid your deductible.

The most common coinsurance setup is 80/20. This means that after you've paid your deductible, your insurance will pay 80% of your healthcare costs, while you are responsible for the other 20%.

Next, consider the out-of-pocket maximums for each plan. Once you reach this limit, your insurance will cover everything else, except for monthly premiums. If you have a high deductible health insurance plan (HDHP), your out-of-pocket costs will be a bit higher. There are hybrid plans with a high deductible that continue to require co-payments after you meet the deductible. These plans will not qualify for health savings accounts (HSAs).

  • Consider your deductible, copayments, and coinsurance
  • Look at the limits on coverage
  • Compare the out-of-pocket maximums

Total Your Maximum Costs

Finally, add up how much you will end up paying from each plan including monthly premiums, copayments, and coinsurance costs. If you are in poor health or have a chronic condition, you may consider a plan with a higher premium and more coverage. If you are in relatively good health, you may choose to go with the plan with the lowest premiums or a moderate option.

  • The best policy may not be the least expensive policy
  • Look for ways that you can save once you have your health insurance
  • Do not forget to include plans offered by your employer in your search

Consider High-Deductible Options

Many employers are beginning to offer high deductible health plans (HDHPs). This type of insurance has a lower premium, but a much higher deductible. However, if you are enrolled in a HDHP, you are also able to open a Health Savings Account, which you can contribute pre-tax dollars to and you can use to pay for eligible healthcare costs. 

In order for a plan to be considered a HDHP, it has to have a deductible of at least $6,750 for an individual or $13,500 for a family. This will go up to $6,900 for an individual or $13,800 for a family in 2020.

If you are enrolled in a HDHP, set aside enough money to cover your annual deductible.

Maximize Your Plan

Once you have found a good plan, it is important to make the most of your policy. Read the benefits booklet. Make sure that you understand the different rates that are charged for different services. For example, an x-ray may be covered at an urgent care as part of the visit, but may not be covered fully if your doctor orders one and you have to visit a separate lab to get the x-ray.

Verify coverage before any medical procedures or major medical events, like giving birth. Try to limit urgent care and emergency room visits and visit your doctor instead. It is also important to carefully review the medical bills that you receive and dispute any possible mistakes. The process can take time, but it is important to make sure you are being billed correctly.

Updated by Rachel Morgan Cautero.