How to Choose Health Insurance
In a perfect world, we’d all get health care as needed with no thought about its cost.
But health care costs a lot — tens or even hundreds of thousands of dollars a year for some people.
Health plans can be baffling and frustrating. If you’re shopping for coverage, especially for a family, expect to spend at least a few days considering options and weighing your priorities.
Let’s start with the basics and cover exactly what health insurance is and all it entails.
What Is Health Insurance?
Just about any kind of insurance exists to protect you from unexpected costs. At its core, health insurance is no exception.
Health coverage should prevent you from falling tens of thousands of dollars in debt if you break a bone, need expensive medicine, or have a baby.
Your health care policy should also help you pay for routine visits to the doctor, either for preventive care or when you’re just not feeling well.
In the past few decades, the costs of medical care have increased exponentially. Health care is skilled labor-intensive and technology-dependent, so as a result:
- Doctor Visits: Seeing a doctor or nurse practitioner can cost several hundred dollars.
- Emergency Room Visit: A trip to the emergency room may cost a few thousand dollars.
- Outpatient Procedure: An outpatient procedure like a colonoscopy may cost tens of thousands of dollars.
- Hospitalization: A hospitalization can cost hundreds of thousands of dollars.
- Chronic Diagnosis: Managing a chronic diagnosis could surpass $1 million in annual health care expenses.
A health insurance plan that pays for all potential health care needs would be unaffordable for most Americans.
So very few, if any, health plans pay for all your medical care needs. Policies find ways to limit what they’ll pay, and limit where you can receive care, as a way of limiting costs.
In most cases, the fewer limitations your policy places on your care, the more you’ll pay in annual premiums.
Which Health Insurance Policy is Best?
Most health insurance companies offer five different insurance policies. There is no one size fits all policy, and the choice is very individual.
Before you can choose which health insurance plan is best for your needs and budget, have a look at all of them, to understand all of your options:
- Catastrophic. A viable option for people under 30 years old and is usually much cheaper than other health insurance policies. Keep in mind, it only covers serious injuries and illness, with the deductibles tending to be higher.
- Bronze. This might be a good option for those on a tight budget. This policy will have a lower premium, but higher deductibles. Some insurance companies might have an out of pocket annual maximum and health savings account, however not many do.
- Silver. Here, the premium is higher than bronze, but deductibles are lower. On average, insurance companies will cover up to 70% of the cost. You might also be able to get a health savings account that can help you to cover deductibles.
- Gold. A low deductible option, which is great for those that like to plan their expenses and would rather pay more monthly to avoid unexpected expenses. The insurer will cover up to 80% of the cost.
- Platinum. The lowest deductible option. The insurance company covers up to 90% of the bill, so you are left with 10% out of pocket payment.
What are HMOs and PPOs?
This is a commonly asked question in the health insurance industry. The way a health insurance policy works impacts its costs and performance.
While you can find several variables and hybrids, most plans fall into one of two categories, HMO or PPO, but there are other categories to be aware of as well:
Health Maintenance Organization
An HMO typically costs less, but you’ll need to stay within a specific network of health care providers.
Your favorite doctor or specialist may not be included, so be sure to check first, both with your insurer and your provider.
If you need to see a specialist in an HMO, your primary care doctor must approve and refer you. Going out of network could mean you’re fully responsible for the costs (except in emergencies as outlined by your policy).
Preferred Provider Organization
PPOs have higher premiums but give you more freedom. You’ll have a network of providers preferred by your health insurance plan, and staying in-network will be beneficial to your budget.
But you can still get some help paying for out-of-network coverage. You won’t need your doctor’s permission to see a specialist (but the specialist could require a referral).
Point of Service Plan
The Point of Service plan or PPO is a combination of HMO and PPO, where you are able to choose an out-of-network provider, but this might come at an extra cost.
Exclusive Provider Organization
Exclusive Provider Organization, or EPO, is similar to HMO and only covers selected health care providers inside the insurance company’s network.
With EPO, unlike HMO, you don’t need your primary doctor referrals.
What are Deductibles, Out-of-Pocket Maxes, Co-Pays?
Along with creating care networks to control costs, insurance companies also require policyholders to pay for part of their own coverage through these features:
This is the amount you’ll pay out of pocket for your care before your health care plan starts paying.
A higher deductible can lead to lower premiums. Deductibles can be different in and out of network with an HMO or a PPO.
Also, your policy should have a separate (lower) deductible for prescription medication.
This is the maximum amount you should expect to pay for your care during a year.
The Affordable Care Act of 2010 limits out-of-pocket maxes to $16,600, but out-of-network costs do not have to be included in this maximum.
So they can be much higher or even uncapped, leaving you more exposed if you choose out-of-network care.
This is the amount you’ll pay each time you visit a clinic, specialist, or hospital.
Co-pays tend to range from $10 to $200 with the higher co-pays for emergency room visits. Co-pays can also vary in and out of your network.
If you don’t see a co-pay listed in your policy, that’s probably not a good thing. It means you’d be paying all your bills until you reach your deductible and/or out-of-pocket max for the year.
Most policies specify the percentage they’ll pay for a particular service and you will pay the rest, your co-insurance amount. A 70/30 coverage means the policy will pay 70 percent of a service while you pay the remaining 30 percent.
Remember, though, the policy won’t pay its 70 percent until you reach the deductible. After you reach the out-of-pocket max, your insurance should pay 100 percent for a covered service.
Your premiums — which is an insurance term for the amount you’ll pay to keep coverage in place — do not count toward your deductible or your out-of-pocket max.
A higher out-of-pocket max, co-pay schedule, and deductible should lead to lower premiums. But these lower premiums can bite back if you experience an unexpected illness or accident and find yourself personally responsible for a larger portion of the medical bill.
As is true with so much in life, you have to find the balance you’re most comfortable with. Use your past health care needs to guide you, but leave room for the unexpected, too.
Alternatives to Health Insurance
With costs so high, it’s no mystery why Americans worry so much about health care expenses and look for alternatives, including:
Faith-based health co-ops have expanded rapidly in the past decade. If you joined one, you’d pay into the co-op and then share expenses with other members. This sounds like a great idea.
But there are some obvious catches:
- It’s Not Insurance: Yes, you can find some insulation from unexpected costs, but your state insurance commissioner does not regulate these co-ops. If the co-op decided not to pay, you’d have little, if any, recourse.
- Low Caps: If you developed an expensive health problem, your co-op would limit its financial support, either for the year, your lifetime, or both.
- Pre-Existing Conditions: The ACA prevents insurers from denying coverage because you already have a health condition. Co-ops can and do deny membership because of pre-existing conditions.
Shoppers who get frustrated with their lack of insurance options often call an insurance broker for help. A broker may try to sell you a short-term health policy.
Short-term policies don’t follow ACA guidelines so they can deny coverage because of a pre-existing condition. These policies can also come with high out-of-pocket maximums. As a result, you may be able to find some premium savings.
But short-term policies also last a few days less than a year, so you’d have to renew early or go without coverage a few days each year.
This kind of coverage exists to provide coverage when you’re in-between jobs or searching for permanent coverage. It’s not a good long-term solution.
Catastrophic coverage offers a nice medium. You’d be responsible for your ongoing medical expenses, such as visiting the doctor or pharmacy.
But if you got into a car wreck or developed a serious illness, your insurance coverage could kick in, insulating you from out-of-control medical bills.
To qualify for this kind of coverage, you’d need to be younger than 30 or in financial hardship as defined by the Affordable Care Act. Some self-employed or freelancers can also qualify for this kind of coverage at Healthcare.gov.
You can couple catastrophic coverage with a Health Savings Account, which lets you spend untaxed money on your health care.
Some of the cheapest non-catastrophic plans mimic this approach because they pay so little. So you may be able to use this approach even if you don’t officially qualify.
Going Without Insurance
Congress recently removed the Affordable Care Act’s coverage mandate, meaning you’ll no longer be fined for going without coverage.
If you’re healthy and seldom require medical care, you might like this approach. But nobody expects a frightening diagnosis or a bad wreck, and without coverage, this kind of tragedy could ruin you financially.
If you’re determined to go without coverage, consider other ways to patch together some protection against the unexpected:
- Accelerated Death Benefit Rider: A life insurance policy with an accelerated death benefit that could help keep you from leaving your family with a ton of health care debt.
- Full Coverage Auto Insurance: Medical payments through your car insurance in case you’re struck by an uninsured motorist.
- Healthy Lifestyle: You can’t prevent everything, but a good diet and regular exercise can make some chronic health conditions less likely. (I’m not a physician, but I think this is common knowledge.)
Can I Get Health Insurance for 2021?
Open enrollment for 2021 ended December 15, 2020, on Healthcare.gov Marketplace. You can qualify for a special enrollment period (SEP) after the deadline if:
- You lose your job and its health benefits.
- Get married or have a baby / adopt a child.
- Get a divorce and lose coverage as a result.
- A death in the family changes your insurance status.
You can buy other forms of non-Marketplace coverage, such as short-term policies anytime during the year.
Health Insurance FAQs
How Much Is Health Insurance a Month for a Single Person?
In 2019 the average single American paid about $400 a month in health insurance premiums. But your monthly premium can vary widely, depending on several variables:
- Tax Rebate: The Affordable Care Act of 2010, which most of us call Obamacare, helps Americans pay health care premiums through tax rebates. People with lower incomes use this rebate to subsidize their monthly premiums. Start your rebate process at Healthcare.gov or by talking to an independent insurance agent, and be sure to accurately report your income: Under-reporting can lead to a throbbing tax headache in the New Year.
- Where You Live: Your location determines a lot about your insurance costs because health care costs and policies vary state by state. Typically, people in the Southeast and Southwest pay higher premiums. Sometimes, costs can vary county by county widely depending on area hospitals and clinics.
- Where You Get Coverage: If your employer or university offers health care, you can save a lot out of pocket, both because group policies cost less and because your employer may be paying a chunk of the bill.
- Your Age: Younger people tend to be healthier and can expect to pay less for health insurance.
- Your Coverage Options: Your level of coverage, as discussed earlier in this post, will almost always impact your premiums. Better coverage costs more.
How Much Is Blue Cross Blue Shield Per Month?
- A 35-year-old paying full price for a mid-level Blue Cross Blue Shield health policy would pay about $520 in monthly premiums.
- A 25-year-old with the same coverage would pay about $430 a month.
- A 50-year-old would pay about $800 a month for the same coverage.
As you can see, prices vary widely, and age isn’t the only variable.
Blue Cross Blue Shield is comprised of 36 separate insurers. If you start shopping for a BCBS health policy, the agency will direct you to your local chapter. Costs vary widely from state to state (and sometimes county by county).
BCBS also provides policies through the Affordable Care Act at Healthcare.gov, which means your income could factor into your premiums.
BCBS also partners with the federal government and many other employers to provide group health plans. These partnerships will usually affect premiums.
How Do I Get Cheap Health Insurance?
You can save money on premiums by limiting your coverage — think HMO with a high deductible — but you could find yourself paying thousands in extra out of pocket costs.
You can save out-of-pocket costs by opting for higher premiums — think PPO with a lower deductible and lower co-pays — but you may be healthy all year and not need the more robust coverage.
Whatever your strategy, It’s essential to read every detail of your policy before committing. You’ll find all sorts of fine print limiting your coverage.
To get the cheapest health coverage, seek some help from:
- Healthcare.gov: Tax rebates can make your premiums affordable. The process at Healthcare.gov is easy enough. Enrollment is usually open in the fall or if you have a qualifying life change.
- Medicaid or Medicare: State policies differ, but many lower-income and older Americans can get significant help through Medicaid or Medicare programs. Even if you don’t qualify, your children might.
- Employer-Provided Plans: If your employer provides health coverage, you’re in luck. Depending on your employer, you could save significantly compared to buying your own coverage.
- University Plan: If you’re in college, you can opt into your university’s group insurance. In fact, you may be automatically enrolled. The costs will appear on your student account.
- Parents’ Plan: If you’re not older than 26, you can stay on your parents’ or guardians’ family plan, assuming they’re willing to keep you. Even if you’re married and no longer a dependent, you can still keep the coverage.
How To Choose The Best Health Insurance for You?
If you start to feel hopeless while shopping for health coverage, you’re not alone.
You may see a plan with premiums you can afford only to realize the plan’s out-of-pocket max would break you.
Or, you may like a plan’s features, but you can’t be sure whether you’d need them. If you didn’t use the coverage, wouldn’t those premiums all year be wasted money?
Your answers depend, in part, on what you expect from your coverage. If you expect insurance to make every trip to the doctor painless financially, you may not mind paying expensive premiums.
If you want coverage in place just in case something bad happens, look for a plan with more limitations but lower premiums. Or consider catastrophic coverage if you qualify.
And if you get stumped, ask for help. Look for an independent insurance agent in your area who can answer your questions and clarify some of the confusion.