How to Compare Health Insurance Plans

How to Compare Health Insurance Plans

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When it comes time to compare health insurance plans to decide which one fits your needs and budget, you'll need a way to make that comparison. Here are some guidelines and considerations to help you figure out which insurer best suits your needs.

As you review each question, plan to get answers from at least two people who represent each insurer. Ask questions of:

Agents -- Particularly if you will be seeking out individual health insurance, your first contact may be an insurance agent. They can be very helpful because they often represent more than one insurer. On the other hand, since they don't work directly for one insurer, they don't always know the latest policies or changes in plans. Further, since their income is based on how many insurance plans they sell, they may not be as objective as you would like them to be.

Customer Service Representatives -- These folks work directly for the health insurers. Plan to get some preliminary information from them, but always double check their responses. In the past few years, I have heard dozens of complaints from patients who were told one thing by one CSR, only to be given a different answer by someone else who worked at the same company.

Human Resources Staff -- These folks work for your employer and are a good place to start for basic information. However, you'll want to confirm whatever information they provide you, either by material you are given in writing, or by calling the insurer's customer service rep.

Health Insurance Exchanges -- These health insurance marketplaces are available to help compare and choose plans under the Affordable Care Act. There are state exchanges and the exchange.

Now that you know who to talk to, here are the questions and considerations you'll want to make.

Question #1: What Are Your Personal Circumstances?

Do you need to insure just yourself? Or your family? Do you or anyone you plan to insure already suffer from an illness or a long-term injury? Where was the last place you had insurance? Can you document that?

Do you plan to have a baby? Hoping to have some elective surgery? Or planning to travel overseas, requiring out-of-the country-coverage?

Why your personal circumstances are important: Whether or not you can get affordable insurance will depend on your health insurance history. If you can prove you have been insured over the past year or more, but need to make a change due to other circumstances (like getting laid off), it will be easier to find affordable insurance than it will be if you have not had any health insurance for awhile.

If you already have a pre-existing condition the Affordable Care Act has made it easier to get insurance. See question #4 (Step 5) for more information about pre-existing conditions.

If one person in your family has a pre-existing condition, then you may find you can save money by separating that person's insurance from the rest of your family's insurance.

As for pregnancy or travel... Not all insurers offer pregnancy and birth coverage. Not all insurers expand their coverage area outside the country, although most will cover you while you travel within the United States. True elective surgery such as many forms of plastic surgery is rarely covered, although which surgeries are considered elective vary from insurer to insurer.

Your life circumstances may influence the choices you make. Or, your insurance choice may limit your future plans. You’ll want to take these into account, too, if necessary.

Question #2: Do Your Doctors Accept the Health Plan You Are Considering?

Health insurers will provide a list of doctors who accept their plans. You can go online or check their printed material, or you can call the insurer to ask about specific doctors.

Why this question is important: When you have a good relationship with your doctor, that relationship is valuable. Choosing the wrong insurance plan may require you to change doctors.

On the other hand, if you don’t have a good working relationship with any providers, then you may decide to save money on a less expensive insurance plan.

Double-check this coverage: Don’t take the insurance plan’s word for whether a doctor accepts their insurance. Once you have narrowed down your choices to one or two, then call your favorite doctors and ask if they accept those one or two plans.

Doctors and insurers change their relationships all the time. You don't want to make a decision based on bad information. And you don't want to end up paying out-of-network charges for doctors who used to be covered by your insurance plan.

Question #3: Will You Have Access to a Hospital of Your Choice?

Not every hospital works with every insurer. Once you've chosen the best hospital for your needs, you'll want to be sure your new insurance plan will cover any care you receive from or in that hospital.

Question #4: What About Pre-Existing Conditions?

If you or your family member has a pre-existing condition, ask whether each insurance plan accepts patients with that condition. A pre-existing condition is a chronic illness (like diabetes, heart disease, allergies or asthma) that you have before you ever apply for that insurance.

Why this question is important: Passage of the Affordable Care Act in 2010 changed the rules for people with pre-existing conditions. As of 2014, both adults and children with pre-existing conditions are able ​to buy insurance through state exchanges without discrimination.

One way to lower the overall cost of health insurance for the entire family is to buy the very expensive plan only for the person in the family who has that pre-existing condition. Then purchase a family plan for the others.

Money Question #1: What Will the Total Annual Cost of Health Insurance Be?

Most insurers will charge you for monthly premiums, or they may charge you quarterly or bi-monthly. Some may charge an enrollment fee to be put into a group of others like you who want individual insurance. Still others will tack on a monthly billing fee if you don’t pay for it all at one time. You’ll find premiums for a single person, for a couple or for a family (three people or more.)

Why this question is important: You’ll want to compare your annual total for the insurance, not including co-payments, to know what your minimum cost will be for the year. These premiums will be what your insurance costs before you or your family member ever gets sick or needs to access the services. It’s money you will pay even if you are perfectly healthy all year.

Narrowing Your Choices and Drilling Deeper

Once you have the answers to these first five questions, you will probably have narrowed your choices down to two or three insurance companies and plans.

Now draw up a set of assumptions that you can use to help you compare each plan to the next, fairly, like apples to apples. This will be a sample health year that you'll use for estimation purposes.

For example, if you have a family of four, you may estimate 12 trips to the doctor over the course of the year, needing a prescription for six of those visits. Maybe you’ll need five medical tests (like blood tests, MRIs, or anything that will require a co-pay.)

Apply the next five questions to the remaining choices:

Money Question #2: What Is the Deductible for the Health Insurance Plan?

Your deductible is the amount you will pay out of your pocket before insurance will pay for your healthcare. A higher deductible will mean a lower premium, and lower deductible will mean a higher premium.

Generally, if you are quite healthy, then you can afford to choose a high deductible plan and keep your premiums lower, because you won’t need to see your doctor so often. If you have a chronic health problem or get sick or injured frequently, then you are better off keeping your premiums higher and letting your insurance kick in sooner.

A deductible will typically be $250 up to $5000, and may vary depending on how many family members you are insuring. That means you will pay that $250 to $5000 before insurance begins to pay for your care.

If you choose a very high deductible, your insurance may be considered to be “catastrophic,” meaning it is intended to take care of you only in a situation that would otherwise be catastrophic to your finances.

Money Question #3: What Co-Pay Is Expected for Each Medical Visit?

Your co-pay is the amount you pay for each visit, regardless of whether the visit is covered by insurance. It’s usually something like $25 or $50 per visit. Along with this question is a similar one: When does the co-pay apply? For example, some plans don’t require a co-pay for a well-visit or check-up. Others will, or won’t charge a co-pay for testing appointments.

Now multiply the co-pay as it relates to your set of assumptions in Step 6 (Question #5). A co-pay charged at $25 for each doctor visit and test would be 17 x $25 = $425. A co-pay charged at $30 for visits but not for tests might be $360.

Now find out what the additional co-pay percentage is - also called "co-insurance." Once your deductible has been met, you will still be responsible for that additional co-insurance amount, usually expressed as a ratio like 80/20 or 60/40. That means that the insurance company will pay 80% (or 60%) and you will be responsible for the remaining 20% (or 40%) of the bill. An 80/20 ratio will require you to pay higher monthly premiums than a 60/40 because it will mean your insurance company is responsible for more of your bill, whether or not they ever really need to pay it.

Yes, all this math is a pain, but as best you can, use your assumptions and these numbers to figure out what your health and medical visits and tests will cost you. A few minutes of difficult math may save you thousands!

Of course, you'll need to do this math for each insurance plan that seems like a good possibility for you.

Money Question #4: Will Prescription Drugs Be Covered Under this Health Plan?

Not every health plan covers the cost of prescriptions. If you are very healthy and don’t take prescription drugs often, then this will be less important to you. But if you do take a prescription on a regular basis, make sure you can get coverage, and make sure the prescription co-pays seem fair.

Co-pays for prescriptions are addressed in tiers. Tier One drugs are least expensive, and the co-pay will be the least amount. Tier Two drugs cost more and Tier Three drugs cost still more. The co-pays will be expressed as if they are ratios, something like $15/$20/$25 or $25/$40/$50 – for Tiers One, Two and Three respectively.

Recently, a fourth tier has been added to many insurers' lists of drugs called "formularies." The fourth tier will apply to very expensive drugs and the ratio costs won't be expressed. Ask your potential insurer whether they use a fourth tier and if so, how it is calculated.

In our family scenario above, those six prescriptions may cost as little as $90 over the course of the year, or as much as $300 even with coverage, and that’s if they are only needed for one fill. A drug that is taken daily for a year will be worth 12 of those co-pays because it may have to be refilled 11 times more. It’s worth it to take the time to do the math.

Bottom Line: Careful Review Saves Money on Health Insurance

As time goes on, as healthcare reform is implemented, and as confusion about what is, or is not allowed through health insurance continues, smart patients know to review all the information they can find about purchasing the right health insurance plan.

In many ways, health insurance companies are feeling squeezed for profits. As a result, they are taking steps to protect the money the raise from selling policies, and in many ways we patients are being blind-sided by the steps they take.

The one thing that protects us is knowledge of what is included in the written policies and plans we purchase - especially when we have reviewed our choices carefully before committing to the one that will work best for our circumstances.

If you have more questions about choosing and purchasing the best health insurance plan for you, you may want to review Health Insurance 101, a compilation of all the articles at this site which can help you.

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