Before You Choose a Health Plan

What You Need to Know When You're Shopping for Health Insurance

Shopping for health insurance is more complicated than shopping for other things. image ©Art Glazer/Getty Images

Shopping for health insurance isn’t as easy as shopping for other things. But it's important to get it right.

Choosing the wrong health insurance plan could mean paying too much. Worse yet, it could mean not having the coverage you need, or not being able to use the health insurance you bought.

The resources below will help you buy health insurance that’s the best fit for you and your family while balancing the money you have to spend with the benefits you want.

What the heck does that mean? Health insurance terminology 101

Understanding these confusing health insurance terms will help you make informed choices and be a savvy consumer while you’re shopping for health insurance. Once you understand the terminology used to describe plans, you'll find it much easier to compare your various options.

Understanding different types of health insurance

Before you can choose the best plan for your situation, you need to understand how common types of health insurance plans work. This article explains the difference between an HMO, PPO, EPO & POS, and will help you understand how they work and which one will be the best fit for you. 

Understanding Plan Details

Now that you understand common types of health plans, you need to understand how the details work. Plan details like whether you’re responsible for a copay, deductible, or coinsurance and what expenses count toward the out-of-pocket maximum can mean a difference of thousands of dollars when you use your health insurance.

Understanding how these details work will help you spot good and bad deals while you're shopping for health insurance, and know how much you’ll owe when you use your health insurance.

What’s the Difference Between Copay and Coinsurance?
Out-of-Pocket Maximum—How It Works and Why to Beware

How the plan covers prescriptions

If you’re taking a prescription drug, check the drug formularies of each plan to make sure you understand how that health plan will pay for that particular drug.

This could literally be the difference between you paying $15 per month to fill your prescription versus paying $1500 per month.

Under the ACA, health plans are required to cover at least one drug from each U.S. Pharmacopeia category and class, OR the same number of drugs from each category and class as the state's benchmark plan - whichever is greater. Starting in 2017, health plans will also have to use a "pharmacy and therapeutic committee system" which will incorporate more scientific evidence into formulary design.

Understanding Your Health Plan Drug Formulary

Comparing health insurance plans: Choosing a Specific Plan

One of the hardest parts of shopping for health insurance is balancing how much freedom of choice you want with how much you can afford to pay in premiums and out-of-pocket expenses.

The more freedom of choice you have in a health plan, generally, the more expensive the plan will be. This is because health insurers keep their costs down by limiting network size and access.

For example, a health plan may limit your choice of doctors, allowing you to choose only among doctors who give the health plan a discount. Or your health plan may only cover specialist visits if you're referred to the specialist by your primary care doctor, as opposed to letting members decide for themselves whether they should see a specialist.

In general, people who are healthy tend to value lower premiums over broad networks and unfettered access to doctors. But people who are dealing with health conditions may place more value on ease of use and access to providers, even if it costs more. When you're comparing health insurance options - even if you're currently healthy - pay attention to how easy the plan would be to use if you were to develop a serious health condition.

Health Savings Accounts & Flexible Spending Accounts

HSAs and FSAs are special types of savings accounts designed to help pay some of your healthcare costs. They can help you save on health insurance by allowing you to buy health insurance with lower monthly premiums and higher out-of-pocket expenses. Plus, you’ll save on income taxes since money you put into an HSA or FSA isn’t taxable.

FSAs are established by employers. HSAs can be established by employers or by individuals, and contributions can be made as long as the employee or individual is covered by an HSA-qualified health plan.

So if you're buying your own health insurance - as opposed to getting it from your employer - you'll have access to HSA-qualified plans (and the opportunity to set up an HSA and contribute to it), but not an FSA. If your employer provides your health insurance, you may have access to an FSA or an HSA - it depends on what your employer offers.

FSAs and HSAs come with a lot of rules, and it's important to understand them before you sign up. 

Sources:

Centers for Medicare and Medicaid Services, Fact Sheet: Final HHS Notice of Benefit and Payment Parameters for 2016. Accessed 5/26/16.

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