Health is the most important wealth
If you are lucky enough to have health insurance provided by your employer, that narrows your options to the plans offered by your employer. If you don’t have coverage through your job, perhaps an organization or association you belong to will allow you to purchase health insurance through them at a group rate.
Another option is to check your local Obamacare health insurance marketplace to see if you qualify for an initial premium credit, which would allow you to lower your premium costs. Even if you don’t qualify for the credit right away, buying your health insurance through the marketplace means you can qualify for it when you file your tax return for the year.
If you are unable, or unwilling, to obtain health insurance from any of these sources, you will have to resort to purchasing a private plan. It will give you the widest range of options, but it will likely be much more expensive.
Deciding what type of policy to buy
Health insurance policies come in a variety of basic types, although you may not have access to all of these options through your preferred source. Health Maintenance Organizations (HMOs) are a very common type of health insurance policy. With an HMO, you must use health care providers within the policy’s network and you must get a referral from your primary care physician to see a specialist.
Preferred Provider Organizations (PPOs) are also quite common. A PPO health insurance policy has a network, but is not limited to in-network care, although using network providers is cheaper and you don’t need referrals to see specialists.
Exclusive Provider Organizations (EPOs) are a hybrid between HMOs and PPOs. You must join the plan’s network, but you do not need referrals for specialists. Finally, Point of Service (POS) plans are a less common option that are essentially the opposite of an EPO. You are not limited to the POS plan network, but you do need a referral to see a specialist.
Of the four common types of plans, an HMO or EPO tends to be cheaper than a PPO or POS with the same level of coverage. However, if network coverage is poor in your area, or you’re not comfortable limiting yourself to network providers, it may be worth paying a little more to get a PPO or POS policy.
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High deductible versus low deductible
All other things being equal, the higher the deductible for a plan, the lower the monthly premiums. A high deductible means that you will have to pay a large amount of health care expenses before the insurance policy takes effect, but if you have little or no medical expenses in any given year, these plans can be a bargain. Very low medical expenses mean that you probably won’t exceed the deductible, even from a low deductible plan, so getting a plan with a high deductible keeps your insurance costs as low as possible while protecting you at the same time. case something catastrophic happens.
If you decide to go the high deductible route, your best bet is to get a Health Savings Account (HSA) -enabled plan and fund it with at least the equivalent of a year’s deductible. An HSA plan perfectly covers the biggest weakness of a high deductible health insurance policy, meaning that you would have to fork out a large amount of money for a major medical expense before the insurance would take over. If you have a full-year deductible hidden in your HSA, you can use that money to finance your share of expenses, while simultaneously enjoying the triple tax advantage that an HSA offers.
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Coverage comparison
There are two main factors that affect how well a particular plan will cover your medical expenses: the plan’s network and its coverage policies. Even if you choose a plan with out-of-network options, like a PPO, it’s best to use in-network providers as much as possible because doing so will lower your costs. And the rules that a given health insurance policy uses to decide what is covered and what is not covered, and how much copayments will be, can make a big difference in how useful a particular policy is to you.
For example, if there is a fairly expensive drug that you take every day, you will definitely want to get a health insurance policy that includes that drug on its formulary. If you travel a lot, stick to plans that offer good out-of-area treatment options. And if you already have a primary care doctor, you will definitely want to choose a plan that includes your doctor in its network.
Find the best deal
If you are caught between two or three different policies and can’t decide which one to choose, try this exercise. Multiply the monthly premium by 12 to get a plan’s yearly cost, then add the plan’s out-of-pocket maximum. The result is the most you would end up spending on health care if you had one or more major medical expenses during the year. Do this calculation for each plan you are considering, and then compare the results. The plan with the lowest total is probably the best deal for you.