Health is the most important wealth
If you’re lucky enough to have employer-provided health insurance, that narrows your choices to plans offered by your employer. If you don’t have coverage through your job, perhaps an organization or association you belong to will let you buy 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 advance 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 may qualify for it when you file your taxes for the year.
If you can’t, or don’t want, to get health insurance from any of these sources, you’ll have to resort to buying a private plan. It will give you the widest range of options, but it will probably 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 obtain 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 you are 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 be in the plan’s network, but you don’t need referrals for specialists. Finally, Point of Service (POS) plans are a less common option that is essentially the opposite of an EPO. You are not limited to the POS plan’s 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 don’t feel 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 vs. Low Deductible
Other things being equal, the higher the deductible for a plan, the lower the monthly premiums. A high deductible means you’ll have to pay a lot of health care expenses yourself before the insurance policy kicks in, but if you have little or no medical expenses in any given year, these plans can be a bargain. Very low medical expenses mean you probably won’t exceed your deductible, even for a low-deductible plan, so getting a high-deductible plan keeps your insurance costs as low as possible while protecting you in case you something catastrophic happens.
If you decide to go with the high deductible, your best bet is to get a health savings account (HSA)-enabled plan and fund it with at least the equivalent of one year’s deductible. An HSA plan clearly covers the biggest weakness of a high-deductible health insurance policy, namely that you’d have to shell out a lot of money on a major medical expense before the insurance would take over. If you have a full year’s deductible tucked away in your HSA, you can use that money to finance your share of expenses, while simultaneously enjoying the triple tax advantage of an HSA.
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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, such as a PPO, it’s best to use in-network providers as much as possible because doing so will lower your costs. And the rules a given health insurance policy uses to decide what’s covered and what’s not, and how much co-pays will be, can make a big difference in how helpful a particular policy really is for you.
For example, if there’s a fairly expensive drug that you take every day, you’ll definitely want to get a health insurance policy that lists that drug on its formulary. If you travel a lot, stick with plans that offer good out-of-area treatment options. And if you already have a primary care doctor, you’ll definitely want to choose a plan that includes your doctor in their network.
Find the best deal
If you’re stuck 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 the annual cost of a plan, 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.
