What is one of the worst things you can do when purchasing a health plan? That’s easy– not doing your homework.
Choosing a health plan you thought would cover you completely and then discovering that’s not the case is an all-too-common scenario. Comparing plan features can be like digging through the weeds and many times people focus only on the premium because it’s the easiest to understand.
Here are the top features you can’t overlook when choosing a health plan.
Type of Plan
This is the most basic and essential part of the process. For most people the big decision is between an HMO and PPO. Some companies also offer POS or traditional indemnity (fee-for-service) plans, but both of these are becoming more rare.
With an HMO, you choose a primary care physician (PCP) and he or she must refer you to any kind of specialty care. You also must stay within the plan’s physician network for the care to be covered. With a PPO, there is also a network, but you are free to go to specialists at any time and if you do go outside the network, you’ll still be covered, you just pay a higher share of the cost.
Imagine this scenario: you want to see some kind of specialist. Would you feel OK about having to go to your primary care physician first? Or would you prefer to go to the specific provider you want, whenever you want, without being required to first get a referral from your primary care physician? If so, you might do better with a PPO. If you don’t mind always going through your PCP, a lower-cost HMO is probably worth it.
Once you know the type of plan you want, look at the deductible. The deductible is how much you’ll need to pay out of pocket each year before your health plan starts to cover any care. Notice we said “deductibles” — plural. It’s common for plans to have different deductibles for in-network providers versus out-of-network ones. The same can be true for family coverage, too. Each member of the plan may have a separate deductible, which tends to get more expensive than a combined deductible.
Choose a plan with deductibles you can reasonably manage. You may want to select a plan with a lower deductible if your expectation is to meet it, or a higher one if you expect to never reach it, which means you will save on premiums instead.
Consider how much you have saved up in case you had to pay your entire deductible this year and don’t choose a plan with a deductible much higher than that. If you choose a high deductible plan, some come with an HSA (Health Savings Account). You can save money tax-free in the HSA as long as you only spend it on health care. As a ballpark: a $200 deductible is great—about as low as you can go. A $10,000 deductible is pretty risky and you should only expect to meet it with emergencies or major health services.
Maximum Out-of-Pocket Limit
Many health plans have maximum out-of-pocket limits, or in other words, the most you will be required to shell out in a year. It’s a protection for you, so the lower the better.
A good benchmark is the maximum allowed on Medicare Advantage plans: $6,700 per year. However, for many people, a limit closer to $4,000-$5,000 is more reasonable. Just like a deductible, consider what you have available in your savings, or (since the costs will likely be spread out throughout the year) what you can realistically afford in the worst-case scenario.
Access to not only the doctors you are currently seeing, but also a variety of specialists, hospitals, and other facilities, is important. First, make sure your physicians accept the insurance plan. Then, find out from the plan which physician groups and hospitals it contracts with.
If you do not have any preferences for doctors, try to choose a plan that has a pretty large network, so that you will have options if you need them. Search for providers on the plan’s website or call to ask about which physician groups work with the plan. Another hint is to look for affiliations with academic medical centers, which tend to include a good portion of specialists in the area.
Some health plans have been tightening up on emergency coverage. Some require you to notify them before going to an emergency room unless the condition is life threatening. Without this prior authorization, the visit may not be covered. Similarly, some plans will not cover emergency care at non-network hospitals. A plan could also limit coverage to true “emergencies,” so it is important to know how the plan defines a life threatening situation.
Think about how much financial risk you are willing to take on in case there is an emergency — a lot or a little? Then be sure you understand the plan’s rules for obtaining emergency care and how much you are responsible for in different situations. Do you have a flat co-pay? Co-insurance? Do you need to notify the plan or go to certain hospitals? Since emergency care is the biggest unknown, the best thing to do is to be informed and understand your risk.