What You Need To Know To Choose a Health Insurance Plan
Purchasing health insurance is one of the most important financial decisions you will make. The best policy is the one that provides the most coverage for your situation at a price you can afford. If not familiar with industry-specific terminology, the process can seem overwhelming. But with a little understanding of key terms, you can make a good choice. Below are some of the most common terms explained.
The Marketplace
The marketplace is where individuals shop for coverage. If you receive your health insurance through your employer, your employer’s offerings are essentially the marketplace. For others, the marketplace can be the federal or individual state’s exchange. Exchanges are also marketplaces.
Outside of a mortgage payment each month, insurance may be your most significant expense. Many people have found ways to achieve financial goals and reduce overall household costs with a velocity banking strategy. Health insurance is expensive. It’s worth considering options and definitely running a side-by-side comparison of policies offered in your marketplace.
Networks
A network is made up of medical providers that have a contract with certain insurance carriers. Networks are established to reduce costs. If you have specific doctors, specialists, and hospitals that you desire to use, search the provider network on the insurance company’s website to verify that your providers are in the network.
Insurance Types
Policies are grouped by type. The type you choose, will affect your costs and benefits. Below are the most common types offered.
• Preferred Provider Organization (PPO). PPO’s have a network of doctors, hospitals, and other care providers. You have some flexibility in selecting, but costs are higher if you go out of network. Typically, referrals are not needed.
• Health Maintenance Organization (HMO). With an HMO, except for emergencies, you must use the network providers. The HMO coordinates your care and referrals. If you go outside of the network, you can be liable for the full cost of care.
• Point of Service Plan (POS). Though the policies have networks, you have more provider options. You can go out of network, but the out-of-pocket costs are higher. Referrals are generally needed.
• Exclusive Provider Organization (EPO). Except for emergencies, you must use in-network providers. No referrals are necessary
• High Deductible Health Plan (HDHP). These plans can be PPOs, HMOs, POSs, or EPOs. You will pay a large deductible before any plan benefits begin. These plans can be used with a Health Savings Account (HSA), a tax-advantaged account to help pay for medical expenses.
Consider your overall health and current needs. If you want to manage and select your specialists, PPOs and POSs may be the best options. If you are healthy and rarely go to the doctor, an HMO can be a cost-effective choice.
Out-of-Pocket Costs
Out-of-pocket costs are much more than monthly premiums. Once you know the type of plan you want, begin comparing prices.
• Monthly Premium. This is the dollar amount you pay each month to have the coverage.
• This is the amount you pay before the plan benefits kick in.
• Co-pay. This is the amount you pay out-of-pocket for each service or prescription.
• Co-insurance. This is generally a percentage you pay of the total costs.
• Premium Tax Credit and Cost Savings Reductions. These are government programs that can reduce the monthly premium, depending on income qualifications. Information is available through federal and state exchanges.
If you are on certain high-cost medications, it’s a good idea to run those through the pharmacy formulary on the insurance website. Formularies and tiers are not standard across carriers.
Even if you are happy with your current policy, companies can change the cost and benefits offered. New companies enter the marketplace each year bringing with them, additional benefits. Selecting health insurance is not always easy, but it is necessary to protect your financial assets. It’s best to review coverage at least annually. Use these definitions to help you understand the benefits offered and the estimated out-of-pocket costs for your situation.
