When comparing health insurance quotes, it’s important to have a handle on basics. Here’s what you need to know.
Why do I need health insurance?
For a person in good health who doesn’t have employer health benefits, it can be tempting to save some money by not buying an individual health care plan. Health insurance is expensive – certainly more expensive than the relatively small amount a person in good health would spend on health care services in a typical year.
But there are a lot of reasons to purchase a private health insurance plan. In the long run, it’s likely to save you money, and can help you avoid potential long-term health consequences.
Some of the primary benefits of purchasing private health insurance are that you:
- Are assured access to preventative care. Individual plans have to provide access to certain kinds of preventative care (including annual check-ups and routine tests and procedures such as vaccinations and mammograms or colonoscopies) without a copay. That means you can affordably stay on top of necessary health care and have a chance to head off more serious medical problems before they start.
- Can get appropriate primary care. The law also requires health plans to cover certain basic types of health care, such as maternity & newborn care, prescription drug coverage, mental health and substance abuse services, and more. These kinds of health care services are necessary even for healthy people – because they help ensure you stay healthy.
- Have access to follow-up health care after emergencies or acute problems. If you have a serious illness or injury, such as a broken leg, you may wind up going to an emergency room. But the ER typically won’t see you for routine follow-up care as you heal. If you have private health insurance, it is easier to access follow-up care, therapy or other services you may need as you heal.
- Have continuous access to medical care. You can only sign up for an individual health insurance plan during open enrollment each fall or within 30-60 days of certain qualifying life events that may impact your access to a health insurance plan, such as marriage, divorce, a change in jobs, etc. If you miss that window, you won’t be able to purchase an individual health care plan again until the next open enrollment period. Open enrollment typically starts in the fall of the year prior to when the policies begin and end Jan. 31. So, if you were shopping for a health care insurance plan for 2018, start researching your options before Oct. 2017.
- Can prevent a health – and financial – disaster. No matter how healthy you may be now, anyone can become sick or suffer a serious accident. If you don’t have health insurance, even one seemingly minor injury can cost you thousands of dollars in needed care. If you develop a serious, chronic illness, such as cancer, the medical bills could be in the hundreds of thousands. Even if your illness or injury is quickly taken care of, you might be dealing with the medical bills for years to come.
- Avoid penalties. Under current law, if you can afford an individual health plan and don’t purchase one, you could face penalties of up to $695 per adult (and $347.50 per child) or 2.5% of your annual income – whichever one is greater.
If you’re still worried about the costs of purchasing an individual health insurance plan, keep in mind that even many people with middle-class incomes qualify for subsidies from the government to help offset the cost of a private medical plan. To see if you are eligible, check out your state health insurance marketplace (also often called an “exchange.”)
Note: There are health care exchanges run by the federal government and 21 states. You don’t have to buy an individual health plan from the exchange – you can also purchase directly from a health insurance company. But purchasing through an exchange is the only way to receive subsidies if you qualify for them.
Other insurance options to consider
When you are considering your health insurance options, you should consider whether you will also need dental or vision coverage. Some medical plans include this coverage, but many do not. (Note: Even those that do often have tight limits on what they cover and the benefits are minimal.) You can also buy separate plans that only offer dental or vision coverage. If you choose this option, you will pay a separate monthly premium.
As a separate plan, vision and/or dental coverage is relatively inexpensive, usually running less than $20 per month.
If you are comparing health insurance plans that have dental or vision coverage versus plans that do not and end up buying a separate plan, not only do you need to compare the two sets of benefits, you also need to take the second premium into account when comparing overall costs. For example, a monthly health plan that includes dental may cost $275 per month, while the combined cost of a “medical-only” plan and a separate dental plan is $300. In this case, assuming the coverage benefits are the same, the all-in-one plan is the better value.
You can buy a dental plan on the marketplace, but only if you are purchasing a health plan at the same time. The Marketplace does not offer stand alone vision plans. You can buy either plan direct from an insurance carrier.
What is the best type of policy for me?
There is no one best medical insurance plan or even a best type of health plan. You must determine what is right for you based on your current health, your medical history (including any family history of certain kinds of diseases), and your expected health care needs in the coming year – as well as how much risk you are comfortable taking.
Individual health plans – meaning the private health insurance you can buy from the government marketplace or directly from an insurance carrier – comes in four tiers of service. They are platinum, gold, silver and bronze.
Platinum plans have higher monthly premiums but lower out of pocket costs; bronze has lower monthly premiums but higher out of pocket costs. Silver plans fall somewhere in between the two.
A bronze health care plan may be the most cost effective overall if you are healthy and don’t anticipate needing many medical services. (But it still protects you if you do end up becoming seriously ill or having a serious accident or injury.) Platinum plans are often a better value for people with pre-existing conditions or who expect to use a lot of health care services such as seeing a specialist multiple times, filling many prescriptions, or requiring ongoing therapy of any kind.
A catastrophic plan offers only basic coverage – and accordingly, is considered the cheapest health insurance plan. They are available for people under 30 or those with very low incomes who qualify for a so-called hardship exemption because they would be otherwise unable to afford health coverage.
So the health plan that works best for you will depend on your specific needs and concerns. It is wise to do a thorough health insurance comparison before making your decision. For example, let’s assume you are in good health now, have no risk factors for chronic diseases such as diabetes and no anticipated change in your health needs. If you are more concerned about making sure you have low-cost health insurance, a bronze plan is the best option.
But let’s say that while all the other factors are the same, in the next year you anticipate using more medical services. Perhaps you are planning to get pregnant, have a minor surgery you’ve been putting off, or were recently diagnosed with a minor, but chronic ailment that will require a series of specialist visits or a daily prescription. In that case, you should compare plans from each of the tiers. Depending on what kinds of health services you expect to use, each of the plans (and their different levels of coverage vs. premiums) will cost you more or less out of pocket.
It may feel impossible to predict exactly what you might spend in the next year on medical services – but more medical insurance companies offer calculators that help you compare their plans so you can see which plan is the best fit – and lowest total cost – for your expected needs.
How do I compare individual health care plans?
When you’ve narrowed it down to a level of coverage (gold, silver, bronze, etc.) and/or a few specific plans that look like a good fit for you and you want to start comparing details, you’ll want to make sure you carefully compare the following areas:
- The provider network – This is the group of doctors and hospitals that you can access with that plan, often called “in-network.” If your preferred doctor isn’t in-network for your plan, you can still see him or her, but it will cost you more out of pocket for each visit.
- The monthly premium – This is how much you pay each month regardless of what health services you do (or don’t) use. So, if your plan has a monthly premium of $200, you’ll pay $2,400 a year, whether you ever see a doctor or not. These costs are not considered part of your deductible.
- The deductible – This is how much you have to pay out of pocket before your coverage kicks in. So, if you have a $1,000 deductible, you would have to cover the first $1,000 in health service fees before your insurer covers any bills. (Note: Some costs, such as certain co-pays, do not count toward your deductible. These should be noted clearly in your plan description.)
- The drug formulary – This is the list of which prescription medications are covered by the assistance, and what types of co-pays apply to them. Some plans have tiered drug coverage/costs. In that case, some kinds of drugs, usually generics, or some older name brand prescriptions will cost you less than other prescriptions (usually newer, or rarely prescribed drugs). If you take a daily maintenance medication, you’ll want to make sure that the prescription(s) you use are a part of your plan’s formulary and ideally, that it is covered at the lower-cost tier.
- Plan benefits — All plans have to cover certain basic kinds of care – but the details of what they cover and how they cover them can vary significantly among plans even from the same provider. For example, some plans may have an annual limit on how many specialist visits you can have or a dollar amount on therapeutic services.
Each of these factors is important, but how importantly depends on your health and expected medical service use. Unfortunately, you may not find one plan that is a perfect match for all your needs, but you should be able to find one with health benefits that fit the most important areas.
For example, if you rarely visit a doctor, you may want to focus on plans in which your current physician participates in-network and has the lowest monthly premium. The details of the drug formulary and a high deductible matter less if you tend to go to the doctor once a year for a physical and flu shot.
However, if you take three medications and have to see a specialist regularly to monitor your progress, you need a plan that has your doctor in-network. You also want to make sure the drug formulary covers your prescriptions, that the plan benefits cover what you expect to use, and perhaps a low deductible. In that case, to get the other benefits you need, you might have to pay a higher monthly premium – but you’ll also reduce out of pocket costs.
If you are buying a private health plan for your family or you and a spouse, you’ll need to find one that offers benefits that apply to everyone’s expected healthcare needs. Depending on the specifics of what each person needs, it may be cheaper in the long run to buy separate plans for each person, so go over all the potential scenarios to make sure you get the plans that are the best value for your specific needs.
For example: Take the case of a single mom who needs to buy a health insurance policy to cover her and her child who has a non-serious, chronic condition such as asthma which requires monthly prescriptions and repeated visits to a specialist. The platinum or gold plan might provide the coverage the child needs, but the mother is paying for coverage for herself that she is unlikely to use. A bronze plan might be all the mother needs, but for her child, it would likely result in a lot of out of pocket expenses. In a situation like this, the best value might be purchasing a bronze plan for the parent, and a different, higher-tier plan for the child.
It’s important to remember that signing up for a higher monthly premium doesn’t mean you aren’t getting a good value. For people who use a lot of health care services, a higher premium plan with good coverage saves them more money overall than a cheaper monthly premium with a lot of out of pocket expenses.
There are a lot of variables to weigh when you are selecting a private health care plan, so make sure you give yourself plenty of time to look at all the options and analyze plan details. If you look at the first two or three plans you see and purchase one of them, you may save time, but it could cost a lot of money in the long run.
What does health insurance cost?
Unfortunately, it’s expensive to buy an individual medical plan no matter how well you take advantage of ways to lower your health insurance costs. Like other types of insurance, your premiums will vary based on individual factors including your age and health history, what state you are in, as well as what tier of coverage your choose and whether or not you qualify for any subsidies.
Most people pay at least $100 for the monthly premium of even a basic, low-tier health insurance plan. For older people on a platinum plan, the monthly premium could be $500 or more monthly. If you are a single person, you can expect to pay at least $1,500 to $3,000 per year on the combination of monthly premiums, co-pays and any out of pocket expenses until your deductible kicks in.
If you are buying private health insurance for you and a spouse and/or one or more kids, it is not uncommon for the combined monthly premiums and out of pocket expenses to reach $10,000 or more each year.
How can I get cheap health insurance?
Most insurance carriers charge similar rates for similar kinds of health insurance. So, unfortunately, merely shopping around probably won’t dramatically lower your health insurance costs unless you switch from a higher-tier plan to a lower one. But that doesn’t mean there aren’t ways to reduce the costs of your health insurance.
If you are shopping for an individual or private medical plan, it’s probably because you don’t qualify for an employer plan, or you don’t like the options the company offers. You may still be able to benefit from the lower premiums of group health insurance plans.
If you belong to a professional society or certain other kinds of membership organizations, they may offer a group plan that has lower costs than an individual health plan. This is often a good option for self-employed people or those who work as freelancers. Be mindful that these plans do not qualify for any government subsidies. And be sure to use the same careful plan comparisons discussed above. Just because these plans are lower cost doesn’t mean they are a better value or fit for you.
If a group plan is not an option for you, you can choose to purchase your health plan directly from a carrier or the Marketplace. If you qualify for the subsidies, it’s best to purchase through the Marketplace – that is the only way to access that benefit. (You can check if you qualify or purchase a plan at healthcare.gov) If you do not qualify for subsidies, you can still buy a plan on the Marketplace, or you can go directly to the insurer. The monthly premium will be the same.
There are other options you can use to help keep the overall cost of your health insurance lower.
If your employer offers Flexible Spending Accounts (FSA), consider using one to set aside funds you can use to pay for copays and other out of pocket expenses. Because you don’t pay tax on the funds put into the FSA, it significantly reduces your total expenses. But be aware that you cannot carry over these funds from year to year – anything you don’t use, you lose. So you should only set aside as much money as you feel certain you will spend on medical services.
A similar financial tool, available if you choose a high-deductible plan is a Health Savings Account (HSA). Like FSAs, with an HSA you can set aside pre-tax dollars in a special account and use them later to cover out of pocket expenses for qualified medical services and reap the tax benefit. Unlike FSAs, funds in an HAS can be rolled over from year to year, so you don’t have to worry about using every dollar up within 12 months. Funds in an HSA can also earn interest. You can set up an HSA at most banks.
Which are the best health insurance companies?
The best health insurance company is the one that has the policy which best fits your specific needs and is available in your state. But, some companies have a track record of excelling in particular areas of providing and servicing health insurance policies. Navigating the complex world of health insurance can be a tricky business but by using this handy guide, comparing health insurance policies can be a lot easier.
The following five national companies received some of the highest ratings by J. D. Power based on cost, coverage, benefits, communication, provider choice, claims processing and customer service. Note: Medical insurance plans vary in coverage and service levels significantly across the states. This list is based on overall performance nationwide. Companies are listed in alphabetical order.
Blue Cross Blue Shield (includes Anthem, Carefirst, and other regional carriers)
For more detailed listings of individual plans available in your state and how they perform on specific quality measures, check out the state-by-state medical insurance plan ratings from the National Committee for Quality Assurance at http://healthinsuranceratings.ncqa.org/2016/Default.aspx
Affordable Care Act (ACA) – often referred to as “Obamacare,” this is the federal law that reformed how private health insurance is provided in the U.S.
Annual limit – a cap on specific benefits, such as the number of prescriptions filled or specialist visits. Once an insured person reaches this limit, any further services are paid for out of pocket.
Carrier – the company underwriting the insurance policy
Co-insurance – The percentage of a health service that you are responsible for paying once your deductible has been met. Example, if a policy has coinsurance of 30% and the procedure costs $1,000, the insured person would pay $300 out of pocket. (If the deductible has not been met, the insured will pay the full $1,000.)
Co-pay – A payment made directly to a health service provider, such as a doctor or pharmacy, by the insured. These payments may or may not count toward the deductible.
Deductible – Medical fees that must be paid by the insured person before the health policy benefits begin. For example, if a policy has a $1,000 deductible, the insured would have to pay $1,000 in co-pays, office and lab fees, or other costs before the insurer begins to pay them.
Drug formulary – The list of which particular plan covers prescription medications.
Flexible Spending Account (FSA) – An employer-sponsored plan that allows employees to set aside pre-tax dollars from their paychecks to be used to pay qualified medical expenses.
Health care exchange – (see Marketplace)
Health Savings Account – Similar to an FSA, this is an individual savings plan that allows you to save pre-tax dollars to pay health expenses. They may only be used with a high-deductible health care plan.
High deductible plan – As defined by IRS, this is any health care plan with a deductible of at least $1,300 for an individual or $2,600 for a family.
Insurance carrier – the company from which you buy your policy. You can purchase a healthcare policy on the marketplace or directly from the company of your choice.
Marketplace – government-run sites where you can compare and purchase medical plans available in your state
Open enrollment – the time period each fall through the end of January when you can enroll in a private plan. Outside of open enrollment, you must have a qualifying life event such as job loss, marriage, or divorce to sign up for a private plan.
Out-of-network providers – care providers who are not considered part of your healthcare plan. You may still see them for services, but you will likely pay more than if you used an in-network provider and may have to do additional paperwork to have the visit covered
Out of pocket costs – Anything you pay directly to a service provider, including co-pays, office or lab fees before the deductible is covered, etc.
Plan benefits – The list of specific benefits and how each health insurance plan provides them.
Premiums – A fixed amount each month that you pay for your health care plan
Preventative care – Certain kinds of medical care that the federal government mandates be provided through your health plan because it reduces the need for additional health care in the future. Examples include routine vaccinations, an annual exam and certain kinds of diagnostic screenings, such as for breast or colon cancer.
Provider network – the group of doctors, hospitals and other care providers that are available to you through your plan (also called “in-network”)
Subsidies – financial aid provided by the government to qualified people to help reduce the cost of health insurance