Considerations for Selecting Your Health Insurance Plan
Health insurance can be very important to both your physical and financial health. There are many different types of plans, and within those types, a wide variety of features. Consequently, it is important to research your options carefully so that you can find a policy that meets your health needs and your budget.
Key Health Insurance Terms
As you do your research and compare plans, there are a number of terms that you should be familiar with, including:
- Premium. This is the amount you pay each month to your health insurance provider to get coverage. It is an important part of your health insurance cost, but not the only part, as fees like copayments play a role as well.
- Copayment. What is commonly referred to as your “copay” is an amount you pay to your provider for a particular type of covered service. For example, you might pay $25- $40 for an office visit to see your primary care physician. This is on top of your monthly premium.
- Coinsurance. Similar to a copay, this share of medical costs is typically expressed as a percentage rather than the flat fee. For example, your plan may cover 80 percent of the cost of a procedure and require that you pay 20 percent.
- Deductible. This is the amount you are required to pay for a covered service before your insurance kicks in. Typically plans with lower deductibles have a higher premium.
- Maximum out-of-pocket cost. Most plans have a maximum amount that you are required to pay in a particular period (typically a year) through copays, deductibles, etc. One you have reached this limit, your insurance company covers 100 percent of the cost of your care, and you have no more out-of-pocket expense for that period.
- COBRA. The Consolidated Omnibus Budget Reconciliation Act is legislation that allows you to continue the health insurance provided by your employer 18 months after your employment ends. You pay 100 percent of the premiums along with a small administrative fee.
- In-network provider. This term refers to physicians or other providers that an insurance company has approved. Typically the insurer has negotiated a lower rate for services with these providers.
- Out-of-network provider. These are physicians or other providers that are not on the insurance company’s approved list. Generally no special rate has been negotiated with these providers, so you will pay more to see them.
Types of Health Insurance Plans
There are many types of health insurance plans, but the most common include:
- PPO. A Preferred Provider Organization plan has a network of physicians and hospitals that have agreed to charge a negotiated rate for their services. Typically you have the freedom to see any of the providers within the plan.
- HMO. Health Maintenance Organization plans generally have lower out-of-pocket costs. In an HMO you will select a primary care physician, and will need that doctor’s referral to a see a specialist.
- High Deductible Health Plan. An HDHP plan has a higher deductible than other insurance plans, but with a monthly premium that is generally lower. You tend to pay more for your healthcare before your insurance kicks in, but an HDHP plan can be combined with a health savings account (HSA), where you can save money for certain medical expenses free from federal taxes.
The health insurance companies whose plans you are considering will provide you with details about their offerings. But, the information above is a good foundation for having conversations with them.