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Small Business Employee Benefits and HR Blog

How to Choose the Best Health Plan This Open Enrollment

With open enrollment for individual health insurance less than two weeks away now, many Americans are scrambling to evaluate their current (if any) policy, and thinking about how they will make changes for 2015. The Affordable Care Act introduced new changes that greatly benefit individuals and individual health insurance by making it more affordable and accessible than ever. In addition, the health insurance Marketplace makes it easy to shop and compare rates for different carriers and coverage levels.

While many people get caught up on the monthly premium amount, this may not be the best or most efficient way to select a plan this open enrollment. Lower premium prices typically accompany higher-out-of-pocket costs; however, research has shown that there is a gap in health insurance literacy for many Americans. Here’s how to look beyond the sticker price to choose the best plan for you this open enrollment.

Select the Right Category of Plan

In the past, it was hard to understand the coverage levels of plans. That’s no longer the case. As of 2014, individual health insurance plans are categorized in four standardized levels of coverage, called “metallic tiers of coverage.” These categories help you better compare plans “apples to apples.”Metallic_tier_plans

Source: Affordable Care Act 101

In order to save money, it is important to select the right metallic tier for your health and financial needs. If you are unsure of what plan to select, it is always a good idea to talk to an insurance broker to help you with your selection.

If you anticipate using a lot of medical services, it is more ideal to select a platinum or gold plan. Although the premiums higher, you will pay less out-of-pocket when it comes time to receive medical care. If you do not anticipate having a lot of healthcare needs, selecting a silver or bronze plan is more ideal to save money. Although there will be higher out-of-pocket costs when you do need medical services, you will pay a significantly lower premium.

Look at the Deductible

Your deductible is the amount paid for covered care before the insurer begins to pay. For example, a you may have to pay $500 out-of-pocket for covered services before the insurance company pays; this would be a $500 deductible.

High deductible health plans are becoming more and more popular. While the appeal of a high deductible plan is the lower monthly premium, some consumers will end up racking up big bills before their health insurance even kicks in. If your employer offers an HSA or an integrated HRA to help lessen the burden of a large deductible, then a high deductible plan may actually work better for your financial needs.

While many lower-tiered bronze and silver plans may have a low monthly premium cost, they may be accompanied by high deductibles. As stated above, make sure your insurance plan is comprehensive enough to cover all of your healthcare needs.

If you have health needs that require regular doctor visits, such as a chronic illness or pregnancy, you may be better off paying a little more monthly instead of racking up large medical bills.

Look at the Out-of-Pocket Costs

The out-of-pocket costs, such as coinsurances and copays for certain services. The copayment is a flat dollar amount paid to the healthcare provider for a covered service. For example, a $30 copayment may be required for each covered visit to a primary care doctor, and $10 for each generic prescription filled. Copayments vary from plan to plan and are sometimes different depending on the type of covered service received.

Coinsurance is the percentage of allowed charges for covered services. For example, health insurance may cover 70% of the charges for a covered hospitalization, leaving you responsible for 30%. This 30% is known as the co-insurance. If the plan has a deductible, the co-insurance for covered services is paid after your deductible is met. Co-insurance can also significantly affect the price of the insurance premium. Typically, plans with lower co-insurance have higher premium costs

These out-of-pocket costs can have a significant financial impact. If you know you are on an expensive prescription that needs to be filled each month, pay close attention to the summary of benefits for the plans you are browsing. If there is a high copay or coinsurance for prescriptions, even after the deductible, you may be better off with another plan.