Five questions to ask when picking a health insurance plan

Medical care in the U.S. is shockingly expensive. The most recent report from the Agency for Healthcare Research and Quality¹ (AHRQ) found the average cost of a single hospital stay cost about $14,900 in 2020. While the cost of care isn't cheap, you can make it more affordable with health insurance coverage. When you work with a health insurance company, you agree to share the cost of healthcare prices with the company in exchange for a premium. Plus, depending on your plan type, you can get access to in-network providers that offer pricing discounts.

Whether you're selecting a health insurance plan at work or purchasing one on your own, we'll cover five of the most important questions to ask when picking a health insurance plan.

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1. What type of health coverage is right for you?

This is the first question you'll want to consider so you don't come up short on coverage or break the bank with out-of-pocket expenses.

To find out what type of health coverage is right for you, consider the following:

• Frequency of appointments. Do you rarely see your doctor? Or do you have a health condition or pre-existing condition that requires office visits regularly?
• Family. Are you pregnant? Do you plan on having a baby? Or do you already have children who require coverage?
• Prescription drug coverage. How many medications do you use daily? How much do they cost?
• Surgery. Will you require any surgeries in the near future?

Once you've answered these questions, you can search for plans that best fit your lifestyle.

2. What does the plan cover?

Before the Affordable Care Act (ACA) went into effect, different health insurance plans could cover different types of medical care with no regulations for what they needed to include. For example, some might not cover mental health, prescription drugs, or maternity care.

That changed in 2014 when the ACA mandated that all insurance plans sold to individuals and small businesses must cover at least the “essential” health benefits.

These ten benefits are considered “essential” by the Affordable Care Act:

• Emergency services
• Hospitalization
• Laboratory tests
• Maternity and newborn care
• Mental health and substance abuse treatment
• Outpatient care (medical services you receive outside of a hospital)
• Pediatric services, including dental and vision care
• Prescriptions
• Preventive services (such as immunizations, check-ups, and screenings like mammograms) and management of chronic conditions such as diabetes
• Rehabilitation services

The rules for insurance provided by large employers (which the ACA defines as 50 or more employees) are slightly different, but most will cover the same set of benefits. If you're selecting from plans offered by a large employer and are unsure what the plans cover, ask your employer for the Summary of Benefits and Coverage² (SBC). This standard form will state exactly which products and services are covered.

3. How much does the plan cost?

When looking at the cost of health insurance plans, there are several different prices to consider. Let's look at a few different categories of costs that will help you determine how much you'll end up paying for your plan.

Premium

Your premium is the monthly amount you'll pay to maintain your coverage. This monthly amount won't change during your entire plan year, so you can budget for it every month. Just like a monthly car insurance payment, you'll pay your premium even if you don't use your insurance to cover anything that month.

Deductible

The deductible is the amount you'll pay for covered services before your health insurance pays for anything. For example, if you have a $3,000 deductible, then you'll have to pay $3,000 on your own before your insurance starts to cover your bills. Generally speaking, plans with higher deductibles have lower premiums and vice versa.

Copay

A copay, or copayment, is a flat dollar amount you'll pay your healthcare provider for a covered service. For example, you may have to pay a $20 copayment for each covered visit to a primary care provider (PCP) or $10 for each generic prescription you get filled. Copayments vary from plan to plan but generally fall between $10 and $50.

Coinsurance

Coinsurance is the percentage of allowed charges for covered services you must pay after you’ve paid your deductible. For example, your health insurance may cover 70% of the charges for a covered hospitalization, leaving you responsible for the remaining 30%. This 30% that you pay is known as coinsurance.

Out-of-pocket maximum

An out-of-pocket maximum is the maximum amount of money you'll pay for medical expenses during a benefit period (for example, over the course of a year).

The out-of-pocket maximum never includes your premium, balance-billed charges, or services your health insurance plan doesn't cover. The out-of-pocket maximum will vary from plan to plan, but it can include copayments, deductibles, and coinsurance.

Once you have paid your out-of-pocket maximum for the year, your insurance company will pay the total amount of your covered medical expenses for the rest of the period.

Given all of these different prices within one plan, comparing plans and their overall costs can be tricky. That's why plans sold in state and federal marketplaces will be displayed in standardized “metallic tiers of coverage” ranging from Bronze to Platinum with various combinations of premiums and out-of-pocket costs.

For example, a Platinum plan will generally have the highest monthly premium cost, but you'll pay the least out-of-pocket when you receive medical care. This could be a good option if you usually require a lot of care, such as for chronic illnesses. With this plan, your insurance company agrees to pay 90% of your medical expenses and you agree to pay the remaining 10%.

With Bronze, Silver, and Gold plans, you’ll pay lower monthly premiums but pay more when you receive medical care.

This chart covers the basic structure of those options, including the 2023 average monthly premiums from data collected by the Kaiser Family Foundation³:

It’s important to note that these metal tiers have nothing to do with the quality of care you’ll receive. They simply determine how you and your insurance company will split your healthcare costs.

4. Can I keep my current doctor?

Every health insurance plan has a network of healthcare providers—doctors, hospitals, laboratories, imaging centers, pharmacies, etc. Each insurance company has contracts with these types of medical providers agreeing to provide healthcare services to plan members at a specific cost.

If a doctor isn't in your plan's network, your insurance carrier may not cover the bill. In other cases, they may require you to pay a higher share of the cost. So if you have doctors you want to continue to see, make sure they're included in the plan's network.

If you're shopping for health insurance on your own, review the plan's provider directory before you purchase the plan. If you're looking at insurance plan options through your employer, you can get provider lists from participating insurance companies. You can also reach out to the company's employee benefits department.

5. Where will you be covered?

Accidents happen. One day, you may need emergency medical care while you’re away from home. Maybe you catch a cold while you're away on vacation. Either way, what happens when you're far from your in-network doctors?

If you want to make sure you have all your bases covered, check to see how plans cover you when you're out of the state or country.

Most plans will cover visits to the emergency room and urgent care centers anywhere in the world, but it's always good to double-check the details.

It's also helpful to know if a plan offers telemedicine services or virtual visits where you can use your mobile device to easily connect with a doctor.

Conclusion

Choosing your own health insurance plan can seem daunting at first, but by asking yourself these five simple questions, you'll be well on your way to finding a plan that meets the needs of you and your family. Whether you have a lot of medical needs or only visit the doctor once a year, there's a plan that will match your specific preference for cost and coverage.

This article was originally published on October 31, 2013. It was last updated April 18, 2023.

1. https://datatools.ahrq.gov/hcupnet

2. https://www.healthcare.gov/health-care-law-protections/summary-of-benefits-and-coverage/

3.https://www.kff.org/health-reform/state-indicator/average-marketplace-premiums-by-metal-tier/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D