| Blog
SIGN UP

Three questions to ask when picking a health insurance plan

Written by: Gabrielle Smith
June 11, 2021 at 8:35 AM

Medical care in the U.S. is shockingly expensive. The Agency for Healthcare Research and Quality reports that the cost of a single hospital stay averages around $11,700, and data from the Organisation for Economic Co-operation and Development finds that the U.S. spends more on prescription drugs than any other country.

Health insurance is a way to reduce those costs by sharing the risk with others while also giving you access to in-network pricing discounts.

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

See how you can find an affordable health plan through a state or federal Marketplace

1. What does the plan cover?

Before the Affordable Care Act (ACA) was put 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:

  1. Emergency services
  2. Hospitalization
  3. Laboratory tests
  4. Maternity and newborn care
  5. Mental health and substance-abuse treatment
  6. Outpatient care (doctors and other services you receive outside of a hospital)
  7. Pediatric services including dental and vision care
  8. Prescription drugs
  9. Preventive services (such as immunizations and mammograms) and management of chronic diseases such as diabetes
  10. Rehabilitation services

The rules for insurance provided by large employers (which the ACA defines as 50 or more employees) are a little different, but most of them 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 Coverage (SBC), a standard form that will state exactly which products and services are covered.

2. How much does the plan cost?.

When you're looking at the cost of health insurance plans, there are actually 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 will start 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 doctor, or $10 for each generic prescription you get filled. Copayments vary from plan to plan, but they generally fall between $10 and $50.

Coinsurance

Coinsurance is the percentage of allowed charges for covered services that you're required to pay before you’ve met 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 the coinsurance.

Out-of-pocket maximum

An out-of-pocket maximum is the maximum amount of money you’ll pay for covered services 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 costs like copayments, deductibles, and co-insurance.

Once you have paid the full amount toward your out-of-pocket maximum, your insurance will pay 100% of the allowed amount for your covered healthcare expenses.

Given all of these different prices within one plan, it can be tricky to compare plans and their overall costs. 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 cost the most monthly, but you'll pay the least when you receive medical care. This could be a good option if you have a lot of medical needs or visit your doctor often.

On the other end, a Bronze plan will generally cost the least monthly, but you'll pay more when you receive medical care. This could be a good option if you don't plan on needing a lot of medical services, but want coverage if you’re in an accident.

This chart will help you decide which tier is best for you:

 

Platinum

Gold

Silver

Bronze

Monthly cost

$$$$

$$$

$$

$

Cost when you get care

$

$$

$$$

$$$$

The insurance company pays

90%

80%

70%

60%

You pay

10%

20%

30%

40%

Good option if...

You usually use a lot of care and are willing to pay a high monthly premium knowing nearly all other costs will be covered.

You’re willing to pay more each month to have more costs covered when you get medical treatment.

You’re willing to pay a slightly higher monthly premium than Bronze to have more of your routine care covered.

You want a low-cost way to protect yourself from worst-case medical scenarios, like serious sickness or injury.

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 the costs of your healthcare.

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

If a doctor isn’t in your plan's network, the insurance company may not cover the bill, or 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 options through your employer, you can obtain provider lists from participating insurance companies, or from the company’s employee benefits department.

Conclusion

Choosing your own health insurance plan can seem daunting at first, but by asking yourself these three simple questions, you’ll be well on your way to finding a plan that meets the needs for 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 of cost and coverage.

This article was originally published on October 31, 2013. It was last updated June 11, 2021.

Topics: Individual Health Insurance, Health Benefits, Health Insurance

Additional Resources

See what you can expect to pay for health insurance in your state.
Find out which medical expenses you can get reimbursed with an HRA.

Comments