When things are going well, health insurance is something that can be easy to miss. You don’t see the doctor every week or even every month, so it can feel like you’re paying for coverage that is an unnecessary cost.
But that perspective can change fast if an unexpected illness, injury, hospital stay or ongoing treatment becomes part of life.
Health insurance is meant to make health care affordable. Rather than the insurance covering the full cost of covered medical services as stated in the policy, the insurance plan and the policyholder share the cost.
But picking a plan is more than just the lowest monthly price. The right plan will depend on healthcare needs, expected medical care, preferred doctors and hospitals, prescription needs and the amount of financial risk that can be managed.
Start With What the Coverage Really Provides
The first thing to compare among health insurance plans is the coverage of each plan.
Different plans cover different medical services, have different healthcare providers in their networks, different prescription coverage, and different amounts that have to be paid out of pocket.
An apparently affordable plan may not be so affordable if it doesn’t cover the healthcare services needed or if preferred doctors are out of network.
Reading the details of the coverage before choosing a plan can help avoid unpleasant surprises later. In the U.S., plans typically provide a Summary of Benefits and Coverage intended to make comparing plans easier.
Monthly Premiums Are Just Part of the Cost
The monthly premium is probably the figure that gets the most attention when comparing plans. It is the amount paid to maintain the insurance, even if no medical care is used during that month.
But the premium doesn’t tell the whole financial story.
Other costs can include deductibles, copayments, coinsurance and other out-of-pocket expenses. A plan with a low monthly premium may have a higher deductible or higher costs when medical services are actually used.
That is why comparing premiums on a month-to-month basis can sometimes lead to the wrong decision.
A better approach is to look at the potential total yearly cost of the plan based on expected healthcare use.
What Does a Deductible Mean?
Another important part of a health insurance plan is the deductible.
A deductible is the amount paid for covered healthcare services before the insurance plan starts to pay according to its terms. For example, a plan with a $2,000 deductible may require the policyholder to pay the first $2,000 of certain covered expenses before the plan begins paying for those expenses.
Sometimes a plan may have a higher deductible with a lower monthly premium. Another plan may require a higher monthly payment but have a lower deductible.
Neither option is automatically better.
Someone who rarely needs medical care may have different priorities from someone who regularly sees doctors, takes prescription medications or expects ongoing treatment.
Copayments and Coinsurance
Copayments and coinsurance are terms that frequently appear in insurance documents.
A copayment is generally a fixed amount paid for a covered healthcare service or supply. For example, a plan may require a fixed payment for a doctor’s visit.
Coinsurance works differently. It is generally a percentage of the cost of a covered service paid after the deductible requirements have been met.
If medical care is needed frequently or the treatment is expensive, these costs can become significant.
Understanding how copayments and coinsurance work before choosing a plan makes it easier to estimate what healthcare might cost throughout the year.
Think About the Out-of-Pocket Maximum
The out-of-pocket maximum can be particularly important when considering unexpected medical expenses.
If a plan has an out-of-pocket limit, it is generally the most that will be paid during a plan year for covered services when the plan’s rules are followed. After reaching the applicable limit for covered in-network care, most plans pay 100% of covered benefits for the rest of the plan year.
The out-of-pocket maximum generally does not include monthly premiums or services that are not covered by the plan.
Looking at this number can provide a better picture of the financial protection a plan offers, especially for households concerned about a major medical event.
Check the Provider Network
A health insurance plan can look great on paper, but that does not mean every doctor or hospital will be in-network under the same terms.
Provider networks can vary among health plans. Some plans have more limited rules for using out-of-network providers, while others may offer more choices.
Before enrolling, it can be useful to check whether preferred doctors, specialists, hospitals and other healthcare providers are included in the plan’s network.
This can be particularly important when managing an ongoing health condition or receiving regular treatment.
Prescription Coverage Matters
Prescription costs can become a regular part of healthcare spending.
Each insurance plan can have different prescription drug rules, including which medications are covered and how much will be paid for them.
For anyone taking regular prescription medications, checking the plan’s prescription drug information can provide a clearer idea of potential costs instead of assuming that medications will cost the same under every plan.
Even a small difference in monthly prescription costs can add up over an entire year.
Don’t Skip Preventive Care
Health insurance is not only about paying for medical care when something goes wrong.
Preventive services can include screenings, vaccinations, checkups and other services intended to identify or prevent health problems. Many Marketplace plans cover certain preventive services without a copay or coinsurance when provided by a network provider, although specific rules can vary.
Preventive care can be particularly valuable because some health conditions may be easier to manage when identified early.
Coverage details should always be checked because specific services and rules can vary by plan.
Consider Healthcare Needs Now and in the Future
Sometimes insurance selected for current needs may not account for reasonably expected changes.
Healthcare needs can change because of age, family circumstances, planned procedures, ongoing treatment or changes in medication.
For example, someone who rarely sees a doctor may have different priorities from a family that regularly sees specialists and has ongoing prescription costs.
The objective is not to predict every possible medical event. That is impossible. The point is to consider reasonably expected healthcare needs and choose coverage that offers an appropriate balance between monthly payments and potential out-of-pocket costs.
Don’t Select a Plan by Price Alone
Price is important, but it should be only one factor in the decision.
A very low-cost plan may have a higher deductible, a more limited provider network or greater cost-sharing when care is needed. A plan with a higher premium may have lower costs when healthcare services are used.
There is no one-size-fits-all answer because financial circumstances and healthcare needs differ.
A more useful question is not simply, “Which plan costs less each month?” It is, “Which plan offers adequate coverage for the healthcare needs and available budget?”
Read the Small Print
Insurance policies can contain a lot of information, making it tempting to focus only on the headline benefits.
Important details can include exclusions, network rules, deductibles, copayments, coinsurance, prescription coverage and out-of-pocket limits.
When something is unclear, contacting the insurance company or a qualified insurance professional is generally better than making assumptions.
A few extra minutes spent understanding a policy can go a long way when healthcare is actually needed.
Finding a Middle Ground When Choosing a Plan
One health insurance plan will not be the right choice for every household.
A suitable option often comes down to balancing monthly premiums and potential healthcare costs, checking the provider network, understanding cost-sharing and making sure important medical services and prescriptions are covered.
Health insurance is not something that needs to be thought about every day. In many ways, that is the point. Good coverage provides financial protection for situations that cannot always be predicted.
The best approach is to look beyond the monthly price and understand how the entire plan works. Knowing healthcare needs, potential costs and what is covered can make comparing insurance options less confusing and more practical.
