How to Choose Your Health Insurance Plan

It's that time of year again when many of us renew our employer sponsored insurance plans.  Some of us spend a lot of time evaluating them each year, reminding ourselves "now why should we go with that HSA thing?" and many of us just "go default"... what we call SALY (same as last year) without any idea why. Here's a quick reminder on what to evaluate.

Premium

What you pay each month. Usually deducted from your paycheck. Regardless of hitting your deductible or when co-insurance kicks in, you will keep paying the premium each month. When you sign up for insurance, you're committing to making these monthly premium payments (or paycheck deductions).

Deductible

(Family / Individual) What you have to pay out of pocket before your co-insurance kicks in. Once you hit that deductible co-insurance begins and you only pay a percentage (usually the minor percentage) of medical care. An individual deductible is if it's just you and a family deductible is when you have a family; keep in mind that there are also individual deductibles outside of a family deductible.

Co-Insurance

What the insurance company pays, stated as a percentage. If the co-insurance is 80 percent, then your insurance company pays for 80 percent and you pay the remaining 20 percent of all medical costs AFTER you pay your deductible.  

Co-Pay

What you pay out of pocket for doctor visits. This is usually for office/ ER/ urgent care visits. The co-pays you pay count toward your deductible (hooray!)

Out of Pocket Max

The most you will pay, excluding monthly premiums, in one year before insurance covers 100 percent of medical costs.

HSA

Health Savings Accounts: Typically, the overall cost ends up being substantially less than PPOs and other plans. The downside is that you have to pay upfront at the start of the year and cash can be tied up in a heath savings account, where you can only access these funds for medical costs. If you are relatively healthy and can afford to tie up some cash for the year, really consider the HSA route. The annual savings can be in the thousands, especially with a family.

PPO

Preferred Provider Organization 

HMO

Health Maintenance Organization

EPO

Exclusive Provider Organization

POS

Point of Service Plan

So what's the best plan? Like most things in finance, it depends on your unique situation. Here's how to figure out which plan is right for you.

Employer-Sponsored Plans

This means insurance that is provided to you and subsidized from your employer. If you don't have employer sponsored health insurance, you're buying on the open market. 

Know which benefits are generally different in HMOs, PPOs, EPOs and POSs.

Source: NerdWallet

Some plans have lower premiums with higher out of pocket costs, and some have higher premiums with lower ongoing costs. 

High premiums, low out of pocket costs

A plan that has higher premiums with lower ongoing costs may make sense if you have consistent medical expenses. These expenses include regular doctor visits, frequent emergency care, expensive or brand-name prescriptions or if you have/expect to have kids.

Low premiums, higher ongoing costs

A plan that has lower premiums with higher ongoing costs may make sense if you need lower monthly premiums, you are in good health and rarely see a doctor.​

Coverage

Double check specific coverage for your needs: Make sure any medication you regularly take and your specific typical medical needs are covered.

Cost

So which plan "costs the least"? Well, it depends. There are various options in terms of co-pay, co-insurance and even "high deductible HSA." To determine the cost of a plan, you'll have to determine which plan will provide the coverage you need, and be least expensive in the end.