Health Insurance: Choosing the Plan That's Right for You
Whether you are buying insurance or your company is offering you a selection, you need to know how much health insurance you can afford each month, what amount you can pay out of pocket, and what services you need.
When there were only one or two insurance plans to choose from, medical decisions were left entirely up to doctors and other health professionals. Now, employers and health plans require patients to participate in making those choices to help keep costs down.
Common Points Among Plans
Generally, health plans will cover only those products and services they deem as medically necessary, such as preventive care, medications and needed surgery. They will generally not cover cosmetic or other unnecessary surgery, though what insurance companies deem as unnecessary can sometimes be challenged. Most insurers will not provide treatments they consider experimental, though what the medical profession considers standard care sometimes differs from an insurers' point of view.
Virtually all plans require patients to pay a portion of the bill, called a co-payment, which is usually a small amount. There is usually also a cap on how much you will be required to pay out in a year. This is an important detail because a single injury or, severe or chronic illness can be quite expensive.
Different Types of Plans
There is a large and confusing variety of health plans available. Most of them fall into 3 basic categories: indemnity, managed care, and health savings accounts.
Indemnity or Fee-for-Service Plans
These plans allow you to select any doctor or hospital you like, and the insurer pays a percentage of what they consider usual and customary charges. If you choose a provider who charges more than the insurance company’s limit, then you pay the difference.
You usually have to pay a deductible, for example, the first $300 of medical costs per year, before the plan kicks in. There is also a maximum amount you could be required to pay for medical care in the course of a year.
Managed Care Plans
Managed care plans include health maintenance organizations (HMOs) and preferred provider organizations (PPOs). These plans are frequently less expensive than fee-for-service plans, but they have a more limited choice of doctors and hospitals. Increasingly, however, providers are facing the fact that they must participate in multiple insurance plans to stay in business, which is increasing the choice of providers.
Managed care plans may provide payment only for doctors, labs, clinics, and hospitals within the plan’s network. They usually require a co-payment for each visit—the amount of which is designed to encourage members to use less expensive services. The co-payment for a visit to a doctor’s office, for example, is less than for a visit to the emergency room. Some plans require that you select a primary care doctor, whose referral you must obtain before the plan will cover you to see a specialist. Some will pay a percentage of visits to specialists outside the network, but the aim is to remain in network.
Health Savings Accounts (HSAs)
A health savings account (HSA) is a tax-exempt account that reimburses you for certain medical expenses.
The account includes various discounts, routine care, and co-payments, depending on which package an employer chooses to offer its employees. Unused money may roll over to the following year. It may revert to a traditional managed care with caps on out-of-pocket expenses if the fund is depleted and after a deductible is met.
Questions to Ask Before Making a Decision
While it is difficult to predict what care you will need in the future, there are questions you can ask to help select the best plan:
- Are the deductibles and annual maximum payments within your reach? How much will your employer pay toward the coverage?
- If your income changes for any reason, will you still be able to afford the plan?
- Do you want to make decisions about whom you will consult, or are you comfortable leaving that choice to your plan and primary physician?
- What kinds of permissions and referrals do you need to access care, including emergency room treatment and surgery?
- Does the plan you are considering provide comprehensive treatment for chronic conditions?
- Are your current doctors in the plan? If not, how much will you have to pay to see them?
- If the need arises, would you want to be admitted to a certain hospital? Will the plan allow this?
- Does the plan provide information on the quality of its doctors and hospitals? If not, can your employer help you obtain this information?
- How wide is the choice of doctors in the plan, and how many are accepting new patients?
- Will you have any changes in your life—marriage, starting a family, travel, retirement—that will change your needs? Is the plan flexible enough to meet those changes?
- To what extent are the services what your family needs? Look carefully at the benefits for routine well-child care, dental and vision services, and cancer screenings. Mental health and substance-abuse coverage varies widely among plans.
- Does the plan cover other healthcare options that you use such as acupuncture or chiropractic therapy?
Agency for Healthcare Research and Quality
US Department of Health and Human Services
Glossary. Agency for Healthcare Research and Quality website. Available at: http://archive.ahrq.gov/consumer/insuranceqa/qaglossary.htm. Updated August 2007. Accessed July 31, 2017.
Health insurance glossary. Health Insurance Resource Center website. Available at: http://www.healthinsurance.org/glossary. Accessed July 31, 2017.
Health savings accounts (HSAs). US Department of the Treasury website. Available at: http://www.treasury.gov/resource-center/faqs/Taxes/Pages/Health-Savings-Accounts.aspx. Updated December 1, 2015. Accessed July 31, 2017.
Publication 969. Internal Revenue Service website. Available at: http://www.irs.gov/publications/p969/ar02.html#en_US_2012_publink1000204081. Accessed July 31, 2017.
Questions and answers about health insurance. Agency for Healthcare Research and Quality website. Available at: http://archive.ahrq.gov/consumer/insuranceqa. Accessed July 31, 2017.
Last reviewed July 2017 by Michael Woods, MD, FAAP Last Updated: 8/5/2015