Beginner’s Guide to Buying Health Insurance
The open enrollment period for buying health insurance is just a few months away, and brushing up on the basics can help ease the pain of buying a health insurance plan for the first time, or shopping for a new plan that fits your needs better than existing coverage.
The average American’s shopping confidence when picking an insurance plan scores pretty low. An Alegeus study found that:
- 76% of consumers say they are extremely focused on getting the best value for their money when it comes to spending on health care
- Yet, 66% of consumers rate “planning for out-of-pocket costs” as the most challenging aspect of managing their health care
- 59% believe it is also a challenge to understand the difference between their plan options
- 45% don’t understand the cost implications of picking one health insurance plan over another
To help shake off the stress and feel confident you are selecting not only the most cost-effective plan, but a plan that can keep up with your medical history, there are definite factors to consider. Here are some simple steps to follow:
See if total income qualifies for a subsidy
More than 80% of Americans qualify for some type of cost assistance for health insurance in the form of a tax subsidy, which is taken off the monthly rate. Savings are based on projected income for the following year, not the previous year’s income. For 2017 coverage, estimate your adjusted gross income, including any fluctuations you might experience, either more or less income than in 2016. You can also wait until tax time to see if you qualify for cost assistance, and receive a refund for the money you are owed for paying full price.
Determine monthly budget
The average health insurance plan can equate to the cost of a car payment if you do not qualify for medical assistance or a tax subsidy to help lower the cost of coverage. If you do not receive health insurance from an employer, you have to plan accordingly for the monthly expense. Remember that paying each month does nothing more than keep your policy active. It does not pay down your deductible. Check out the Alternative Solutions section for ways to lower your monthly health insurance cost.
Add up how much was spent on health care the previous year
Did your children make several trips to Urgent Care last year? Does your spouse see a specialist? Or did you only use free, preventive care services? Having the full picture of medical expenditures will help you determine which plan to choose. The cheapest plan isn’t always the best, especially if you use medical services. Sometimes paying more each month can actually reduce your out-of-pocket costs overall during the course of a year. In a HealthCare.com white paper study, at least 70% of plans on the marketplace had at least one better option for consumers once they started shopping around.
Check the provider list
After you narrow your search down to just a couple of plans, check the network. Is your doctor covered by this health insurance plan? The best way to determine if a doctor is covered until a particular plan is to call the health insurance company directly. They have the most up-to-date lists of providers.
Understand the deeper details, like coinsurance, copayment and prescription drug deductible
There are three definitions you need to know to better understand what your health insurance policy covers.
- Deductible: This is the total amount of money you are responsible to pay before your health insurance kicks in. If you have a low monthly payment, you might have a $10,000 deductible. So, if you become sick or injured unexpectedly, your insurance claims are yours to pay up to the deductible amount. If you take prescription medications, also look for a prescription drug deductible on your plan. This is separate from your medical deductible.
- Coinsurance: After you have paid your deductible in full, you are still responsible for a portion of your medical bills. Coinsurance is paid by two people – you and your insurance company. Typically your insurance company will pay 80% of the costs and you are left to pay 20% of your medical bills. If you have a chronic condition and require ongoing treatment, consider a more expensive health plan with a low deductible. It will get you to the lower-cost coinsurance portion of your coverage faster than a high deductible health plan.
- Copayment: Some services your health insurance company might cover, but they could still require you to pay a flat fee copayment to help decrease their overall cost.
If sticker shock has you believing you can’t afford health insurance, there is an alternative solution. Short term health insurance, also known as temporary insurance, can provide you up to 12 months of insurance coverage at a low cost while you figure out your health care game plan. Short term plans are subject to a tax penalty for not carrying Obamacare coverage, but many times the cost of the insurance and penalty is still far lower than having to buy major medical coverage.
Total up cost of tax penalty
In 2017 the penalty for not having health insurance is 2.5% of overall income or a flat fee of more than $695, once adjusted for inflation in the new year. You can calculate your penalty at healthinsurance.org.
Run quote for short term medical insurance
Find out how reasonable short term health insurance can be by running a free quote. Many times you can save up to 50% or more than an Obamacare plan. Coverage includes
Coverage gap between plans
Short term medical insurance is also a great “filler” while you wait for your individual major medical plan to begin. Policies can be purchased for 90 days, 180 days or up to 364 days and begin as quickly as 24-hours after enrollment.
Shopping for health insurance can feel overwhelming, but with the right information and alternative backup plan, you can succeed at finding the best plan for your lifestyle.