Fall is open enrollment season, whether you’re comparing health insurance plans offered by your employer or researching Affordable Care Act plans on Healthcare.gov. That means it’s time to ask yourself some important questions: Will you be able to keep your current health insurance plan? Do you want to keep your current health insurance plan? Of the available plans, which one will provide the coverage you need at a cost you can afford?
In most cases, whatever plan you choose during open enrollment will be your health insurance plan for the next calendar year. (There are exceptions for people who move, change jobs, or experience Qualifying Life Events like marriage or the birth of a child.) This means you need to choose your health insurance plan wisely. But how do you know which health plan is right for you? I reached out to three financial experts to learn what to look for during open enrollment, common misconceptions about which plans are better, and how to compare health insurance plans effectively.
Why cheaper isn’t always better
Don’t assume the plan with the lowest premiums is your best option. Make sure you review exactly what that low-cost plan covers, and compare it to what the more expensive plans are offering. “Health plans vary by cost, coverage, and flexibility,” Tony Matheson, a CERTIFIED FINANCIAL PLANNER
professional and founder of Matheson Financial Partners LLC, explains. “An ‘inexpensive’ HMO often provides less freedom in choosing your doctors, access to specialists except by referral and may limit coverage for ancillary wellness, such as chiropractic or acupuncture. Depending on your needs, cheaper may not be better.”
Logan Allec, CPA and owner of personal finance site Money Done Right, agrees. “Some individuals may focus on having the lowest monthly cost. For them, the best plan is the one with the lowest premium. For those who live in a rural area with few doctors, the best plan will likely be the one that the local doctor is in-network for. Others may prioritize a fantastic quality of coverage, often called a platinum plan, because they expect to need great medical care.”
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Don’t rule out a high-deductible health plan
You shouldn’t assume the plan with the lowest deductible is your best option, either. “Don’t rule out a high deductible plan,” Matheson advised. “The steep cost of reaching the deductible can feel daunting.”
In fact, a high deductible health plan (HDHP) combined with a health savings account (HSA) can be more affordable than you realize, especially since you are able to fund your HSA with pre-tax dollars. Some employers even make or match contributions to employees’ health savings accounts, as a way to motivate their staff to take advantage of these accounts.
“One of the single biggest things that people can do to save money on health care costs is to start socking money away pre-tax into a health savings account,” says Joel Ohman, CFP® professional and founder of InsuranceProviders.com. By contributing to an HSA, you’re able to set aside money toward the cost of that high deductible, as well as other qualified health care expenses — and if you don’t spend the money in your HSA on health care, it converts into a retirement fund once you turn 65.
Calculate your total health insurance costs
If you want to know how much you might pay on a given health insurance plan, there are ways of calculating the total cost.
The first method involves estimating how much you might pay for health care in the future based on how much care you’ve needed in the past. “To calculate the total cost, simulate an average year of your medical patterns and do the math,” Matheson advised. If you use Healthcare.gov to find an ACA health insurance plan during open enrollment, you’ll be able to compare the cost of health care plans based on your anticipated healthcare needs. If you’re going through open enrollment in your workplace, you might be able to access similar tools—or you can always open up your bank account or budgeting app and take a look at last year’s medical spending.
However, health insurance isn’t just about the anticipated healthcare needs—it’s about the unanticipated costs as well. In that case, you’re going to want to look at all of the numbers side-by-side, including the maximum amount of money you’ll be required to pay before your insurer begins to cover 100% of the healthcare expenses included in your insurance plan (not including monthly premiums).
Matheson also advises insurance shoppers to compare deductibles, coinsurance payments, and out-of-pocket maximums. Remember that some insurance plans include copays that don’t count towards your deductible and that your payment responsibility doesn’t end when you’ve hit your deductible; in most cases, you’re still required to pay coinsurance on healthcare expenses until you reach your out-of-pocket maximum. Once you calculate a year’s worth of monthly premiums, plus your estimated copays, plus your out-of-pocket maximum cost, you’ll know how much your health insurance plan could end up costing you.
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Read moreDecide what to prioritize
Ultimately, picking the right health plan during open enrollment comes down to defining your priorities. “Let’s say you decide that the lowest monthly payment with the highest quality of care matters the most to you,” Allec explains. “Only now should you go online and compare different plans and focus on the only two elements that matter to you. This will allow you to evaluate the whole package.”
Ohman suggests asking yourself the following questions:
- How much can you afford to pay in premiums?
- In a worst-case scenario, how much could you afford to pay in out-of-pocket costs?
- How important is it to stay with your current doctors/providers?
“People tend to fall into one of two different categories when shopping for a health insurance plan,” Ohman told us. “There are those who don’t care so much about the monthly premium cost, but they just want to know that if anything happens, major or minor, then their out of pocket costs will be very low — these types of people are attracted to copay type plans. Then there are another group of people who primarily are concerned with having a very low monthly premium — these types of people are attracted to high deductible type plans, especially HSA plans.”
When you begin comparing health insurance plans during open enrollment, decide which aspects of your plan you want to prioritize. Do you want a plan with an HSA? Do you want a plan with low monthly premiums? Do you want a plan with coverage that includes your current doctor? Once you know what you’re looking for, you’ll be able to make an informed decision — and once you know how to add up the numbers and compare two plans side-by-side, you’ll be able to pick the health insurance plan that’s right for you.
Nicole Dieker is a full-time freelance writer. Her work regularly appears on Bankrate, Lifehacker, The Write Life and numerous other sites. She is the author of Frugal and the Beast: And Other Financial Fairy Tales.
This article is sponsored by Haven Life Insurance Agency. Haven Life does not endorse the products, services or strategies discussed here. Opinions are those of the individuals interviewed.
Haven Life Insurance Agency offers this as educational information only. Haven Life does not provide tax, legal or investment advice. This material is not intended to provide, and should not be relied on for, tax, legal, or investment advice. You should consult your own tax, legal, and investment advisors before engaging in any transaction.
The post How to pick the right health plan during open enrollment appeared first on Blog | Haven Life | Life insurance & Personal Finance Tips.
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