If you’re lucky enough to have employer-provided health insurance, that limits your options to the plans your employer offers. If you don’t have coverage through your job, an organization or association you belong to may allow you to purchase health insurance through them at a collective rate.
Another option is to check your local Obamacare health insurance marketplace to see if you qualify for a prepayment credit, which will give you lower premium costs. Even if you don’t qualify for the credit right away, buying your health insurance through the marketplace means you qualify for it when you file your tax return for the year.
If you can’t or don’t want to get health insurance from one of these sources, you’ll have to fall back on buying a private plan. It will give you the widest range of options, but will likely be much more expensive.
Decide what type of policy you want to buy
Health insurance policies come in several basic types, although you may not be able to access all of these options through your preferred source. Health Maintenance Organizations (HMOs) are a common form of health insurance. With an HMO, you are required to use health care providers within the policy’s network, and you must get a referral from your primary care physician to see a specialist.
Preferred Provider Organizations (PPOs) are also quite common. PPO health insurance is in-network, but you’re not limited to in-network care — although using in-network providers is cheaper — and you don’t need referrals to see specialists.
Exclusive Provider Organizations (EPOs) are a hybrid between HMOs and PPOs. You must adhere to the plan’s network, but you do not need specialist referrals. Finally, Point of Service (POS) plans are a less common option that are essentially the opposite of an EOB. You are not limited to the network of the POS plan, but you do need a referral to see a specialist.
Of the four common types of plans, an HMO or EPO is usually less expensive than a PPO or POS with the same level of coverage. However, if network coverage in your area is poor, or if you’re not comfortable limiting yourself to network providers, it may be worth paying a little more for a PPO or POS policy.
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High deductible versus low deductible
All things being equal, the higher a plan’s deductible, the lower the monthly premiums will be. A high deductible means you have to pay a lot of out-of-pocket healthcare costs before the insurance kicks in, but if you have few or no medical expenses in a given year, these plans can be a bargain. Very low medical costs means you probably won’t exceed the deductible even on a low deductible plan so getting a high deductible plan will keep your insurance costs as low as possible while still protecting you for in case something catastrophic happens.
If you decide to go the high-deductible route, your best option is to purchase a Health Savings Account (HSA) plan and fund it with at least the equivalent of a year’s deductible . An HSA plan neatly covers the biggest weakness of a high-deductible health insurance plan — namely, that you have to pay a lot of money for major medical expenses before the insurance takes over. If you have an entire year’s deductible tucked away in your HSA, you can simply use that money to fund your portion of the expenses, all while enjoying the triple tax benefit that an HSA offers.
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There are two main factors that affect how well a given plan covers your medical costs: the plan’s network and its coverage policy. Even if you choose a plan with out-of-network options, such as a PPO, you’re still better off using in-network healthcare providers as much as possible, as it will lower your costs. And the rules a particular health insurance plan uses to decide what is and isn’t covered — and how much the co-pays will be — can make a huge difference in how useful a particular policy really is to you.
For example, if there’s a rather pricey drug that you use every day, you’ll definitely want to get a health insurance plan that lists that drug on the formulary. If you travel a lot, stick to plans that offer good treatment options outside the area. And if you already have a primary care physician, you’ll definitely want to choose a plan that includes your physician in their network.
Find the best deal
If you’re stuck between two or three different policies and can’t decide which one to choose, try this exercise. Multiply the monthly premium by 12 to get your annual cost for a plan, then add up the plan’s cash maximum. The result is the most you would ultimately spend on health care if you had one or more major medical expenses during the year. Do this calculation for every plan you’re considering, then compare the results. The plan with the lowest total is probably the best deal for you.