Buying health coverage is a crucial process for protecting your health and finances, but the task can be overwhelming if you don’t know what to consider. With dozens of plans to choose from — all different in premium, deductible and network — how can you know which health plan is best for you? This comprehensive overview will take you through everything you need to know to purchase health insurance, from terminology in a policy to comparing benefits under different plans. By the end, you’ll feel like you know enough to confidently select a plan that offers the most coverage for your family at the least cost.
Health insurance is not a one-size-fits-all product. Your optimal health insurance plan will be tailored to your circumstances: your budget, the doctors you want to see, any medications you take and how often you think you’ll need to get care. We’ll address all the key elements — monthly premiums, whether doctors and hospitals are in or out of your plan’s network, coverage for prescription drugs and out-of-pocket costs, such as deductibles and copays — so you can make a more informed choice. So, grubby fingers of yours, let’s dive in towards affordable health insurance that covers you and gives you the peace of mind you deserve.
Determine Your Health Care Needs and Budget
Before you begin to compare health insurance plans, take some time to assess your own health care needs and your financial situation. A few key questions to ask yourself up front will help you narrow down your choices:
Who needs coverage?
Are you buying a plan just for you, or do you need to include your spouse, children or other dependents? Cost considerations and coverage needs will be separate for family plans and individual plans.
How often do you go to the doctor?
If you’re relatively healthy and go to a doctor only for a yearly checkup, you could choose a plan different from someone who’s managing a chronic condition and needs regular doctor or specialist visits.
Are you on any prescription medications?
Get a list of any regular prescriptions. You’ll want to make sure that whatever plan you pick has good coverage for the prescription drugs you take (more on that below).
Do you have any preferred doctors or hospitals?
If you have particular healthcare providers (a primary care physician, specialists, or a preferred hospital) you want to keep seeing, you will need a plan with those providers in-network.
How much do you plan to spend on health care?
Think about how much you can afford to pay in monthly premiums but also how much you could manage to pay out-of-pocket for care in a worst-case scenario. How would a larger monthly payment sit with you if it meant lower bills when you needed care, or do you need the lowest premium you can get even if it means higher costs if you use services?
By clarifying these factors, you can decide which of them are critical when it comes to shopping for a health plan. If your budget is tight and you’re relatively healthy, for example, you might gravitate toward one with a lower premium. Conversely, if you anticipate lots of medical care (for example, you definitely need surgery or you have ongoing treatment), spending more on premiums for more comprehensive coverage and a lower deductible is likely to save you money in the end.
Tip: List what you want (for example, your family’s doctors in-network, specific drug coverage) and what you’d like. This may help you when comparing plans side by side.
Premiums, Deductibles And Out-Of-Pocket Costs
Undoubtedly, one of the most confounding aspects of shopping for health insurance is understanding the cost structure of each plan. It’s not only about the monthly subscription cost you pay for (the premium) – you should also know how much you may have to pay when you get the medical care you need. Here are the key health insurance cost terms to help you know and keep in mind:
Premium:
The cost you pay every month to keep the health insurance plan even if you do not use any of the medical services. Consider it the plan’s membership dues.” Low-premium plans can be inexpensive each month but often have higher out-of-pocket costs if and when you need care. Higher-premium plans do cost more each month, but they often cover more of your costs when you receive medical care.
Deductible:
Amount you pay for health care services before your health insurance begins to pay. Building in a deductible: For instance, if a plan carries a $1,500 deductible per year, you’ll pay the first $1,500 in eligible medical expenses annually on your own. Once you meet the deductible, the insurance starts paying its share. Low-premium plans tend to have higher deductibles, and opposite.
Copayment (Copay)
A specific amount you pay for a covered service, at the time you receive the service. Examples include a $25 copay for a doctor’s visit, or a $10 copay for a generic prescription. Some plans don’t use copays for certain services and instead use coinsurance. Copays generally don’t count toward your deductible, but they do count toward your out-of-pocket maximum (which is described below).
Coinsurance:
The percentage of costs you pay for a service after you have met your deductible. An 80/20 plan, for example, would mean the insurance company pays 80% of the covered charges and you pay 20% in coinsurance. If you have not yet met your deductible, you typically pay the entire allowed amount for the service. Coinsurance divides the expense between you and the insurer, and it starts kicking in only after you’ve paid the deductible.
Out-of-Pocket Maximum:
The maximum amount you must pay in a calendar year for covered medical services. That includes your deductible, copays and coinsurance. After you have paid this amount in a given policy year, the insurance company pays 100% of any additional covered costs for the remainder of the year. For instance, if a plan has a $6,000 out-of-pocket max, and you’ve already paid that amount between your deductible and copays/coinsurance, you won’t have to pay anything more for covered services that year. (The cap doesn’t take into account your premiums — you still have to pay those.) Strategies with much higher premiums often have place up with lower profits maximums.
Knowing the difference is important because the true cost of a health plan goes beyond the premium. If you’re comparing plans directly, consider the full picture of possible costs. A very low-premium plan may be appealing, until you consider that you could be on the hook for thousands in deductibles and coinsurance should you end up in the hospital unexpectedly. On the other hand, a high-premium plan can save you money if you do need a lot of care, because your insurer will begin paying the costs earlier.
Striking the proper balance:
If you anticipate using little health care, a high-deductible health plan with a low premium may be less expensive. You’d pay less every month and only pay moreif you actually need care. On the flip side, if you know for sure you’ll be using your insurance pretty regularly (if you have regular appointments with specialists, for instance, or planned procedures), you might choose a plan that has a higher premium but a much lower deductible and copays, so you’re going to have more predictable and lower total out-of-pocket expenses. Always think of the worst-case for each plan — would you be able to cover that deductible and out-of-pocket max if you had major medical expenses this year?
Plan Types and Policies Networks (HMO, PPO, EPO, etc.)
There are a few different types of health insurance plans, and those affect how you can use the insurance as well as what doctors or hospitals you can visit. The most common types of plans you’ll see are HMO, PPO, EPO and, occasionally, POS. These acronyms relate to the provider network and referral rules:
HMOs (Health Maintenance Organizations):
HMO plans typically require that you use only their network of doctors and hospitals for your care to be covered (except in a true emergency). You will also have to select a primary care physician (PCP), and that physician must provide a referral if you need to see a specialist. HMOs tend to have lower premiums and lower out-of-pocket costs, but they are less flexible — if you go out-of-network, you’ll likely have to pay for it.
PPO (Preferred Provider Organization):
PPO plans provide more freedom in provider selection. They come with a network of preferred doctors and hospitals, but you can go out-of-network if you don’t mind paying more. A PPO generally doesn’t require you to get referrals to see specialists. Your copay/coinsurance will be lower if you use an in-network provider; it will be a higher share out of your costs if you go out of network (and, typically, you’ll pay a separate, larger out-of-network deductible). PPOs tend to have higher premiums than HMOs, but a broader choice of providers.
EPO (Exclusive Provider Organization):
EPO plans are sort of a hybrid between an HMO and a PPO. Similar to an HMO, you are required to use in-network providers (except in emergencies) for the insurance to provide coverage; like a PPO, EPOs generally do not require referrals to see specialists. Because of this, EPO networks can be narrower (fewer provider options) than a PPO network. Their premiums and costs are usually moderate, too, somewhere between HMO and PPO levels.
POS (Point of Service):
POS plans are less popular than HMOs and PPOs, but they work like an HMO that allows you to go out-of-network like a PPO. You need a referral to see specialists (this is similar to an HMO), and your primary doctor coordinates your care. You can go out-of-network, but you will pay more out-of-pocket. POS rules are a bit like a hybrid between HMO rules and PPO rules.
Why do plan types matter? These categories predominantly affect what doctors, clinics and hospitals you can access and at what cost, which is where the idea of provider networks comes into play. All insurance plans have a network, which is the list of healthcare providers who have contracted with the insurance company to provide services at agreed-upon prices. If the provider is in-network, your insurance will cover their share of the costs for covered services, and you will pay whatever copay or coinsurance is specified by your plan. If a provider is out-of-network, your insurance may cover only a small amount, or nothing at all, and you’ll be stuck with a significantly higher bill.
Always compare the provider networks among the plans when shopping for insurance. If it’s important to you to keep your current doctor or specialist, confirm that they’re in your plan’s network. Most insurers have a searchable online directory — by your doctor’s name or the hospital of your choice. Don’t assume that your doctor is covered under every plan that insurer offers; networks can vary even among plans from the same insurer. And think about the size of the network: A larger network will give you more options for providers and for facilities near you. This is particularly critical if you live in a rural area, or have few provider options locally.
In-Network vs Out-of-Network —
Staying in-network can save you a LOT of money. In a PPO plan, for instance, your cost could be 20 percent for an in-network specialist and 50 percent (or more) for an out-of-network specialist visit (assuming your plan covers out-of-network care). Out-of-network care is generally not covered at all (except in emergencies) under HMO and EPO plans, meaning you’d be responsible for 100 percent of those charges. If you sometimes want the option to seek care outside the network, a PPO or POS plan may be worth the higher premium. But if you’re comfortable with a defined network of providers, an HMO or EPO can save you money. Think about how much provider flexibility matters to you and select a plan type based on that.
Prescription Drug Coverage and Pharmacies
Another key area to consider is prescription drug coverage. Every health insurance plan has a formulary or drug list, which is a list of medications it covers. Drugs on the formulary are usually arranged into tiered levels (for example: generic drugs are placed on Tier 1 with the lowest copay, and brand-name drugs on higher tiers with higher copay or coinsurance). If you have any medications you take regularly, you should:
Check the plan’s formulary:
Ensure that your medications are included and track what tier they land in. This will help you determine how much you’re going to pay. If a drug you need is not included on the formulary (also known as “non-formulary”), that plan may not cover it at all — or you may have to undergo an approval process or pay a higher cost.
Compare prescription copays/coinsurance:
Some plans will charge you a flat copay (e.g. $10 for generic, $30 for preferred brand, etc.), while others may charge you a percentage of the drug’s price. If you have costly medications, those differences can be significant.
Check for a separate drug deductible:
Some health plans have a separate deductible for prescription drugs. That means you’d need to pay a certain amount for medications out of your own pocket before the plan starts covering them. Investigate the details of each plan so you aren’t caught off guard.
Check pharmacy choices:
Most plans have a network of pharmacies. If you have a go-to pharmacy, make sure it’s in network for the plan. Most plans also cover mail-order pharmacy benefits, which are convenient for maintenance medications (and can also be less expensive for a 90-day supply).
Tip: If you take specific or high-cost medications (like insulin or specialty drugs), it’s key to compare how each of the insurance plans would cover those. One plan might cover your medication with a low copay, while another might not cover that brand at all or insist on a steep coinsurance. A plan’s formulary can typically be found on its website or through the marketplace where the plan is offered. If you’re unsure, call the insurance’s customer service line and ask whether your prescriptions are covered and what they would cost on the plan.
Comparing Plans: Coverage and Benefits in Addition to the Basics
All qualified health insurance plans (especially those received through the Affordable Care Act Marketplace or an employer) must cover a base set of essential health benefits. These generally encompass services such as emergency care, hospitalization, preventive care (such as vaccines and screenings), maternity and newborn care, mental health services, and more. Although nearly all standard plans will cover these categories, coverage limits and extra benefits can vary widely. When comparing plans, consider details such as:
Premise of care and wellness programs:
Most plans cover preventive services (annual checkups, certain screenings, flu shots, etc.) at no cost to you. Some plans also offer add-on wellness programs, such as discounts on gym memberships or free telehealth services.
Specialist services:
If you need things like physical therapy, chiropractic care or mental-health counseling, compare the plans to see if they limit the number of visits you can make — or require you to pay higher-than-usual copays for these services.
If you could become pregnant or use fertility services, compare how the plans cover prenatal pregnancy, delivery and related services. Every Marketplace plan is required to cover maternity care, however, costs (cops, hospital stay coverage, etc.) expenses can differ.
Out-of-area coverage:
If you travel often or have students in college out of state, think about how the plan covers care away from home. PPOs typically include out-of-area urgent care, or emergencies, whereas most HMOs will cover only true emergencies out of area. Some plans also have national networks, while others are regional.
Extra requirements:
Some insurers offer additional benefits for health plan customers, such as telemedicine hotlines, nurse advice lines, or even limited dental/vision discounts. These may not be deal-breakers, but they are helpful features if you will use them.
While these benefits probably aren’t the first thing that comes to mind when you’re shopping for insurance, they play into your general satisfaction with the plan. Understanding, for example, that your plan covers free annual preventive visits and screenings can save you money and keep you healthier in the long run. Or, if mental health is a priority for you, a plan with lower copays for therapy visits would be beneficial. Feel free to peruse the plan’s summary of benefits to check coverage details for services that matter to you or to your family.
When and Where to Buy Health Insurance
Timing is everything when shopping for health insurance, because you can usually enroll or change plans only during certain periods, unless you experience a special circumstance. Here’s what you need to know about when and where to get health insurance:
Open Enrollment Period (OEP) —
An annual Open Enrollment Period exists for most individual and family health insurance, like ACA Marketplace plans. In the United States, open enrollment typically lasts from Nov. 1 to Jan. 15 (exact dates vary by state). During this period, you can sign up for a new health plan or switch your current plan for any reason. Miss this period and you may not be able to get coverage unless you qualify for exception. Employers also have open enrollment seasons — usually in the fall — for employees to select or change their job-based health plans for the coming year.
Special Enrollment Period (SEP):
If you experience a qualifying life event, you can sign up for health insurance outside the general open enrollment. These qualifying events can include events that lead to losing your job-based coverage, moving to a new state, getting married, having a baby or other major life changes. An SEP generally runs for 60 days from the event, and you can enroll in a new plan during this time. If you’re uninsured and your life changes, see whether you can qualify for special enrollment.
Where to shop – ACA Marketplace:
If you don’t have insurance through an employer, Healthcare. gov (or your state’s exchange site) is the go-to site for shopping for individual/family health plans under the Affordable Care Act. These marketplaces allow you to compare multiple plans from different insurance companies side by side, and they also show you if you qualify for financial assistance or subsidies to bring down your premium (or even out-of-pocket costs, in some cases). The plans come in metal tiers (Bronze, Silver, Gold, Platinum), which show how costs are shared between you and the insurer. Bronze plans carry the lowest premiums and highest deductibles; Platinum plans have high premiums, but very low out-of-pocket expenses. If your income is below a certain level, you may qualify for tax credits to help pay the premiums, and if it is very low you may qualify for Medicaid (or Medi-Cal in California, etc.), which has its own enrollment rules.
Insurance companies and brokers:
You can also purchase health insurance directly from an insurance company or through an insurance broker/agent. This could be helpful if you want a plan that isn’t available on the ACA Marketplace (for example, some employers provide “off-exchange” plans or short-term health plans). But beware: Plans available outside the official marketplace may not have to meet all of the ACA’s requirements, and might offer less comprehensive coverage. If you take this approach, you’ll want to make sure you understand what the plan includes (and excludes). Also keep in mind that subsidies (financial assistance) are only available in the official marketplace.
Employer or group plans:
If you’re seeking health insurance through your employer (or another group like a professional association), your options will be limited to whatever plans the employer/group makes available. Apply the same principles from this guide to evaluate those options. Watch for enrollment deadlines your employer sets.
Bottom line:
Mark open enrollment on your calendar each year so you don’t miss your opportunity to obtain or change coverage. If you’re using the marketplace, the site’s comparison tools are very useful: you can enter your doctors, medications and other preferences to filter and rank plans. Looking for coverage early in the enrollment period will give you time to shop around and avoid the stress of last-minute decisions. If the process is confusing, free help is typically available — ACA marketplaces have navigators, and licensed insurance agents can also advise you (at no charge to you) on your options.
How to Compare Your Shortlist of Plans and Make a Decision
Hopefully, by now, you have a sense of what kind of health plan you may want and what factors to use for comparison. As a next step, it’s a good idea to choose a few promising plans and compare them side by side. Here’s a tip to make the comparison simpler:
Make a comparison checklist or table:
Write down each of the things that matter most for you – like: monthly premium, deductible, copay/coinsurance for common services (primary care visit, specialist visit, urgent care, ER), out-of-pocket max, prescription coverage for your medications, whether your preferred doctors are in-network. Include any other important items on your must-haves list (such as pediatric dental if you have kids or therapy coverage).
Be sure to fill in the details for each plan:
Use the plan’s Summary of Benefits and Coverage (SBC) document, which outlines a standardized overview of costs and coverage, in order to get the most accurate information. SBC will be a link for each plan on most marketplaces or employer HR portals. Write the numbers next to each thing on your checklist. That way you can easily spot differences — for example, maybe Plan A has a higher premium but a much lower deductible than Plan B.
Compare total expected costs:
Estimate how much health care you think you’re going to use over the course of a year. Although emergencies are unpredictable, you can estimate based on your usage in the previous year or a known need (like scheduled surgery or regular visits to a specialist). Do the math for each plan: (Premium × 12 months) + (your yearly projected out-of-pocket costs). Say Plan A is $300/month in premium = $3,600/year and you think you will pay around $1,000 in copays over the course of the year — so ~$4,600 all in. If Plan B is $200/month = $2,400/year but it has a high deductible, and you believe you’ll pay $3,000 out-of-pocket, that adds up to $5,400. In this case, even though Plan B has a lower monthly rate, Plan A can actually end up costing you less overall because you need so much care. When you look at both routine and unexpected needs, this exercise helps you find the truly affordable health insurance option.
Consider the intangible benefits:
Sometimes a plan that costs about the same as another one might be better because it has some extra that’s important to you — better customer service, a larger network (more doctors to choose from) or convenience features like telemedicine. If you have had experience with an insurance company (good or bad), that may also guide your decision.
Verify provider and drug coverage:
Before you settle in your selection, verify that your docs are nonetheless in-network for the new plan (networks can change from yr to yr). Check any critical medications again on the formulary. If something is not covered, you may switch to a different drug or decide another plan is better.
Read the plan’s fine print:
Consider things like whether you need referrals to see specialists, what the ground rules are for things like physical therapy or mental health visits, and whether any services you’re certain to need require prior authorization. And while these shouldn’t be deal-breakers, knowing what to expect is helpful.
Ask about any other questions:
If you still have questions, call the insurance company’s customer support line or speak to a licensed insurance agent. It’s better to get that clarity now than to face unhappy surprises once you’ve enrolled.
When you’ve got a read on all of this, ask yourself which plan gives you the best overall value and coverage for your needs. That plan will likely be the one that covers your priority needs for a cost (premium + potential out-of-pocket) that is reasonable for you.
After you choose, the last step is to enrol in the plan. If you’re using an online marketplace or working through your employer’s system, just follow its instructions for enrollment. Also, be sure that all paperwork or online forms are finished by the enrollment deadline. Once you enroll, you’ll get an insurance card and plan documents – have those close at hand and review the materials so you understand how to use your coverage when the time comes.
Final Thoughts: Shop for Health Insurance Being the Same Informed Consumer
Selecting a health insurance plan can seem complicated, but if you do it step by step, it’s doable. Keep in mind that the aim here is to locate a plan that provides the health coverage you want at a price you can afford. For starters, understanding the meaning of insurance jargon and key concepts such as premiums, deductibles, provider networks, and drug coverage has already made it possible for you to slice through a lot of the confusion.
An informed shopper won’t trap themselves in this situation where they’re only looking at one piece of the puzzle (lowest premium) and they are ultimately forced to make a decision that they’re unhappy about. The best health plan for you will depend on your health status, the doctors you see and the medications you take, and your budget. So there is no “best” plan, but there is a plan that’s best for you.
Finally, don’t be afraid to ask for help if you need it. Health insurance brokers and marketplace navigators can help at no cost to you. They can explain how plans differ or help you estimate costs. If you have group insurance through your employer, your employer’s HR department can also explain your options.
Just by doing your homework and turning to resources like this guide, you’re already on the right track. Once you’ve selected a plan and done so, you can breathe a little more easily. You’ll have the peace of mind that comes with knowing that you and your family have the health insurance coverage that meets your needs. And the next time open enrollment rolls around, you’ll be prepared to consider your options like a pro. Happy hunting for health insurance, and here’s to your health and security in the coming year!
