Know Your ABCs Before Buying Individual Health Insurance
Deciding what type of health insurance you need can be as daunting as memorizing the New York City phone book in under five minutes. The type of insurance, the deductibles, the benefits, the co-insurance, the premiums, the network—terms that are foreign to most are suddenly overwhelming your computer screen or mailbox when choosing a health plan for you and your family.
Before delving into the complicated language of health insurance, you should start with the basics. As when building a new house, you must start with a good foundation before adding your walls and windows. The following three points will help you build a strong foundation for building the right health plan for you and your family:
A is for Access. How important is it to keep your current doctor(s)? Health plans typically have “networks” of hospitals and doctors that provide services for the plan members under contracted terms —meaning you will have to use those facilities and physicians to receive the most from your plan benefits. Failure to stay in the network could result in having to pay a great proportion of the medical charges yourself. Before considering any new health plan, you should first check to see if the physicians and medical facilities you prefer are in the plan’s network.
B is for Benefits. In general terms, benefits are the specific medical services covered at specific levels by your health plan. The type of plan you choose determines how much you pay for your benefits. Fee-for-service, commonly called indemnity plans, generally offer the freedom to choose any doctor or healthcare facility for your medical needs. These plans are often more expensive than managed care plans.
Health Maintenance Organization (HMO) plans offer many benefits for a set fee or co-pays and typically do not have deductibles. However, HMOs require that you choose a primary care physician to manage your care within a specific network of physicians and medical facilities. Preferred Provider Organization (PPO) plans are managed care plans that cost more than HMO plans and require that co-pays and deductibles be satisfied prior to receiving full benefit coverage. There is still an assigned network of physicians and medical facilities, but members have the option to seek care outside of the network and pay a higher share of the bill.
Point of Service, or POS, plans typically cost more than HMO and PPO plans and acts as a hybrid of the two plans. As with an HMO, you still choose a primary care physician in the network who manages your care, but you may choose to see physicians outside of the network and pay a higher set fee. It is important to determine what type of plan will best suit your personal medical needs and the level of choice you are comfortable with before choosing a health plan.
C is for Cost. There are several things to consider when deciding how much to spend on a health plan. It is difficult to decide whether it is safer to pay higher premiums each month and fewer out-of-pocket expenses or pay lower premiums and risk much higher out-of-pocket expenses. There are numerous types of plans with different levels of benefit coverage, which involve co-pays, deductibles, co-insurance, health savings accounts and more.
Before deciding which levels of out-of-pocket expenses you feel comfortable with, be sure to estimate your or your family’s typical yearly medical expenses to help determine what you can afford. To estimate and compare the cost of various health plans, try using the Health Care Insurance Calculator found at Money-Zine.com.
As with any important decision involving your health, choosing the right health plan for you and your family involves close consideration. Download a free Buyer’s Guide for additional tips to help with your decision.