Choosing health insurance? Five things to consider

If you find choosing a health plan daunting, you’re hardly alone — a survey from Forbes Advisor found that up to three-quarters of consumers were confused by common health plan terms.¹

Yet the right plan can save you money and keep you and your family healthier. The key is to know what to look for since it’s all too easy to become overwhelmed. Here are five elements to consider as you make your choice.

1. Review the plan options each year

It can be tempting to automatically renew with the same plan, but it’s wise to read the documents every year to consider new plan offerings and compare rates and details.

Then research how much your family previously spent on healthcare to see if another plan might help reduce bills. For example, if you are routinely accessing a mental health provider outside of your network, you may opt for a plan that includes your specialist. Determine if your needs might change and how that could affect your costs going forward. Of course, you can’t anticipate every medical event, but if you know you will be having a baby or are planning an elective surgery, this might be the time to find a plan that better manages those costs.

2. Understand how premiums and deductibles interact

While there are many components to a health plan, two with a major effect on your monthly cash flow are “premiums” and “deductibles.”

The premium is the amount you pay the health insurance company to be enrolled in their plan, typically expressed as a monthly amount. In many cases your company might cover a portion or even all this payment and the remainder can often be automatically withdrawn from your paycheck.

The deductible is the out-of-pocket amount you’ll pay for healthcare events (aside from preventative services like an annual physical or suggested screening) before your insurance starts covering the costs.² With most plans, there is an annual deductible for each family member on your plan, as well as a total for the whole family.

As you compare plans, you may notice you’re offered options that have either a higher deductible with a lower premium or the opposite. While each has its pros and cons, in general a plan with a smaller premium will help keep your monthly bills low, especially if you don’t have a condition where you regularly use healthcare services; whereas a lower deductible might be better if you routinely need to access medical care and will quickly hit that number, thus triggering full coverage.

3. Confirm which practitioners are in-network

Many plans have a list of preferred providers that they consider “in-network.” If you or a family member has an ongoing relationship with a certain provider, you may prefer to continue seeing them so it's important to verify they are covered. Often you can still see an out-of-network practitioner, but you are likely to pay more for those services, and that can add up over time.

If you don’t see your doctor included, consider choosing another plan where they participate or seek a referral to one of the covered providers to avoid ongoing out-of-network costs.

4. Enroll in a Health Savings Account (HSA) and/or Flexible Savings Account (FSA) if offered

Both of these accounts allow you to set aside pre-tax dollars to be used for healthcare needs, which can yield an impressive savings. However, it’s important to understand the difference. HSAs function like a savings account in that they can build up over time and are portable even if you leave your job. They are typically offered in conjunction with high-deductible plans although some other employees might offer them with other types of insurance.

By contrast funds you contribute to a FSA typically must be used by a year-end deadline or you lose the surplus. The good news is that these dollars can be used in a variety of “flexible” ways. While they are often are allocated to prescriptions or uncovered dental or vision services, they can also be applied to pregnancy test kits, medical supplies and a broad array of other expenses. (The Internal Revenue Service has a complete list here.³) 

5. Consider options for “supplemental insurance”

Many companies offer a variety of supplemental plans in addition to your regular medical insurance that can further help when planning for your finances. Here are some to look into:

• Dental/vision insurance: This plan usually covers both routine dental and vision checkups and extras, such as orthodontic care or glasses.

• Disability insurance: If you can’t work for a period of time because of a health event, such as a heart attack, accident or mental health condition, short-term and long-term disability insurance can replace a portion of your income.

• Life insurance: The last thing you want your loved ones worrying about is how they will pay their bills should a tragedy occur. With adequate life insurance, you can protect their financial future.
   
• Accident insurance: This type of policy can help cover unanticipated costs that arise from an accident or injury, such as co-pays and deductibles for doctor’s visits, medical supplies and prescriptions. Because it is paid directly to you, rather than your providers, it can even be used to cover non-medical expenses, including childcare and household bills like groceries and your rent or mortgage.
   
• Critical illness insurance: This covers costs that fall outside your general medical insurance if you're diagnosed with a serious illness, such as cancer, Alzheimer’s disease or a heart condition, to name a few. Similar to accident insurance, it offers a lump sum payment that you can allocate as appropriate.

Making the right choice for you and your family

Health insurance can be a complex topic given all the different options available. That’s why it’s important to take the time to research these various aspects of health plans. Understanding your benefits and taking advantage of them may help you in saving money in areas you didn’t realize before. Reach out to your human resources department or plan administrator with questions you might have.  

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