Do you know when is the most wonderful time of the year? No, it’s not the holidays. We’re talking about open enrollment season, baby! That’s right! It’s the magical time of year when you get to compare different health insurance plans to see which one is right for you!
Okay, you got us. Probably nobody gets that excited about comparing health insurance plans. But when it’s time to choose, it’s really important to know what each plan covers, how much it costs, and where you can use it.
This stuff can be complicated, but you’re in the right place. Let’s take a look at the different types of plans so you make an informed decision.
How to compare different health insurance plans
We get it. Health Insurance is full of weird jargon and acronyms. It’s like trying to solve the puzzle on the back of a cereal box without a decoder ring. Well, consider this your health insurance decoder ring, because we’re going to take you through the various types of plans and how they work.
Do you have the right health insurance coverage? You could be saving hundreds!
First, if you have a job with an employer who provides health insurance, definitely talk to your Human Resources specialist. They should be able to walk you through the specific plans your company offers. If your company doesn’t offer a health plan or you’re self-employed, then you’ll need an expert in your corner to help you sort through the different plans available on the HealthCare.gov exchange.
Here are the main types of plans available:
Preferred Provider Organization (PPO)
Preferred Provider Organization health plans contract with hospitals and doctors to create a network of participating providers.1 These plans also have coverage for doctors outside of their networks, but you’ll pay more out of pocket—often a lot more—than if you see the plan’s preferred providers. (See what we did there?) Emergency care is often the exception to the rule. PPOs are the most popular plan for people who get their health insurance through work, with 67% of covered workers enrolled in a PPO.2
Pros: Most PPOs have a reasonable selection of providers to choose from in your area. Just be sure you verify which providers accept your plan prior to any treatment so there are no surprises.
Cons: Higher premiums make PPOs more expensive than other types of plans like HMOs.
High Deductible Health Plans (HDHPs)
High Deductible Health Plans: That’s pretty self-explanatory, isn’t it? Just like the name says, these are health plans with high deductibles.3 These plans have very low monthly premiums, but you’ll pay a lot more out of pocket for health care costs before your plan kicks in. HDHPs can be combined with a health savings account (HSA), which you can add to tax-free and use to pay for qualified medical expenses.
You may be asking yourself, Wait a minute. Who determines just what they mean by “high” deductible?
That’s a great question. The IRS does. That’s who. And the IRS defines an HDHP as any plan with a deductible of $1,350 or more for an individual or $2,700 or more for a family.4 In addition, these plans have maximum out-of-pocket expenses of $6,750 for an individual and $13,500 for families. That means that once you’ve hit these limits, your health insurance pays for everything. In 2020, the deductible limits will go up to $1,400 for an individual and $2,800 for a family while the maximum out-of-pocket expenses will rise to $6,900 and $13,800.5
And the HSA is a great feature of HDHP plans because you can contribute up to $3,500 for an individual and $7,000 for a family tax-free for 2019.6 In 2020, this goes up to $3,550 and $7,100, respectively.7 Even better, this money rolls over if you don’t use it, and you can earn interest or other earnings on it that are also not taxable. That’s awesome! Being able to open a HSA is great for your future.
Pros: HDHPs have low premiums and you get to contribute to an HSA.
Cons: There are higher out-of-pocket expenses.
Health Maintenance Organizations (HMO)
A health maintenance organization is a type of health insurance plan that only covers care from doctors who work for (or contract with) that specific plan.8 That means that unless there’s an emergency, your plan will not pay for out-of-network care. HMOs are often restricted to a specific geographic area, so you’ll be required to live or work within that service area.
Pros: Lower premiums and out-of-pocket expenses make HMOs attractive.
Cons: There’s not much flexibility. When it comes to choosing providers, it’s like what your teacher told you in pre-school: You get what you get, and you don’t get upset.
What about health insurance "metal" categories?
When you’re shopping for a plan on HealthCare.gov or your state exchange, the plans are shown in four “metal” categories. No, not like Mötley Crüe. More like Michael Phelps. The plans are tiered according to how much they cost and what they cover: Bronze, Silver, Gold and Platinum. (Okay, yes, it’s true: The Crüe did have some platinum records and Michael Phelps never won a platinum medal at the Olympics. So that works.) Keep in mind that if you’re eligible for “cost-sharing reductions” under the Affordable Care Act, you must pick a Silver plan or better to get those reductions.9
It's good to know that plans in every category provide some types of free preventive care, and some offer free or discounted health care services before you meet your deductible. The way it basically works is that Bronze plans have the lowest monthly premiums but the highest out-of-pocket costs. As you work your way up through the Silver, Gold and Platinum categories, you pay more in premiums, but less in deductibles and coinsurance.
However, the extra costs in the Silver category can be minimized if you qualify for the cost-sharing reductions, so you’ll want to make sure you’re getting the maximum value of those reductions when you’re shopping for health plans. They can substantially lower your out-of-pocket health care costs, so get with one of our ELPs who can help you find out what you may be eligible for.
In a nutshell: In addition to the Bronze, Silver, Gold and Platinum levels, you’ll want to pay attention to a few main things:
- Compare the “network” of providers the plan offers to make sure any frequently visited doctors, hospitals or other health care companies are on the list.
- Check the prescription drug coverage, especially if you or a family member take any medications on a regular basis.
- Check the deductible and/or any coinsurance amounts to be aware of what you’ll be responsible for out of pocket should you need to meet your deductible and coinsurance limits in a given plan year. Pay special attention to the out-of-pocket maximum, which details the annual limit of what you’ll be responsible for on your own.
Get help comparing different health insurance plans
Choosing the right health insurance plan for you and your family can be overwhelming.
If you’re not getting insurance from your employer, the best bet is to contact an independent insurance agent, like one of our Endorsed Local Providers (ELPs). They’re experts in answering questions about health insurance, so you can feel confident about getting the right plan for you.