Print Posted on 10/27/2017 in Financial Planning

How To Pick Private Healthcare Coverage

How To Pick Private Healthcare Coverage

The United States healthcare system is daunting to understand. Determining what avenue you need to take in order to get coverage can be complex.

Obviously health coverage is important, but what’s equally important to realize is that it’s also a huge component of your budget. 

Monthly premiums are expensive. While you want to make sure all your needs are covered, you need to get coverage that makes sense for you financially.

You need to have a general understanding of how the healthcare system works in the United States before you learn more about choosing insurance plans.

The system is comprised of four different groups: Federally funded insurance, private insurance, employer sponsored insurance, and those who remain uninsured. Depending on what you qualify for and what is offered to you, the path to choosing a healthcare plan varies.

A 2016 US Census Bureau study of Americans with health insurance discovered that 55.7% percent of Americans received coverage from employers, 36.1% were covered through government programs such as Medicare and Medicaid, 16.4% were covered through private direct-purchase, and 4.6% of Americans received military coverage.

If you’re a working American, then you probably have health coverage through your employer. If you’re self-employed or your employer doesn’t offer coverage to its employees, chances are that you have sought out coverage from private insurance companies.

Federally funded programs like Medicare, Medicaid, and military programs offer coverage for citizens who meet a specific criteria. In order to receive coverage under these programs you need to qualify.

If you’re reading this post, chances are you don’t participate in any of the government healthcare programs and aren’t covered by plans provided by employers. That leaves you with the option of purchasing a plan from a private insurance company.

Now that we’ve determined that you’re looking for private insurance, we’ll go through the steps it takes to choose the right health coverage for you.

Steps To Picking Private Healthcare Coverage

1. Determine Where To Buy

The recent evolution of the healthcare system in the United States has provided those looking for coverage with different options. The cost of private insurance has increased substantially and as a result became unaffordable for many Americans who needed coverage. 

In order to address this problem, the Affordable Care Act was established to create a health insurance marketplace as an option for consumers who don’t have employer healthcare plans.

Depending on where you’re located, your state may offer a marketplace to purchase coverage. If not, you can shop for affordable coverage in the federal marketplace. You can find out what’s available to you here.

We’re assuming that this doesn’t apply to you, so you’ll be shopping for coverage in the private healthcare marketplace. It’s important to keep in mind that you won’t be eligible for premium subsidies, so you won’t receive income discounts on your monthly premiums.

Keep in mind that health insurance plans are individual to each state, so the plans available to you are based on the state you live in. You can also easily find plans online directly on insurance company websites. Or you can work with an insurance broker to help you find a private plan. 

Now that we’ve determined where you’ll be shopping for coverage, it’s time to examine what your needs are. Depending on your needs and past expenses, the plan you choose will vary. 

2. Look At The Medal Categories

Trying to determine how much coverage you need when shopping for health insurance can be difficult. One thing that you need to keep in mind when shopping is that you need to look at available plans in terms of overall value.

Obviously you want to make sure that you have enough coverage to help with your medical expenses, but insurance premiums can be expensive. That’s why it’s essential that you choose a plan that makes sense for you financially.

In order to do that, you need to understand how insurance plans split costs with consumers. Health insurance plans are divided into four categories: bronze, silver, gold, and platinum.

Plans in the bronze category require the consumer to pay 40% of the medical cost, and the insurance company pays the remaining 60%. With silver plans, you pay 30% of the cost and the company pays 70%. If you choose a gold plan, you’ll pay 20% and the insurance company will pay 80%. In a platinum plan you pay 10% and the company pays 90%.

If you know how insurance plans work, then you understand that plans with higher premiums provide you with more coverage when you need care. Plans with lower premiums still provide coverage, but you’ll have to pay more of the expenses when you need care. Depending on how frequently you need care, the plan you should choose varies.

Understanding which of these categories you should choose from can be difficult, especially when you’re looking for the plan that makes financial sense.

You should buy a bronze plan if you’re looking for lower-cost coverage. This will protect you and your dependents from worst case scenarios. While your monthly premium will be lower than other plans, you’ll have to pay for most of your regular care yourself. This is obviously ideal for a healthy individual that doesn’t have regular medical expenses. 

A silver plan is best for individuals who need medical care more frequently than those purchasing bronze plans. This plan has more moderate monthly premium payments and also has more moderate costs when you need care. If you qualify for extra savings, you should consider this plan.

Gold plans have much higher monthly premiums, but as a result your costs when you get care will be lower. This is a good plan for you if you’re willing to pay more monthly in order to have more costs covered when you seek care. If you need regular care, you should purchase this plan.

As you may have guessed, platinum plans have the highest monthly premiums and the lowest costs when you need care. This plan is ideal for someone who has high medical expenses and needs frequent care. Since you’re paying such a high premium, nearly all of your other expenses will be covered. 

When you’re looking as these categories make sure to remember that your decision should be made based on value. The ideal plan for you is whatever gives you the coverage you need at a price that you can afford financially. Once you make your choice, the next step is to look at the different types of plans that are available.

3. Look At The Different Types Of Insurance Plans

When you begin shopping for an insurance plan you may be a little overwhelmed at first. Generally, there are four types of insurance plans that you should consider: HMOs, PPOs, EPOs, and POS plans.

When you start comparing the different plans, make sure to look for a summary of benefits. Usually the marketplace where you purchase your plan will provide a link to the summary and will also show the cost of the plan.

Additionally, you should also find what’s known as a provider directory. This is a list of doctors and clinics that participate in the plan’s network. Essentially these are the places that you can seek medical care and receive coverage.

An HMO plan requires that you stay in-network to receive coverage, except in emergencies. With this type of plan, you’ll also need referrals in order to have procedures done or see specialists. This plan is the best option if you want to lower out-of-pocket costs and have a primary doctor that coordinates your care.

If you’re looking for a plan with more provider options, then a PPO may be right for you. Unlike an HMO, choosing this plan allows you to go out of network for care. However, in-network care is much cheaper. Additionally, with this plan you won’t need referrals to see any specialists or have procedures done.

You should choose an EPO plan if you’re looking for lower out-of-pocket costs and no required referrals for procedures and appointments with specialists. With this plan you’ll need to stay in-network to receive coverage for your care except in emergencies.

A POS plan might be the right plan for you if you want more provider options and a primary care doctor that coordinates your care. This includes the ordering of tests and working hand-in-hand with any specialists you may see. With this plan you don’t need to stay in network, but in-network care is significantly less expensive and you’ll need a referral if you want to go out of network.

Most financial planners will also recommend for clients with high-deductible health plans to open what’s known as a health savings plan, or HSA. This is a tax-advantage account allowing individuals to save for medical expenses not covered by their health plans.

Flexible savings accounts (FSA) are another tax-advantage savings account that some individuals use to pay medical expenses. These accounts are typically set up for an employee by an employer and allow the employee to contribute some of their earnings to pay qualified expenses.

When you’re looking at these plans you need to make sure you’ve thoroughly evaluated your previous medical expenses. While predicting what your expenses will be every year is impossible, previous expenses can be a good indicator as to how much you can expect to spend.

Take a thorough look at these plans and make a decision that provides you with the best coverage and is affordable. Make sure you understand the stipulations of each policy, as they can drastically influence which plan you purchase.

4. Compare Networks, Out-Of-Pocket Costs, And Benefits

As you may have noticed, costs are lower when you seek treatment in-network. That’s because insurance companies contract lower rates with in-network providers. If you go out of network, those providers don’t have contracted rates. That costs your insurance company more, which is why it costs you more as well.

If you already see a doctor you like, find out if that doctor is in your provider network in order to receive the most cost-effective care. Having a large network is particularly attractive for those who live in more rural areas because it gives you a better chance at finding a local doctor who accepts your plan.

Make sure that you take a good look at your provider network to ensure that you can see the doctors that you need at an affordable cost.

In addition to looking at your provider network when considering a plan, you should also consider the out-of-pocket costs the you may have. Your costs are comprised of copayments, deductibles, and coinsurance. Your coverage depends on your plan, so your out-of-pocket expenses vary.

Generally a plan that pays a higher portion of your medical costs has a higher monthly premium. This type of plan is best for you if frequently need emergency care, take brand name medications, are expecting a baby, or have an upcoming surgery. 

Plans with lower monthly premiums have higher out-of-pocket costs. This type of plan would be a smart decision financially for someone who can’t afford the high monthly premiums of other plans. This plan is also great for someone who is in good health and doesn’t see a doctor frequently.

One final thing that you need to take into consideration when purchasing a plan are the benefits included. Check the summary of benefits to see what services are included in the plan. Some plans may offer better coverage for things such as physical therapy, mental health care, and emergency coverage.

At this point, you’ve probably narrowed down your options to a few plans. This is the time in which you should call the companies you’re considering and ask questions about the plan.

Some common questions you may want to consider asking are: is the medication I currently take covered under this plan? What maternity services are covered? What drugs are covered under this plan? You may also have some specific questions, so make sure you ask them in order to make an informed decision.

After you’ve done all of your research you’ll be able to make the decision that’s right for you. It might take some time, but it’s well worth it to know you’re covered.

Make A Decision

The United States healthcare system is one of the most widely discussed topics because it’s constantly changing, incredibly complex, and affects most Americans. 

Everyone needs healthcare coverage—deciding what type of plan you need and whether you need to switch to a new plan are the first steps. Maybe your needs have changed, or maybe your family has grown. Whatever your reasoning is, making sure your coverage meets your needs and is affordable is crucial.

By following the steps outlined in this post: determining what marketplace to buy, what your needs are, examining the different types of plans, comparing networks, comparing benefits, and comparing out-of-pocket costs, you should have all the tools you need to make the right choice.

Remember, you monthly premium payment is a component of your monthly budget. Make sure you update your budget to include expenses for your monthly insurance payments. If you’re having trouble doing that, reach out to a financial professional for help.