The final months of the year can be some of the most stressful for a variety of reasons: gift shopping, family dinners, and party planning just to name a few. But perhaps one of the biggest headaches for many around the end of the year has nothing to do with holidays at all, but with health insurance. That’s because November 1 marks the start of open enrollment, aka the annual period of time when most people can enroll or change their health insurance plan for the next calendar year.
This time of year tends to bring up a lot of questions. How much is health insurance to buy? Are there secrets to knowing how to get affordable health insurance? And what is the best health insurance overall? While everyone’s specific situation is different and answers will vary depending on your employer, age, location, and more, Solv is here to help you understand the basics so you can make the most informed decision possible during this year’s open enrollment.
Health insurance 101: Definitions You Need to Know
While there are dozens of terms and phrases unique to the world of health insurance, understanding a few key definitions will help empower you in the decision-making process. Here are the basics:
- Deductible: This is the amount of money you will owe for covered health care services before your health insurance begins to pay for services.
- Copayment: The flat dollar amount that is your share of the cost for a medical service or item (like a doctor's visit). You’ll pay this amount yourself.
- Coinsurance: This is the percentage of each health care services bill that you’ll have to pay after you’ve met your deductible. For example, if your insurance covers 80% of the charges for a procedure, you are responsible for the remaining 20% — the 20% is your coinsurance.
- Premium: The amount of money you pay to get and keep your health insurance or plan. Some people pay their premiums monthly and others pay one lump sum for the whole year.
- Network: The group of doctors, hospitals, and other healthcare providers your insurer has contracted with to deliver services to members. “In-network” providers are those that are part of the network and accept a specific type of insurance and “out-of-network” providers don’t have a contract with that particular insurer, so can charge unnegotiated rates for service.
- Health Maintenance Organization (HMO): This is a type of insurance plan that consists of a single network of doctors, hospitals, and other health services. Members usually have lower copays but are only allowed to utilize services within the HMO network and a primary care physician must refer patients to in-network specialists. HMOs usually do not have annual deductibles and members are only billed for co-pays when they receive services.
- Preferred Provider Organization (PPO): Unlike an HMO, a PPO insurance plan allows members to see or visit any doctor, hospital, or other healthcare provider they wish (although in-network service providers will typically cost less). Most PPO plans usually have a higher premium than HMOs, as well as deductibles and coinsurance costs, but members are allowed to see specialists without a primary care physician referral and have more freedom in selecting providers.
- Exclusive Provider Organization (EPO): A plan where services are only covered if the member goes to doctors, specialists, or hospitals who are in network (except in emergencies). In most cases, a referral is not needed to see a specialist.
- High Deductible Health Plan (HDHP): A lower-cost option that many employers offer to reduce costs. These plans generally have low premiums and high deductibles, which means members won’t pay as much on a monthly basis but will be required to pay higher costs at times of service. According to the U.S. Office of Personnel Management, Single plans have a minimum deductible of $1,400 and family plan minimum deductibles are $2,800.
- Out-of-pocket maximum: The maximum amount of money you’ll pay out-of-pocket in one year for covered health care. Once you reach that amount, your insurance will pay the rest.
- Drug Formulary: The list of medications that an insurer will pay for. The medications that are “off formulary” may still be covered but more expensive. In general, generic medications that are on formulary are the least expensive for patients, and name-brand medications that are off-formulary are the most expensive.
Tips for choosing your insurance plan through your employer
Employer-provided health coverage can be a major benefit for employees and even influence their decision to take or stay at a particular job. While options can be a wonderful thing when choosing health care plans at work, the flood of information around open enrollment can be overwhelming. Here are some basic tips for selecting the plan that’s right for you:
- Decide which type of insurance plan fits your needs. This can take some thought and consideration, but it’s important to take into account your current health status and history, any prescription medications you take, how frequently you visit the doctor, and more.
- Think about your family’s medical needs. If your family members will also be added to your insurance plan, it’s important to evaluate their treatment needs as well and try to anticipate any future medical needs they may have, which may affect your decision.
- Do some research on each network. If you already have a primary care provider or specialist you love and you want to stick with them, you’ll want to make sure they’re in-network with the plan you select. If you’re tempted to opt for an HMO because of the lower costs, know that the decision may impact your ability to see your established care providers.
- Consider some important questions about your present and potential future. For example, do you take any specific prescription medications? Do you anticipate becoming pregnant or starting a family in the next year? Are you traveling abroad and want to make sure you’re covered overseas? All of these questions are important to answer before picking a plan.
- Compare each plan’s premium and out-of-pocket expenses. Premiums and deductibles are part of the equation, but it’s important to consider each plan’s total potential out-of-pocket costs, which could also include coinsurance and copays for services, medications, and other medical needs. Every individual’s and family’s health situation is different, so it may be helpful to think about your (and/or your family’s) specific scenario and estimate any potential costs. For example, if you or a family member have a chronic illness, take expensive prescription medications, or make regular visits to the doctor’s office, you may want to select a plan with a slightly higher premium but lower deductible, so you won’t end up paying a high amount for each and every service or medication.
How to choose your insurance plan if you’re not going through an employer
If your employer doesn’t offer health care coverage, you’re self-employed, unemployed, or simply want to make your own decisions around health insurance, you still have plenty of options. Thanks to the Affordable Care Act (ACA), individuals and families can purchase health insurance plans through health insurance exchanges or marketplaces. Insurance plan offerings differ by state, so the easiest way to compare options is to visit HealthCare.gov and enter your ZIP code. If your state offers an exchange, you’ll be able to shop for a plan there, and if your state doesn’t have an exchange, you can still find a plan using the federal marketplace.
Another option for people who don’t receive health insurance through their employer is to purchase a plan directly through a private exchange or from an insurance company. Obtaining insurance this way is pricier, however, and people who choose these options won’t qualify for income-based discounts on premiums called premium tax credits.
While open enrollment can be a confusing time, there are plenty of resources to help demystify the process and offer clarity. And if you’re hoping to find a solid healthcare home base before you decide on which insurance option is right for you, visit Solv Health to locate high-quality, accessible services for your specific needs.
- Understanding key health insurance terms (March 8, 2018) https://www.healthcare.gov/blog/understand-health-insurance-definitions/
- Health Insurance Guide (2022) http://www.insurance.ca.gov/01-consumers/105-type/95-guides/05-health/health-ins-guide.cfm
- Affordable Care Act (ACA) (2022) https://www.healthcare.gov/glossary/affordable-care-act/
- Frequently Asked Questions for High Deductible Health Plans, Health Savings Accounts, and Health Reimbursement Arrangements (2022) https://www.opm.gov/healthcare-insurance/healthcare/health-savings-accounts/frequently-asked-questions/#:~:text=HDHPs%20may%20have%20a%20higher,amount%20is%20indexed%20every%20year).