How to pick a health insurance plan

Health care can be very expensive. It costs about $9,000 to have a baby, and the average hospital stay costs $30,000. Health insurance is a way to reduce those costs to an amount that you can manage by sharing the risk with others. That works because most people are mostly healthy most of the time, so their premiums help pay for the expenses of the small number who are sick or injured.

Here are the three major categories you need to consider when picking a plan. 

• Emergency services
• Hospitalization
• Laboratory tests
• Maternity and newborn care
• Mental health and substance abuse treatment
• Dental and vision care for children
• Outpatient care (doctors and other services you receive outside of a hospital)
• Prescription drugs
• Preventive services (such as immunizations and mammograms)
• Rehabilitation services

The rules for insurance provided by large employers are a little different but most of them will cover the same set of benefits. To make sure, ask your employer for the Summary of Benefits and Coverage, a standard form that will state exactly what the plan covers and doesn't cover. 

Click on the image at right for rankings of health insurance plans nationwide. Use the tool to:

• Choose a plan category such as private HMO or PPO, or Medicare HMO or PPO.
• Choose a state.
• Customize your search to compare plans' scores and their performance in measures such as consumer satisfaction and providing preventive services.

You pay for health insurance in two ways:

• The monthly premium that you pay to purchase your plan.
• The share of costs you pay out of your own pocket when you receive medical care. Those are some combination of deductibles, coinsurance, and copays.

In general, if you pay a higher premium upfront you will pay less when you receive medical care, and vice versa.  

To make comparison easier, the plans sold in state Marketplaces will be in standardized “metal tiers” with various combinations of premiums and cost-sharing:

• Bronze plans will cover, on average, 60 percent of the average member's total health care costs
• Silver plans will cover 70 percent.
• Gold plans will cover 80 percent.
• Platinum plans will cover 90 percent.

Which of those plans is right for you depends on your health and your fiancial situation:

• If you already know you have an expensive medical condition, consider a plan with a higher premium that covers more of your costs.
• If you are generally healthy you might come out ahead paying a lower premium and a bigger share of your health costs, because those costs are most likely not going to be that high. Of course, if you need to be prepared to pay more if you do unexpectedly become sick or injured. 

Your out-of-pocket expenses

The terms  “cost-sharing” or “out-of-pocket costs” refer to the proportion of your medical bills you will be responsible for paying when you actually receive health care. Cost-sharing never includes your monthly premium.

If you buy insurance through your state Marketplace, you’ll be able to see and compare the cost-sharing structure of plans before you buy. If you get insurance through a job, the information will be on the Summary of Benefits and Coverage form.

These are the four cost-sharing terms you will see:

Deductible. The amount you pay every year before the insurance company starts paying its share of the costs. In every plan you can buy, preventive services will be covered in full even if you haven’t used up your deductible for the year. Some plans will also pay a portion of your costs for a few other services, usually doctor visits and prescription drugs, even before your deductible has been met. In general plans with higher premiums have lower deductibles, and vice versa.

Copay. A fixed dollar amount you pay for certain types of care. You might pay a $20 for a doctor visit and the insurance company will pick up the rest. Plans with higher premiums generally have lower copays, and vice versa. And some plans do not have copays at all. They use other methods of cost-sharing.

Coinsurance. A percentage of the cost of your medical care. For an MRI that costs $1,000 you might pay you might pay 20% ($200). Your insurance company will pay the other 80% ($800). Plans with higher premiums generally pick up a larger portion of the bill.

Out-of-pocket limit. The most cost-sharing you will ever have to pay in a year. It is the total of your deductible, copays, and coinsurance (but does not include your premiums). Once you hit this limit, the insurance company will pick up 100% of your costs for the remainder of the year. Most people never pay enough cost-sharing to hit the out-of-pocket limit but it can happen if you require a lot of costly treatment for a serious accident or illness. Plans with higher premiums generally have lower out-of-pocket limits.

The new health law says that in 2014, the out-of-pocket limit for plans sold to individuals and small groups cannot be more than:

• $6,350 for an individual
• $12,700 for a family

Some plans may have lower out-of-pocket limits than that.

Every health insurance plan has a network of providers—doctors, hospitals, laboratories, imaging centers, and pharmacies that have signed contracts with the insurance company agreeing to provide their services to plan members at a specific price.

If a doctor is not in your plan's network, the insurance company may not cover the bill, or may ask you to pay a much higher share of the cost. So if you have doctors you want to continue to see, they need to be in the plan's network.

If you are shopping in a Marketplace you can see the plan's provider directory before you buy.

If you are considering insurance through a job, you can obtain provider lists from participating insurance companies, or from the company’s employee benefits department.

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