How to Choose a Health Insurance Plan That's Right for You
February 15, 2024
Choosing a health insurance plan made simple
Choosing a health insurance plan can be tough. There are so many options that look alike on the surface. And each one has so many flashy titles and numbers to compare. It’s no wonder people get overwhelmed when trying to decide how to choose a health insurance plan.
Though we can’t choose a plan for you, we can offer you some tips about how to choose a plan that works for you. Keep in mind that there’s no single, outright, best health insurance plan. Instead, the best plan for you will depend on your healthcare needs. Read on for help identifying those needs and choosing a plan that fits them.
The Basics: Picking a Health Insurance Plan
The first number that jumps out to most people is the premium, or monthly cost of the plan. People tend to think of the premium as the sticker price. But, it’s important to think about your total health care costs, not just the premium.
Your other costs, the “out-of-pocket” costs, can add up. Sometimes they even make up a higher cost than the premium. To get an idea of the actual total cost of your health care plan, you need to think beyond the premium. This means factoring in the plan’s deductible, copayments, coinsurance, and out-of-pocket maximums.
- Deductible: The amount you have to spend for covered medical services before your insurance company pays
- Copayments: Flat-rate payments you make each time you get a medical service after you’ve hit your deductible
- Coinsurance: Percentage-based payments you make each time you get a medical service (after you’ve hit your deductible)
- Out-of-pocket maximum: The most you have to spend for covered services in a year. After you reach this amount, your insurer pays 100% for covered services.
A lot of healthcare jargon, we know… So, let’s look at an example of how they fit together. If you want to brush up on any other terms, check out our Health Benefits Glossary.
Comparing Plans: What to Look for in Health Insurance Costs
We pulled a couple examples of real 2023 health care plans from Healthcare.gov to help you understand how to compare health insurance plans. Take a look.
Plan A has a relatively low premium, but a high deductible. This is typical of Bronze plans.
We’ll explain the differences between the “metal” plans in more detail in the next section. But to give a quick summary, the general progression goes like this: as the metal gets more expensive (Bronze → Silver → Gold → Platinum) the premiums get higher. And as the premiums get higher, the deductibles get lower. There are exceptions to this rule, as plans can be more nuanced in their pricing, but knowing this basic progression will help you compare plans.
With this plan (Plan A), you have to spend $7,500 before your insurer covers 50% of your emergency room care costs. (Remember, coinsurance is the portion you will be responsible for after hitting your deductible!)
If there’s a good chance you’ll use emergency room care or other costly services, you’ll be paying a lot out of pocket. But if not, this plan should be a cost-effective option. Over the course of the year, you can expect to pay around $3700 for your premiums. So, assuming your healthcare needs are limited to routine services like doctor’s visits and generic drugs, your total costs will be lower than in a higher premium plan.
Now let’s look at Plan B.
Plan B has a higher premium and a relatively low deductible, typical of Gold plans. With Plan B, you have to spend $2,000 before your emergency room care costs are reduced to 25%. You’ll also pay less for generic drugs and doctor’s visits.
Healthcare.gov estimates your total annual cost for premiums here to be at least $5,000. That’s $1300 more than Plan A’s. However, if you use more emergency room care and costly services, that gap can close quickly.
Suppose you end up with a $5000 emergency room bill. In Plan B, the first $2000 goes towards your deductible. Then, you’ll owe 25% of the remaining $3000, or $750. Your insurance pays the rest. Adding up premiums and out-of-pocket costs, your total costs would be around $7,750 for the year.
With Plan A, you would have to pay all $5,000 of those emergency care costs out-of-pocket, since your deductible is higher. Your total cost estimate would be around $7,700. This is roughly where the plans break even. Factoring in the money Plan B saves you for doctor’s visits and generic drugs, Plan B would probably come out slightly cheaper. If your out-of-pocket costs end up higher than $4,000, it will save you more money.
How Do I Know How Much I’ll Spend?
Okay, so you can’t know exactly how much money you will spend, because knowing all the medical services you will need for the upcoming year is impossible, right? But you can estimate.
Think through the following questions. How much care do you usually use? Would you consider your medical use to be low, medium, or high? Do you have chronic conditions that require ongoing treatment through the year? Do you expect to seek a lot of specialist care outside of your network?
Frequent patients can save money on a plan with a high premium and low deductible, because their insurer will pay a higher percentage of their costs. For people who don’t seek much medical care, the low premium, high deductible plans will be the cheapest. See if you can categorize your own medical use before selecting a plan.
Pro Tip: Healthcare.gov has a compare plans feature. It’s that button in the top right of the sample images above. You can use this to see a side-by-side breakdown of your estimated healthcare costs.
Which Health Insurance Should I Choose? Bronze, Silver, Gold, and Platinum Plans
Health insurers price their plans according to the Four Metals System. The cost of the premium goes up with the cost of the metal. Bronze has the lowest premium, while Platinum has the highest. Silver and Gold fall somewhere in between.
Here’s a breakdown of the plan types.
- Lowest monthly premium
- Highest costs when you need care
- Highest deductibles
- Our take: Use Bronze if your total healthcare costs have historically been low. Your monthly premium will be low, but you’ll have to pay for most routine care yourself. If you expect to seek special care, opt for a plan with a higher premium. Although Bronze plan deductibles tend to be higher, some insurance is better than none. This tier of insurance coverage will still protect you in the event of a major health expense.
- Moderate monthly premium
- Moderate costs when you need care
- Moderate deductibles, though they are usually lower than those of Bronze plans.
- Our take: Silver plans are a solid option for patients seeking low to medium amounts of care. You’ll pay more in premiums than a Bronze plan, but you’ll be better protected against soaring costs if unexpected care is needed.
- Silver plans are usually the ideal choice if you qualify for “Extra Savings.”
Note: Extra Savings with a Silver plan
- If you qualify for cost-sharing reductions, you must pick a Silver plan to get the extra savings. You can save hundreds or even thousands of dollars per year if you’re a frequent patient.
- Silver plans may also be available if you’re eligible for a premium tax credit and can enroll through a Special Enrollment Period. To see if you qualify for a Special Enrollment Period, read our post on Open Enrollment.
- If you’re enrolled in a Silver plan and lose your cost-sharing reductions, you’ll qualify for a Special Enrollment Period. If you want to change plans, you can enroll in a Bronze, Silver or Gold plan that meets your needs and fits your budget.
- High monthly premium
- Low costs when you need care
- Low deductible (usually).
- Our take: Useful if you’re willing to pay more in premiums to have a greater percentage of healthcare costs covered. If you use a lot of care, a Gold plan may be a good value.
- Highest monthly premium
- Lowest costs when you get care
- Lowest deductibles (usually)
- Our take: the best bang for your buck if you expect to seek a lot of care.
Lastly, to evaluate your plan’s out-of-network costs, you’ll need to know the coinsurance rate. Coinsurance rates vary from plan to plan, but according to the Healthcare Marketplace, the average rates are as follows.
(Note: We have only included the average rates for PPO plans here, since they offer more reliable OON coverage. We'll explain more about the various plan types in the next section.)
Out-of-Network Insurance Costs: The Difference Between HMO, PPO, POS, and EPO Plans
You may have noticed we left something out in the plan comparison: out-of-network (OON) costs. That’s because both of the sample plans we examined are HMO plans. HMO plans only reimburse you for out-of-network services in emergency situations. Otherwise, you pay all your OON costs out of pocket.
If you expect to use a lot of OON services, you might be better off with a PPO or POS plan. PPO and POS plans usually reimburse a percentage of your OON costs. That means you save money on visits to your therapist, your dietitian, your chiropractor, and any other OON specialists.
- Health Maintenance Organization (HMO) plans tend to have the most affordable premiums. However, they typically limit your covered care to providers within your network.
- Preferred Provider Organization (PPO) plans often extend coverage to out-of-network providers but have higher monthly premiums.
- Point of Service (POS) plans usually work like a hybrid of HMO and PPO plans. They cover some out-of-network care when a referral is granted by your primary care provider.
- Exclusive Provider Organization (EPO) plans are similar to HMO plans in that they only cover in-network care. However, EPO plans usually do not require a primary care physician to coordinate your medical care.
Use the graphic below to compare the four main types of healthcare plans, HMO, PPO, POS, and EPO.
Comparing Plan Costs: How to Calculate Coinsurance Rates
To show you how costs may vary between the different types of plans, let’s go over sample plans’ coinsurance rates. As the Average Costs of Coinsurance table showed, PPO plans range from around 10-40% coinsurance. The average PPO coinsurance rate is around 30%.
HMO plans, because they focus on in-network care, can have coinsurance rates as high as 100%. In that case, you would pay 100% of the costs of your OON services, except in emergencies. However, not all HMO plans are that cut and dry. The average coinsurance rate for an HMO plan is 90%.
EPO plans tend to have coinsurance rates closer to HMO plans, while POS plans tend to have rates closer to PPO plans. For convenience’s sake, we will only compare the costs of the two most popular plan types here, HMO and PPO. But know that for a more detailed full-plan comparison, www.healthcare.gov is your best bet.
Putting It All Together: The Summary of Benefits and Coverage (SBC)
When choosing a health insurance plan, don’t forget your rights! Before you choose, you have the right to see a clear, easy-to-read summary of any plan you’re considering. This is called a Summary of Benefits and Coverage (SBC). The SBC makes it easy to compare plans based on a few major points.
Unfortunately, SBCs won’t tell you a lot about your out-of-network coverage. To see a plan’s OON benefits in depth, you’ll need to find the full plan details. They can be hard to find if you’re looking on a specific insurer’s website. (We cover this in our post, How to Check Your Out-of-Network Benefits.) It varies by insurer, but look for a PDF in your insurer’s plan documents named something like “Plan Details.” It will be long, usually more than 50 pages.
If you’re looking at plans on Healthcare.gov you can click on a plan and scroll down to the Other Services section at the bottom. This will tell you about the expected coverage for common out-of-network services. Below is a picture of the section with just a few of the OON services it describes.
If you know, for instance, that you will be seeking chiropractic care in the upcoming year, use this feature from the Healthcare Marketplace to compare plans.
More Guides and Resources
Although we can’t pick a health insurance plan for you, we hope these tips have at least helped you narrow down your criteria. SuperBill’s goal is to get you the most bang for your buck from your health insurance.
Whether we’re sharing guides like this or automating your phone calls to insurers, SuperBill will do whatever it takes to save you time and money. For more guides, check out The Complete Guide to Out-of-Network Reimbursement and our complete guide, What is a Superbill?
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