Which Health Plan Should I Get?

Question:
My company's open enrollment period just started, and I have to choose a health insurance plan. Since I'm single and haven't been to the doctor in years, I've always chosen the cheapest option, which offers low coverage. I'm getting older, though, and next year I'd like to take better care of myself, starting with a checkup, without going broke. How can I choose a health plan that's right for me?

Answer:
First of all, congratulations on taking the initiative to improve your health! Making sure your health care is affordable is a great first step. Choosing the right insurance plan will be simpler for you than for many others because you don't expect to need a lot of health care next year, but you may find you need more than you think.

For instance, during that first checkup, your doctor may want to order lab tests or refer you to a specialist based on your physical exam. And if you're truly looking to make a commitment to better health, you may end up seeking out more care instead of toughing out what feel like minor illnesses or injuries.

Finding the right plan will be a balancing act, but I can help you evaluate plan options so you can find the right one for you.

Compare premiums

The plans your company offers are likely to come with various levels of coverage. Your monthly premium will be higher for a plan that offers more coverage. It's worth your time to compare how much you'd be paying for each plan over the course of a year.

During open enrollment, your employer will tell you how much of your paycheck will be deducted to pay for monthly premiums. Add up the total cost of premiums for each plan and evaluate them side by side. Will an upgrade to a more expensive plan be worth it if you hardly use health services next year? Can you even afford the more expensive plan?

For example, if a plan costs $1,000 more over the course of a year than your base option, it's probably not going to offset the cost of your checkup and any related exams. If that's the only care you end up using, you'd be overspending.

Expensive plans that offer more coverage are typically cost-effective for people who tend to use health care services frequently, such as families or people with chronic conditions. For them, the cost of the higher premium is offset by lower out-of-pocket costs at the time of care.

Take cost sharing into account

The cost of a health insurance plan doesn't stop at your monthly premiums. Your health insurance company will pay a portion of the fees for medical services you receive, while you'll pay the costs they don't. This is called cost sharing. Your plan's cost-sharing schedule will determine the amount you pay at the time you use health services, including your doctor's visit, any laboratory fees and any prescriptions you might need in the future. You can find the schedule on the summary for each insurance plan provided by your employer, or on the plan's website.

When it comes to visits and procedures, there are two ways health insurers set up cost sharing: as a flat rate copay, or as a percentage called coinsurance. Each insurer may have cost sharing set up one way or the other -- or some combination of both, so read the plan documents carefully.

In general, your out-of-pocket costs will be lower with plans utilizing only copays, and it will be easier to understand and plan for your bills. For example, if your doctor decides you need a lab test at your next visit and your copays are $25 for visits and $25 for tests, you'll pay $50 total.

On the other hand, if your plan has 20% coinsurance for each service, you'll pay 20% of the doctor's fee and 20% of all laboratory charges. Unlike with the copay scenario, you won't know what your final cost is until services have been provided and you get a bill in the mail, but it's likely to cost more than $50.

Some plans use copays until the deductible is met, and then coinsurance until you meet your yearly out-of-pocket maximum, which is the most you can pay for health services in a given year. That maximum is listed on your plan document as well, but can be no more than $6,850 for an individual in 2016. A mix of copays and coinsurance is common in lower-premium plans, but is only likely to affect you if you're hospitalized or face some other major medical expense next year.

Evaluate networks

A network consists of health care providers that accept payment from your insurer at a discounted rate. For most people, it's important to check if their doctor is covered by the new plan before evaluating its costs. Since you don't have a preferred physician yet, you don't have to worry about that. But you shouldn't ignore the network altogether.

As a busy professional, the composition of your network -- how many providers are in it and where they are located -- will matter. You don't want to be stuck with an insurance policy whose nearest covered doctor is far from your home or work, or is not taking new patients.

You'll want to evaluate the networks thoroughly, going through all your options; but don't worry, this doesn't have to be a lengthy process. Go to the insurer's website and navigate to the provider directory. You'll have to select the insurance plan available to you, so make sure you pick the plan with the correct numbers and letters in the title -- many will be similar.

Most provider directories will allow you to compare reviews and board certifications for each doctor, as well as see their office locations on a map. If there are at least a few high-quality doctors in your area, you're good to go. If there aren't any in your area, the plan is probably not going to be very useful to you. If there are only one or two doctors that interest you in your area, make sure they're accepting new patients. That should be in the directory but if it isn't, you can always call the doctor's office and ask.

Putting it all together

As someone with few anticipated health care needs, the extra cost in premiums for a high-coverage plan probably won't offset the cost at time of care. Rare exceptions are if you're likely to visit the emergency room or if a network is particularly inconvenient for you.

You might find that even after following these steps, the right choice is still the least expensive plan your employer offers. That's okay! At least this year, your decision will be an informed one.