Writing a check for health insurance every month can seem like wasted dollars. After all, maybe you’re very healthy. Why do you need to shell out money for health insurance? With the right health insurance plan, if you get sick or hurt, medical debt won't follow you around the rest of your life. Here's how to pick the right plan.
The fact is good health is an advantage that can be taken from you at any time. You could get hit by a car while riding your bike and easily run up tens of thousands in medical bills. Or, that funny little twinge could turn into a nasty diagnosis, costing thousands.
So yes—you need health insurance. At some point, you will use health care, and you will appreciate having help paying for it.
With so many choices, though, how do you pick the ‘right’ plan?
It doesn’t have to be difficult. Back in the day, employer plans seemed easy, because they often had limited choices. The Affordable Care Act (ACA) marketplace can feel like an all-you-can-eat buffet. It’s easy to get overwhelmed.
Keep in mind the following: First, no plan is perfect. Focusing solely on the lowest cost can end up being more expensive if it means you don’t get the health care you need. Second, if you’re not satisfied with your plan, you have the option to change it during Open Enrollment, which begins every November 1. Finally, you will likely qualify for ACA subsidies that can significantly lower your premium costs.
Your age has a say in this. For example, 20-somethings tend to see the doctor less than 40-somethings and 60-somethings most of all. What that means is—if you use a lot of health care—you’d be better off paying more each month in premiums and have more costs covered.
Your income plays a role in this. Consider your fixed monthly cost (your premium) and usage costs (your deductible and out-of-pocket expenses.) So—if you don’t have a lot of savings—you may want the fixed costs of a higher premium so you don’t risk debt to cover your cost-shares.
TIP: High deductible plans are often eligible for Health Savings Accounts (HSAs), which offer another way to save money. Plus, they have tax benefits—useful when you’re a 1099 worker!
If you have a favorite clinic or physician, pay attention to provider networks. Preferred Provider Organizations (PPOs) have more in-and-out of network options, giving you more flexibility in who you see. Health Maintenance Organization (HMOs) are less expensive but have narrower networks and give more control to the insurance company on who you see.
If by now you’re thinking that picking the right health plan really comes down to pay now or pay later, you’d be right.
If you DO use a lot of health care, go to doctor often, or take lots of medicines, it typically makes sense to choose a lower deductible, higher premium plan.
If you DON’T use a lot of health care, it can make sense to pick a plan with a higher deductible, lower premium and risk more to pay as you go. BONUS: An HSA plan offers tax advantages.
Toss the Rule of Thumb out the window if: you’re pregnant or planning to start a family; you’re planning a major procedure (i.e., knee replacement, etc.); or you have a chronic condition, such as diabetes or high blood pressure.
Get a higher premium-lower deductible plan. You’ll pay more each month, but in the end, have more care covered.
ACA marketplace plans have four metal tiers: Bronze, Silver, Gold, and Platinum. While the quality of care is the same, how much you pay varies by tier. Also, keep subsidies in mind when considering your costs.
For example, in a Bronze plan, you pay 40% and the insurance company pays 60% of the costs. In a Silver plan, the corresponding split is 30% and 70%, Gold is 20% and 80%, and Platinum 10% and 90%. All have same preventative care at 100%. Silver plans are the most popular, and may offer extra savings if you qualify.
Once you do, it makes it easy to shop for ACA health plans. To learn more, visit the ACA Healthcare page on Mercer Indigo today.