How do I choose a private health insurance plan?

Even the smartest people I know get confused during health insurance open enrollment. Most people whose jobs offer insurance have only one or two options. Some, especially part-time and low-wage workers, are not offered insurance at all. The state health care exchanges provide individuals with an array of options – more in some states than others.

How do I choose a health insurance plan? I do not have easy answers for you, but I have some helpful information. In short, what health plan you want depends on your health care needs and how uncomfortable you are with risk. The more needs you have, and the more risk-averse you are, the more generous a plan you should purchase.

Here, I will explain different types of plans, from least to most generous. In general, the more generous a plan, the higher the premium. The lines between plans are not perfectly distinguishable; an HMO, for example, can have many features of a PPO, and vice versa:

HMO (health maintenance organization): Has a restrictive provider network and limited, if any, out-of-network benefits. Beneficiaries usually required to see a primary care “gatekeeper” before obtaining specialty care.

EPO (exclusive provider organization): has a restrictive provider network and limited, if any, out-of-network benefits, but does not usually require a primary care gatekeeper. Can self-refer to a specialist.

POS (point-of-service): combines HMO and PPO features. Beneficiaries assigned to a primary care gatekeeper, but may use out-of-network providers at a higher rate of cost-sharing (coinsurance/copayment).

PPO (preferred provider organization): has a wide network of “preferred” providers and allows beneficiaries to see out-of-network providers (non-preferred providers) at a higher rate of cost-sharing. No referrals required for specialty care.

Collectively, HMOs, EPOs, POSs, and PPOs, are called managed care plans because they attempt to limit costs and improve quality.

Indemnity: does not have a network of providers, but rather allows the beneficiary to visit whatever provider she wishes. Unlike the previous plans, however, an indemnity plan requires beneficiaries to pay the provider up front, and then obtain reimbursement from the insurer.

It is not clear where to put high-deductible health insurance plans on this list. These plans trade off high deductibles (the amount that you must pay before insurance covers medical services) for lower premiums. After you have paid the deductible, however, these plans usually operate like any other managed care plan. Whether a high-deductible plan is “worth it” depends on the extent of the premium reduction compared to the size of the deductible. Most high-deductible plans do not subject preventive care to the deductible, but rather cover this care without any additional cost-sharing.

How do I shop for care?

All plans, in both the exchanges and the employer-based market, must provide a Summary of Benefits and Coverage, which will allow you to compare major features of the plan.

If you need a certain medication, or if it is important to you to have a certain provider in your network, then you will need to look a little deeper. A drug formulary, available before you purchase a plan, will allow you to see what drugs are covered, for how much, and under what conditions. A provider network directory, also available before you purchase a plan, will allow you to see whether a provider is in-network. Note that a provider may be in-network for one type of plan, but not for another, even with the same insurer.

If other aspects of quality matter to you, then you can go to HEDIS for information on health care plan performance, including technical quality and care experience.

In the exchanges, will allow you to compare the price and benefit structures of different health insurance plans. Plans in the exchanges must conform to one of four “precious metal” categories: bronze, silver, gold, and platinum, each increasingly generous. The precious metals correspond to actuarial values, the estimated proportion of covered costs on average among total enrollees. For example, the bronze plans are estimated to cover 60% of enrollee costs in a given year. But that could mean that one enrollee’s costs are covered at a rate of 90% (for example, because they use more in-network care), and another enrollee’s costs are covered at a rate of 30%. Silver plans have an actuarial value of 70%, gold 80%, and platinum 90%. Adults under 30 may purchase a very high deductible “catastrophic” plan instead of one of these plans.



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