Doing The Right Way

How to Choose a Health Insurance Plan

The expensive cost of medical treatments has made health insurance necessary for all. But considering the wide variations in policies, you have to spend time carefully studying your needs and the options available.

Type of Policy

There are lots of health insurance plan types today, such as the most popular, Health Maintenance Organizations (HMOs). With an HMO, you have to use a doctor or hospital in the policy’s network, and you need your primary care doctor’s referral before you can see a specialist.

On top of HMOs, Preferred Provider Organizations (PPOs) are nearly as common. A PPO plan works within a network, but you can use any provider you wish – though your costs are lower if you choose within the network – and you don’t need a referral to consult with a specialist.

Your third option is Exclusive Provider Organizations (EPOs) which are kind of an HMO-PPO hybrid. You must use network providers, for example, but you are free to see a specialist even without a referral.

Finally, Point of Service (POS) policies which are the least common, are essentially the flip side of EPOs. You are allowed to use doctors and hospitals outside the network, but to see a specialist, you must secure a referral.

Given the same level of coverage, HMOs and EPOs are usually cheaper than their PPO and POS counterparts. However, if you don’t fancy the idea of being restricted in your options, or there’s simply poor network coverage where you live, then a PPO or POS plan may be well worth the higher price.

High vs. Low Deductible

Generally speaking, the higher your deductible, the lower your monthly premiums will be. A high deductible simply means that you have to shoulder more of your health costs before your coverage applies. On the other hand, if you don’t have any major health expenses within a given year, this plan is obviously a steal.

Low medical expenses mean you likely won’t exceed the deductible (even if you have a low-deductible plan), so a high-deductible policy will keep your insurance costs to a minimum while still securing you against catastrophic emergencies.

If you want to go high-deductible, your best option is a Health Savings Account (HSA)-enabled plan and financing it with at least a year’s worth of deductible. An HSA plan is a great way to compensate for the biggest vulnerability of a high-deductible health plan – having to pay a huge amount of money on a major health expense before coverage takes over. With a year’s worth of deductible in your HSA, you can cover your part of the health costs while enjoying an HSA’s thrice-over tax advantage.

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