How to really understand what you are buying on the healthcare market

I’m convinced that the luckiest people in America are those who have a decent health insurance plan paid for by their employer — but only one, so there’s nothing to choose from. For the rest of us, every November open enrollment period begins the painful process of choosing the least-worst plan offered by your employer all over again. But the worst pain is reserved for those of us who have to navigate purchases on the national Healthcare.gov website or a state exchange.

I’ve been getting my health insurance this way for almost 10 years, and while it has made navigating the process better, the process itself hasn’t improved at all. Since a shocking amount of each paycheck will go toward whatever I select, it’s important that I make a smart decision that will save me more money on health care throughout the year without sacrificing the coverage I need.

Here’s everything I learned to help make this decision easier — and it might also help you figure out how to navigate it.

To get started on the right foot, it’s helpful to know some basics about terms you’ll see mentioned repeatedly in healthcare documents:

• Health insurance is a plan you agree to purchase annually, under which you (and in some cases your employer and the government) will make a monthly payment, called award. The purpose of these plans is to try to prevent the health care you may need throughout the year from bankrupting you, and they are most useful in an emergency, although they can also cover some preventive care at little or no additional cost to you ( see below).

• You can only choose these plans during open registration, a year-end period with strict deadlines for when you have to make a purchasing decision. Changing insurance outside of open enrollment typically requires a significant life change, such as marriage, divorce, birth of a child, changing jobs, moving or losing your previous coverage.

• Almost all plans are required by law to also pay for the basic health care you receive throughout the year, such as preventative care visits (like your annual check-up when you’re not sick, versus a visit because of an illness).

• How much will the insurance company pay to the provider (a term that covers doctors, nurses, hospitals and laboratories, basically any place or person who provides health care) is called benefit. Each time you receive health care and use your insurance, your insurance will provide a explanation of benefits (EOB) which looks like, but isn’t, a bill, explaining how much they will cover and how much you may be responsible for.

• Insurers think of your care as divided into several different categories, starting with your primary care provider (PCP) will be primarily responsible for coordinating your health care, who you see at your annual preventive care visit, and you may be asked to be consulted before you can see a specialist (this permission to consult a specialist is called reference), which is any professional who has specialized practice, such as a cardiologist, obstetrician or rheumatologist.

• Mental health care is considered separate from the specialists or your PCP. Any tests you have, such as X-rays or blood tests, are considered laboratoriesand any medications are considered prescriptions. Each health plan has a set of rules about how much they will cover for each of these categories, which should be explained to you before you sign up. So, while you browse the website that offers your different plan options, you can see them in advance.

Considering this, you would think it would be easy to make like-for-like comparisons about which plan is best for you, right? Unfortunately, there are some additional factors that complicate the math.

What is the difference between copayment and deductible?

Health insurance is great at offering you a number of different terms and conditions on what you will pay for and under what conditions. All plans start with a franchisewhich is an amount of money that the insurance company expects you to pay out of pocket before they do anything. That said, the law requires that almost all plans cover routine preventative care without using your franchise.

After you meet your deductible, which is usually thousands of dollars, insurance he must start to help cover costs. At that point, whatever you contribute will be covered by the term coinsurancewhich is usually expressed as a percentage. Your insurance may cover 80%, leaving you responsible for 20% of the costs at that time, as determined by the coinsurance terms of your insurance plan.

All plans also have a number called maximum disbursedwhich can sometimes be the same as your deductible, but is usually higher. This is the most you will pay out of pocket in a calendar year. Once you reach this number, insurance generally covers all of your healthcare costs and coinsurance is no longer necessary. Out-of-pocket maximums are routinely quite high and are only intended to ensure you don’t go bankrupt, not to ensure that healthcare is actually affordable. If you go to the emergency room, need surgery, or are hospitalized or receive a lot of health care over the course of a year, you’re likely to max out your pocket.

Some insurance plans offer what is called a copayment. For specific services, such as gynecological care, medications, therapy appointments, or doctor visits, your insurance may cover some costs before your deductible is met, and all you will pay is a small amount, the copay. Not all plans offer this, so it’s important to look at the benefits table and see if yours does. Plans that offer copays may have higher deductibles, but if you’re unlikely to meet them, a copay may make sense.

All of these costs — which add up to your premiums — can be quite intimidating, especially if you don’t think you’ll meet your deductible in a year. And all of these aspects of how you will pay for your care: premiums, copayments, coinsurance, deductibles, and out-of-pocket maximums, make it difficult to accurately determine how much money you will pay for your health care under each plan, and to compare one plan with other.

HMO vs PPO vs EPO vs HSA

When reviewing plans, you will see that plans often include the terms HMO, PPO, EPO, and HSA. They refer to the type of provider network you will have access to and this may be important for a few reasons. First, you may have providers that you already have a relationship with and don’t want to change, like a therapist, a family doctor, or a gynecologist, so you’ll want to make sure your provider is part of that network. Second, your health insurance only covers the providers and services covered by the plan, except in cases of emergencies, so if you travel a lot or have special circumstances, you want to make sure you can access the providers you need, or you’ll be stuck. with a bill you may need to pay out of pocket.

• A preferred supplier organization (PPO) should offer the most flexibility, meaning it should offer the most options for who you can choose to see for your health care and allow you to make appointments with specialists without a referral from your primary care doctor.

• A health maintenance organization (health plan) should be cheaper, managing your care better. Most health plans require you to see your primary care provider before seeing any specialists, and the provider network tends to be smaller.

• Now there is another variant, an exclusive supplier organization (EPO), which is something between an HMO and a PPO. You won’t need referrals and you’ll have access to a larger network of providers, but you’ll have a higher deductible to compensate for that access.

• Finally, there are health savings accounts (HSA), which is a savings account where you set aside money from your paycheck to use specifically for healthcare expenses. Once the money is in the HSA, it can’t be used for anything else, but the money carries over year after year, you don’t lose it. The reason people use HSAs is that the money is saved pre-tax, and you don’t pay taxes on it, and at the same time, because it’s a savings account, it accrues interest. Plans that offer HSA generally have higher deductibles but lower premiums.

How to make sure the type of care you need is covered by a plan

A difficult lesson many people face is learning that some plans include more restrictions and exclusions than others. Health plans offered by religious institutions may not provide for gender-affirming care or some types of health care for people who can become pregnant, for example.

There are also health networks that are so restrictive that you cannot enter the supermarket and get vaccinated, but can only get them at the vaccination centers offered by the network. The same goes for prescriptions, which you can only get at a specific pharmacy or by mail. This may not seem like a big deal, but less flexibility translates into fewer options.

While almost everyone has a complaint or two about their health insurance, one way to get some basic advice on these types of details is to ask your local community (health insurance is highly regional) or even ask on a Reddit forum for your city or region.

If you are researching health plans offered by your employer, you should have a benefits coordinator in human resources who can answer questions, and your coworkers can give feedback about how flexible the plans have been for them.

How to Choose Between Health Plans (and Find Out How Much You’ll Really Pay)

Although most markets, whether through the state, your job or the national exchange, make it difficult to compare the most important metric: what you would actually end up paying out of pocket between premiums, copays, coinsurance and deductibles. You can do this yourself, but you’ll need to do some math to figure it out.

Make a spreadsheet with last year’s health expenses, with a line for each category:

• Monthly premium x 12 months

• Your total number of primary care visits for the year

• Your total number of specialist appointments for the year

• The total cost of your labs

• The total cost of your prescriptions

• The total number of your mental health visits for the year

You can add rows for additional categories not covered here, such as hospital visits or procedures. Create a new column for each plan you are considering. Now calculate what your direct expenses would be for this plan. There will be a big difference, for example, if a plan doesn’t cover mental health visits until you meet your deductible, compared to a plan that offers a fixed copay. For example, if you see a therapist twice a month, that’s 24 visits per year. This could cost you $6,000 out of pocket if your plan doesn’t offer copays before your deductible is met, or $600 if they do. The same applies to prescriptions and labs.

The totals at the bottom of the spreadsheet will show how much you would pay out of pocket throughout the year for each plan and provide a realistic way to compare. While your health care needs will vary from year to year, comparing last year’s costs will give you a real way to compare plans to each other and will perhaps be the most accurate indicator of your actual costs for the next year.