Decoding Health Insurance: A Millennial’s Guide to Smart Shopping
Buying health insurance is a rite of passage for any adult, but it can feel like deciphering a foreign language without a translator. We’re here to help you navigate this often confusing territory and pick a plan that suits both your budget and healthcare needs.
Types of Policies
Health insurance is not one-size-fits-all. It comes in various flavors, with the majority rooted in managed care. This system uses groups of physicians and healthcare facilities offering services at pre-negotiated rates. Some policies only cover network providers, while others pay for out-of-network services. Your choice of plan directly influences your healthcare journey, affecting things like whether you need a referral to see a specialist. Plans that offer greater flexibility often have heftier price tags.
Four basic types of insurance plans are on offer: Health Maintenance Organizations (HMOs), Point of Service Plans (POS), Preferred Provider Organizations (PPO), and Fee-for-Service Plans. Your choice should consider your specific needs, financial resources, and the offered coverage.
Health Maintenance Organizations (HMOs)
An HMO requires you to get your healthcare services from network providers, usually through a referral from your primary care physician. Non-network services are a no-go. HMOs allow members to pay for their coverage in advance and usually include preventative care. A small copayment is usually required for services.
Preferred Provider Organizations (PPOs)
In a PPO, the insurance company brokers deals with health providers to offer services at a discounted rate. You can choose in-network or out-of-network physicians, but the former gets you a higher reimbursement rate.
Fee for Service Plans
Also known as indemnity plans, Fee for Service plans are becoming rare. Here, you pay a monthly premium and an annual deductible before any benefits kick in. You’re free to choose your providers, and you’re eligible for reimbursement if the service is covered under the plan.
Point of Service Plans (POS)
A POS plan is a hybrid between an HMO and a Fee for Service plan. You can choose a primary care physician who coordinates your care or bypass them and go directly to an out-of-network specialist. The latter option involves meeting a deductible and paying coinsurance, similar to an indemnity plan.
A deductible is the sum you need to pay for your treatment before insurance coverage begins. Choose a deductible that doesn’t surpass your emergency fund to avoid derailing your financial stability due to medical expenses.
Health insurance plans usually offer a range of prescription drug benefits. Commonly, three-tiered plans categorize medications into generic (cheapest), popular brand-name (mid-priced), and rare brand-name or “non-formulary” (most expensive). Choose a plan that won’t saddle you with exorbitant drug costs if you need regular non-formulary prescriptions.
To protect you from overwhelming medical expenses, health insurance policies cap the most you can pay in a year, known as your “maximum out-of-pocket” limit. This figure varies by plan and includes deductibles but often excludes standard office co-pays or prescription costs. Make sure the maximum out-of-pocket limit aligns with your financial capacity.
Before committing to a plan, scrutinize the carrier’s network. If your preferred doctors aren’t in-network, you might need a plan that covers out-of-network treatment or contemplate a doctor change. The network should also offer a broad selection of specialists in your area, providing you with choices and the chance for second opinions when making healthcare decisions.