I’m convinced that the luckiest people in America are those who have a decent health insurance plan paid for by their employer—but just one, so there’s nothing to choose. For the rest of us, each November’s open enrollment period starts anew the painful process of choosing the least worst plan offered by your employer. But the worst pain is reserved for those of us who have to navigate purchasing from the national Healthcare.gov site, or a state exchange.
I’ve been getting my health insurance that way for almost 10 years, and although I’ve gotten better at navigating the process, the process itself has not gotten any better. Since a shocking amount of each paycheck is going to go toward whatever I select, it’s important I make a smart decision that will save me the most money on healthcare over the year, while not sacrificing the coverage I need.
Here’s everything I’ve learned to help make that decision easier—and it can help you figure out how to navigate it too.
To get off on the right foot, it’s helpful to know some basics about the terms you’re going to see mentioned over and over in healthcare documents:
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Health insurance is a plan you agree to buy into yearly, in which you (and in some cases your employer and the government) will make a monthly payment, called a premium. The point of these plans is to try and keep healthcare you might need over the year from bankrupting you, and is most useful in an emergency, though it also may cover some preventative care at low or no additional cost to you (see below).
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You can only choose these plans during open enrollment, a period of time at the end of the year with hard deadlines for when you have to make a purchase decision. Changing insurance outside of open enrollment typically requires a significant life change like a marriage, divorce, birth of a child, employment change, moving, or loss of your previous coverage.
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Nearly all plans are required by law to pay for the basic health care you receive over the year, too, like preventative care visits (like your yearly checkup when you’re not sick, versus a visit for an illness).
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How much the insurance company will pay the provider (a term that covers doctors, nurses, hospitals and labs, basically any place or person who provides health care) is called a benefit. Each time you get healthcare and use your insurance, your insurance will provide an explanation of benefits (EOB) that looks like but is not a bill, explaining how much they will cover and how much you may be responsible for.
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Insurance companies think of your care as divided into tons of different categories, starting with your primary care provider (PCP) will be primarily responsible for coordinating your health care, who you see for your yearly preventative care visit, and might be required to be seen before you can go see a specialist (this permission to see a specialist is called a referral), which is any provider who has a specialized practice, like a cardiologist, obstetrician, or rheumatologist.
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Mental health care is considered separate from specialists or your PCP. Any test you get, like x-rays or bloodwork, are considered labs, and any medications are considered prescriptions. Every healthcare plan has a set of rules for how much they’ll cover for each of these categories that must be spelled out before you sign up, so as you’re poring over the website that offers you your various plan choices, you can see them ahead of time.
Given that, you’d think it would be easy to make apples to apples comparisons of which plan is best for you, right? Unfortunately, there are some additional factors that complicate the math.
What’s the difference between a copay and a deductible?
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Health insurance is great at throwing a lot of different terms and conditions at you for what it will pay for, and under which conditions. All plans start with a deductible, which is an amount of money the insurance company expects you to pay out of pocket before they’ll kick in anything. That said, the law requires nearly all plans to cover routine preventive care without using your deductible.
After you meet your deductible, which is usually thousands of dollars, insurance should start to help cover costs. At that point, what you contribute will be covered by the term coinsurance, which is usually expressed as a percentage. Your insurance may cover 80%, leaving you responsible for 20% of costs at that point, as determined by the terms of the coinsurance under your insurance plan.
All plans also have a number called the out-of-pocket maximum, which can sometimes be the same as your deductible, but is usually higher. This is the most that you will pay out-of-pocket in a calendar year. After you hit this number, insurance generally covers all your heath care costs, and coinsurance isn’t required anymore. Out-of-pocket maximums are routinely quite high, and are only meant to ensure you aren’t bankrupted, not to make sure health care is actually affordable. If you go to the emergency room, you need surgery, or are hospitalized or a lot of health care over a year, you’re likely to hit your out of pocket maximum.
Some insurance plans offer what’s called a copay. For specific services like gynecological care, medications, therapy visits, or doctor’s visits, your insurance may cover some costs before your deductible is met, and all you’ll pay is a small amount, the copay. Not all plans offer this, so it’s important to look at the table of benefits and see if yours does. Plans that offer copays may have higher deductibles, but if you are unlikely to meet it, a copay might make sense.
All these costs—which are on top of your premiums—can be pretty intimidating, particularly if you don’t think you’re likely to hit your deductible in a year. And all of these aspects of how you’ll pay for your care: premiums, copays, coinsurance, deductibles and out of pocket maximums, make it difficult to determine precisely how much money you’ll pay for your healthcare under each plan, and to compare one plan to another.
HMO vs PPO vs EPO vs HSA
As you dig through plans, you’ll see that plans often include the terms HMO, PPO, EPO, and HSA. These refer to the kind of network of providers you’ll have access to, and that can be important for a few reasons. First, you may have providers you already have relationships with and don’t want to change, like a therapist, family physician, or a gynecologist, so you’ll want to ensure your provider is part of that network. Second, your health insurance only covers providers and services covered by the plan except in cases of emergency, so if you travel a lot or have special circumstances, you want to ensure you can access the providers you need, or you’ll get stuck with a bill you may need to pay out-of-pocket.
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A preferred provider organization (PPO) is supposed to 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 physician.
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A health maintenance organization (HMO) is supposed to be less expensive, by managing your care more. Most HMO’s require you to see your primary care provider before going to see any specialist, and the network of providers is often smaller.
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There’s now another variant, an exclusive provider organization (EPO), which is something between a HMO and PPO. You don’t need referrals and you get access to a larger network of providers, but you’ll have a higher deductible to offset that access.
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Finally, there are health savings accounts (HSA), which is a savings account where you have money put aside from your paycheck that you’ll specifically use for your health care costs. Once money is in the HSA it can’t be used for anything else, but the money is carried over year to year, you don’t lose it. The reason people use HSA’s is that the money is put aside pre-tax, and you don’t pay taxes on it, and all the while, because it is a savings account, it accrues interest. Plans that offer an HSA usually have higher deductibles, but lower premiums.
How to make sure the kind of care you need is covered by a plan
A hard lesson many people face is learning that some plans include more restrictions and exclusions than others. Health care plans offered by religious institutions may not provide for gender affirming care or some types of health care for people who can get pregnant, for example.
There are also healthcare networks that are so restrictive you can’t walk into your grocery store and get a vaccination, but can only get them at vaccination centers offered by the network. The same goes for prescriptions, which you may only be able to obtain from a specific pharmacy or by mail. This may not seem like a big deal, but less flexibility translates to 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 particulars is to ask your local community (health insurance is highly regional), or even ask in a reddit forum for your city or region.
If you’re digging through the health care plans offered by your employer, you should have a benefits coordinator in human resources who can answer questions, and your coworkers might be able to give feedback on how flexible plans have been for them.
How to choose between healthcare plans (and figure out how much you’ll actually pay)
Though most marketplaces, whether through the state, your work or national exchange, make it difficult to compare the most important metric: what you’d 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 healthcare expenses, with a row for each category:
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Monthly premium x 12 months
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Your total number of primary care visits for the year
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Your total number of specialist visits for the year
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The total cost of your labs
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The total cost of your prescriptions
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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. Make a new column for each plan you’re considering. Now calculate what your out-of-pocket expenses would be for that plan. There’ll be a big difference, for example, if a plan doesn’t cover mental health care visits until you hit your deductible, versus a plan that offers a fixed copay. For instance, if you see a therapist twice a month, that’s 24 visits a year. That could cost you $6000 out of pocket if your plan doesn’t offer copays before your deductible has been met, or $600 if they do. The same is true for prescriptions and labs.
The totals at the bottom of the spreadsheet will show you what you’d pay out of pocket over the year for each plan and give you a realistic way to compare. Although your health care needs vary year to year, comparing to last year’s costs will give you a real way to compare plans to one another, and be, perhaps, the most accurate predictor of your real costs for next year.