How to Shop for Health Insurance in the US

I recently had the opportunity to select a new health care plan, and, like many folks, was kind of surprised at the variety available. I needed to do some research to bring myself up to speed, and I thought I’d summarize and share my findings.

We’ll start with this: for the most part, any plan purchased through your employer or through a state exchange will offer nearly identical coverage at a high level. That’s because the Affordable Healthcare Act, or ACA (you only call it “Obamacare” if you’re trying to abolish it, still), specifies a number of mandatory care items.

The details matter, though. For example, my old plan offered 20 Physical Therapy visits per year, and required prior approval; my new plan offers no limit and does not require pre-authorization past the initial one, and requires only quarterly reports on the continuing medical need. It is all but impossible to tease out every single one of those little details, but generally speaking the major details will be provided to you when shopping time comes.

So let’s hit the main points of plan differentiation.

Deductible

This is the amount you must pay out of pocket before the insurance even kicks in, and this is one of the main two points where plans differ. However, many things are covered either for free, or with a fixed copayment of $10, $25, or something like that.

You will usually have a per-person deductible and a family deductible. Let’s say you have a $1000/$3000 plan. That’s $1000 per person, and $3000 for the family, regardless of size. So if Mom incurs $1100 in charges, she pays $1000 and the other $100 is covered. If Dad then goes on to incur $4000 in charges, he might pay only $1000, because he still has to hit his own individual deductible.

Most plans will specify what happens after you hit the deductible. For many, once you pay the deductible, you then pay a percentage of the remaining costs, which with higher-cost plans will be 0%. However, all plans also have an annual out-of-pocket maximum, and when you hit that, you’re done—the insurance covers everything, even fixed co-pays.

• For example, imagine our $1000/$3000 plan has a $5000 max out of pocket, and pays 80% once you hit the deductible.
• Now imagine Mom has that $1100 charge. She pays $1020, which is her $1000 deductible and 20% of the remaining $100. That $20 counts toward the out-of-pocket max, meaning the family has now paid $1020 toward that max.
• Now imagine Dad has a $50,000 surgery, which is actually on the cheap side, as I’ve learned. He pays $1000 to hit his personal deductible, and then pays 20% from there. But! Very soon, he’ll hit the $5000 out-of-pocket max. In fact, Dad will have to pay a further $3000 out of pocket, which will “cover” the next $15000 of the bill. So between Mom and Dad, they’re now $5000 out of pocket, and Dad’s bill has had $16000 “taken care of.” The insurance company will cover the rest for the remainder of the year.

A high-deductible plan is one with a higher deductible and out-of-pocket maximum. In exchange, these plans cost less, and they let you contribute tax-free money to a Healthcare Savings Account, or HSA. HSAs can be a cool trick: you can keep the money as cash and spend it tax-free on medical needs, or if you don’t spend it in a year, you can move it into an investment account. You keep the money forever, and can spend it on medical needs at any time. Properly managed, these can be a huge benefit to retirement.

It changes every year, but right now a high-deductible plan must have a deductible of at lest $1600 per individual and $3200 for families. They cannot have deductibles higher than $8050 for individuals and $16100 for families. For 2024, a family can contribute up to $8300 tax-free to a single HSA to help cover those deductibles.

Network Types

This is the other area where plans tend to differentiate.

A Health Maintenance Organization, or HMO, is one where the insurer only covers care provided by a provider with whom they have a contract, meaning the provider is “in-network.” You are assigned a Primary Care Physician, or PCP, who must approve all care given by someone other than themselves, such as a specialist. HMOs tend to be the least expensive options.

An Exclusive Provider Organization, or EPO, is usually the next-most expensive after an HMO. They typically offer a larger network of providers, and will usually not cover out-of-network provides except in an emergency where you have no choice (which applies to HMOs as well), except ground ambulances for some reason. You typically do not have a PCP and don’t usually need referrals to see a specialist (although you may need pre-authorization from the plan itself).

A Preferred Provider Organization, or PPO, is usually the most expensive option. This provides coverage for in-network providers, and usually provides about half the coverage is you see an out-of-network provider. So you get more choice, at more cost.

So a lot of this is figuring out if the providers you use are in whatever “network” you’re considering… and the only safe way to be sure is to call the provider and ask. And it’s not just “do you take Blue Cross?” It has to be “Do you take Blue Cross Blue Card PPO” or whatever the very specific plan name is. Don’t rely on insurance company websites; they’re a shitshow on a good day and contain a lot of inaccuracies they won’t be accountable for later.

Prescriptions

Nearly all plans will include prescription, or “Rx,” coverage. The difference between plans will almost always be the co-pay you must pay for given categories of drugs. Insurance companies group drugs into roughly four “tiers,” and differentiate between brand name drugs and generics. Newer drugs will usually only be available as more-expensive brand name versions.

So one plan might offer something like $5/$10/$25/$100, while another might be double those co-pays.

Many large plans also operate their own pharmacies, which is definitely not a conflict of interests, just saying. These are usually mail-order, they usually provide a 90-day supply for ongoing meds (versus 30 from a local pharmacy), and they usually offer better pricing (sometimes free for lower-tier generics).

Making the Decision

So you’ve got two major considerations, along with the prescription drug piece:

• How much can I afford to be out-of-pocket, compared to how much I anticipate needing care? If you think you can be diligent about putting your deductible into a savings account, then a high-deductible plan with an HSA might be a good fit for you.
• What providers do I tend to use, and are they “in-network” for any of the plan options you’re considering?

Hopefully, this helps de-confuse the issue a little bit. Shopping for insurance can be hard. With most employers starting to offer only a single lower-cost plan that they pay for in full, you may well be out-of-pocket out of every paycheck if you opt for a higher plan. It can be tempting to just spend on one that offers the lowest deductibles, because that feels “safe” in case of future need. But investigate! Don’t overpay for a “warm and fuzzy feeling” that you’re not going to actually use.