Choosing The Right Health Insurance Exchange Plan

With open enrollment less than a month away, consumers looking for insurance on the state marketplaces will soon need to begin evaluating the plans made available to them on the exchanges. The #1 question we've been hearing is simply: "What plan should I choose?" 

The two main components to consider when evaluating a health insurance plan are its coverage and cost. Under coverage we incorporate items such as type of plan (HMO vs PPO), in-network the service providers (hospitals, doctors etc.), the geographical size of the network (some network may be very local) and any added benefits the plan may cover. On the cost sides consumers should consider not only the premiums paid monthly, but also the out of pocket cost sharing (deductibles, coinsurance and copays) built into the plans.

Coverage Options and Characteristics

The Network

One of the biggest points of comparison between insurance providers and plans are the network of service providers (the doctors, hospitals and other medical service) the insurer has developed relationships with. Visiting one of these in-network providers will cost a policyholder significantly less than a visit to an out-of-network provider. As you consider the insurance policy, evaluating the network will be one of your most important responsibilities. Here are some things to consider regarding a plan's network:

1) Is your family doctor in-network?

Most of us have a family doctor, or primary care physician (PCP) we've seen  and trusted for years. If you're like most families, this is the first person you see when you are sick, injured or have any other medically related issues. If you'd like your insurance to help pay for the costs of this relationship it will be very important to check that your physician will be a part of the plan's network. In many of the ACA plans we've evaluated in-network visits to PCP often have very generous coverage including deductibles for up to the first three visits. For those considering HMO plans, in-network PCPs are even more important since nearly every medical service will first require a referral from this physician. 

2) What other services providers are in-network?

Even though an insurance provider offers a plan in your area, this doesn't guarantee that the plan will have a large network of service providers in your area. After checking for your PCP, take a look at the other specialists, hospitals and pharmacies the insurance plan works with in your area. You will want to be sure that the hospitals nearest to your home and work are part of your insurance network, as these types of emergency visits are typically the likeliest cause of high medical bills. In addition, if anyone in your household currently receives specialized or routine medical care (psychiatrist, physical rehab) check to make sure these providers are part of your plan's network or you may have to consider paying out of pocket or finding a new provider.

3) How will your insurance handle medical needs when traveling?

One overlooked factor is how your insurance plan handles medical care when you travel. While plans may have numerous in-network providers in your area of residence, this may not be true at a national level. On a recent vacation, a friend I was traveling with needed to visit the emergency room for an unexpected allergic reaction. Fortunately, her insurance provider has a national profile and the hospital visit required nothing more than a $200 copay. Without these national relationships, this emergency visit may have been extremely costly.

If your or anyone in your household travels frequently, how a plan handles coverage at a national level will be of great interest. It may be a reason to choose a large health care provider instead of a regional one in your area. Generally, the major national providers have provisions to handle coverage in case of emergencies and will have existing relationships with hospitals and providers across the country which will substantially reduce your out of pocket costs. If you're considering a local or regional provider for insurance, make sure you've considered how unforeseen medical needs while traveling may impact you and your family.

Cost Factors and Considerations

On the other side of the coin are the costs associated with your health insurance plan. Costs can be split between monthly premiums, and your out of pocket cost sharing (Deductible, Copays, Coinsurance and Out of Pocket Maximums). In general the more you pay in monthly premiums, the lower your out of pocket cost sharing will be. Under the Affordable Care Act, plans will be divided between Bronze, Silver, Gold and Platinum level plans, with Platinum plans having the highest premiums but lowest cost sharing. Consumers will be interested in striking the right balance between premiums and cost sharing.

What can I reasonably afford out of pocket?

Remember that purchasing insurance is meant to protect you from the unforeseen high cost event. Insurance companies profit by charging you a little more than what they would expect you to cost on average, and in exchange will take on the risk of something very costly occurring such as a trip to the emergency room. The first thing you will want to think about is how much you could afford, in the instance that such an unfortunate event does occur. 

One of the major improvements in health insurance under the Affordable Care Act is the standardization of out of pocket limits for insurance plans. The maximum any policyholder will be responsible for in 2014 when it comes to in-network out of pocket costs is $6,350 for an individual and $12,700 for a family. Higher tiered plans will come with lower caps. If based on your savings and budget, you would be unable to afford such a large maximum, then it may be worthwhile for you to pay the higher monthly premiums to lower your cost sharing responsibilities. 

What is your average cost of medical care?

The second thing you should consider is how much you currently spend in healthcare currently. Insurance plans do not cover most costs until the annual deductible has been met, so it makes little sense to pay a higher premium for a lower deductible if you do not expect to have costs higher than that amount. For instance, if you chose a Silver plan with a $2,000 deductible but only had $1,000 in healthcare costs, the plan would have treated you no differently than a Bronze plan with a $6,350 deductible. You would have paid more in premiums but gained nothing in actual benefits. Over-insuring can be as big a mistake as underinsuring. For the young and healthy, who often have low average annual medical costs it can often make sense to pay for less coverage.

Since the Affordable Care Act requires guarantee issue (meaning insurers can no longer reject you for preexisiting conditions) those who have been chronically ill can now find coverage that makes sense.  The higher your family's regular medical costs are, the more likely higher tiered plans will be financially beneficial for your situation. A quick way to see if these plans make sense is to compare the amount of extra premiums your family would have to pay, against the reductions in deductibles, coinsurance and caps. If you happen to be young and have a chronic illness that requires significant medical expenditures, it will almost always make sense to choose a higher tiered plan.

Do you qualify for Cost Sharing Subsidies?

One carve out in the Affordable Care Act that may apply to your family is the existence of cost sharing subsidies. Under the ACA, families with incomes of up to 250% of FPL (Federal Poverty Level) will be eligible to purchase plans that are adjusted to reduce the amount of cost sharing they would normally be responsible for. Under these subsidies, families purchasing a silver plan on the exchange will have the out of pocket maximums, deductibles, coinsurance and copay amounts adjusted so that these plans will have a benefits profile of a higher tiered plan. Since this subsidy only applies to a Silver plans on the exchange, it will often make sense for households to take advantage of what is a better plan than otherwise available.

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