How to choose health insurance: Step-by-Step guide

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By RobertBass

How to choose health insurance: Step-by-Step guide

You usually have limited time to select the right health insurance plan for you and your family. However, rushing or choose health insurance the wrong coverage can lead to costly consequences. This guide will help you find affordable insurance whether it is through a state, federal or employer-sponsored marketplace.

Step 1: Select Your health insurance marketplace

Your employer may offer health insurance

The majority of people who have health insurance are able to get it through their employer. Unless you are looking for an alternative plan, your employer will offer you health insurance. Plans in the marketplace will likely cost more than plans offered through employers. Because most workers are required to pay a portion of their insurance premiums, employers tend to be the ones paying.

Your employer may not offer choose health insurance

You can search the online marketplace for your state, or the federal market, to find the best plan for you. Go to HealthCare.gov, and enter your ZIP code. If there is one in your state, you will be sent to it. You’ll instead use the federal marketplace.

You can also buy health insurance directly from an insurer or through a private exchange. These options will not allow you to receive premium tax credits. These are income-based discounts that you get on your monthly premiums.

Step 2: Compare different types of insurance plans

When searching for the best insurance plan, you’ll be faced with a lot of alphabet soup. There are three main types of health insurance plans: HMOs (PPOs), EPOs (EPOs), and POS plans. The type of insurance you choose will determine how much you pay out-of-pocket and which doctors you have access to.

Check out this summary of the benefits

Many online marketplaces provide a link that will take you to the summary benefits. This will explain all of the plan’s coverages and costs. You should also have a provider directory that lists all the clinics and doctors who are part of the plan’s network. Ask your employer benefits administrator to provide a summary of benefits if you are going through them.

Consider the medical needs of your family.

Consider the type and amount of medical treatment you have received in the past. Although it is impossible to predict all medical expenses, knowing trends can help you make informed decisions.

  • You might want to consider if you would like a referral system for care
  • Referrals are required for certain plans

Referrals are required for HMO and POS plans. You will need to see a primary physician before you schedule a procedure or visit a specialist. Many people choose to switch plans because of this requirement. HMOs are the most affordable type of health insurance, but you can limit your options to only those providers that they have contracted with.

HMO and POS plans have the advantage of having one primary doctor who manages your medical care. This can help you be more familiar with your medical needs and ensure continuity in your medical records. To reduce your out-of pocket costs, you should get a referral from your doctor before you choose POS plans. (Unless it is an emergency, you cannot leave an HMO’s network.

Referrals are not required for plans

An EPO or PPO might be better for you if you prefer to see specialists without the need for a referral. EPOs don’t usually require a referral. However, some do. EPOs can help you keep your costs down as long as providers are in-network. This is easier to do in larger metropolitan areas. If you live in an area that is remote or rural and has limited access to healthcare, a PPO may be a better option. You might have to leave your network.

How about an HDHP and a Health Savings Account?

High-deductible health plans, or HDHPs, can be any type of including HMO, PPO and EPO. However, these HDHPs must follow certain rules to be eligible for HSA. These HDHPs have lower premiums but higher out-of pocket costs, particularly at the beginning. These plans are the only ones that allow you to open a HSA (health savings account), which is a tax-advantaged account that you can use for health care expenses. This arrangement is worth looking into if you are interested.

Step 3: Compare different health plan networks

The “network” of medical providers and facilities that your covers is what your plan refers to.

Why is the network important?

Because insurance companies negotiate lower rates for in-network providers, the cost of an in-network appointment is lower. Out-of-network doctors may not have agreed rates and you will be responsible for a larger portion.

Are there any doctors you prefer?

You can continue to see your existing medical providers if they are listed in the provider directory for the plan that you’re interested in. If they are on a specific health plan, you can ask them directly.

Is a large network important?

It’s a good idea if you don’t have a preferred physician to choose from. If you live in rural areas, a larger network will give you better chances of finding a doctor who accepts your plan.

If possible, eliminate any plans without local in-network physicians. You may also want to eliminate plans with very limited provider options.

Step 4: Compare your out-of-pocket expenses

Another important consideration is out-of-pocket expenses (other than your monthly premium). The summary of benefits for a plan should clearly state how much you will have to pay out-of-pocket for services. These costs can be compared using the federal online marketplace and many state marketplaces.

Learn about your terms of health insurance


It is useful to understand the definitions for some key terms in health insurance:

  • Cost-of-care: You pay a flat fee, such as $20, each time you receive any type of health care service.
  • Coinsurance: This refers to the percentage of a medical cost that you pay, such as 20%. The rest is covered under your health insurance plan.
  • Deductible This is how much you pay to cover medical care before your insurance begins paying.
  • Maximum out-of-pocket: This limit is how much you will pay each year from your own pocket for covered health care. Your insurance will pay the rest once you have reached this limit.
  • Out of pocket costs: These costs are additional to a plan’s premium and include copays, coinsurance, and deductibles.
  • Premium This monthly payment is for your health insurance.

More coverage, higher premiums

The higher your premium, generally speaking, the lower your out of pocket costs like copays or coinsurance. If you have higher monthly premiums but a plan that covers more of your medical expenses, it may be better.

  • A primary doctor or specialist is a person who you see often.
  • You may need immediate care.
  • Regularly, you take brand-name or expensive medications.
  • If you’re pregnant, have plans to have a baby or are planning to have small children.
  • A planned surgery is coming up.
  • A chronic condition, such as diabetes or cancer, has been diagnosed.

Step 5: Compare the benefits

This step will likely reduce your options to a handful of plans. Next, consider these things:

Take a look at the range of services

To see if the benefits are more comprehensive, go back to the summary of benefits. Some plans may offer better coverage for things such as mental health care, fertility treatments, or physical therapy. Others might provide better emergency coverage.

You could miss out on a great plan for you and your family if you skip this important but quick step.

Any lingering questions should be addressed

Sometimes, calling customer service at the plan may be the best way for you to get answers. You can write down your questions ahead of time and keep a pen or an electronic device to record them. These are some examples of questions you might ask:

  • I take a particular medication. What is the coverage for this medication?
  • What drugs are covered by this plan for me?
  • What are the maternity services covered?
  • What happens if I become ill while on vacation abroad?
  • How can I sign up and what documents do I need?

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