Insurance Basics
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Evaluating a health insurance plan

Having health insurance is great. Not having it is terrible. Between the two extremes are a lot of gray areas, paperwork and a host of confusing medical and legal terms.

If you're lucky, you'll have some choices when it comes to health insurance. Your employer may offer several insurance plans. Or you may be offered coverage by both your job and that of your spouse. You might also have some flexibility in various limits and deductibles in the plan you select.

Then again, you may not. "Very few people are going to have a choice or any significant amount of choice," says Paul Fronstin, director of the health research and education program for the Employee Benefit Research Institute. "Your choice may be whether to take your own employer's health plan or get something else."

Beginning in 2014, getting that "something else" is expected to become much easier when the new state health exchanges created by the Affordable Care Act open for business. These one-stop-shopping health insurance markets are designed to help individuals and small businesses easily compare and purchase the affordable plan that best meets their needs.

But that's in the future. Let's focus on choosing a plan today.

Evaluating the plan

If it feels like you're paying more for health care than in years past, it's because you are.

"Employers and insurance companies have found it makes more sense to tinker with cost sharing when people need health care," says Fronstin. Charges for things like co-pays, co-insurance, deductibles, office visits and prescription drugs are typically where consumers will feel the health cost pinch the most.

One example: the average preferred provider organization, or PPO, deductible for employee-only coverage rose from $379 in 2000 to $1,200 in 2010, according to EBRI statistics. That could impact you if you're lucky enough to be choosing between insurance plans at two different companies.

"Increasingly employers are making changes to their health insurance plans that shift more of the cost to the employees and dependents," says Robert Hoyt, past president of the American Risk and Insurance Association and head of the risk management and insurance program at the University of Georgia.

But "not all employers are making these changes at the same pace," he says. So that's something to consider carefully as you make your choices.

Ask yourself why you're buying health care insurance:
  1. Do you want it to pick up the cost of an office visit everytime someone in the family needs care?
  2. Do you just want a safety net to protect you in case of something catastrophic?
  3. What do you typically spend on health care in a year?
  4. Do you make a couple of office visits during flu season or do you have chronic problems that require regular care and prescriptions?

Your needs should dictate your coverage.

If you usually spend very little on health care, a high-deductible policy coupled with a health savings account for out-of-pocket costs might be a good option. But "for people who are not always healthy or who tend to be sicker, it's not a good deal," says Bill Vaughan, a senior policy analyst at Consumers Union, the publishers of Consumer Reports magazine.

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