How much health insurance do you need?
The short answer: enough to help you and your family weather an unexpected illness or injury and/or manage chronic health conditions without undue financial hemorrhaging.
“You know you’ll likely need something, even if you’re a totally healthy person,” says Amy Bach, executive director of United Policyholders, a San Francisco-based insurance consumer advocacy group. “For most people, it’s about comparing deductibles, copays, benefit limits and reimbursement rates — basically, everything that you could be responsible for — and then any portion of services that would fall to you, such as hospital stays.”
Unlike home or auto insurance, there’s no way to place a value on the asset being insured — in this case, your health and the health of your family. And because the worst-case cost of medical remediation can be astronomical, insurers tend to hedge their risk and keep coverage affordable by offering their densely detailed cost-sharing contracts with little or no customization. So, often the question isn’t really, “How much health insurance do I need?” but, “What health insurance can I get?”
“Health insurance is offered much more on a take-it-or-leave-it basis,” says Bach. “About the only thing you get to choose is how many people you put on your plan.”
Typically, the employer-sponsored group plans that cover most Americans cost consumers less than individual insurance policies because the employer pays part or all of the premium.
The downside is, employers tend to offer only a limited number of plans, often one each from a health maintenance organization (HMO), a preferred provider organization (PPO) and/or an exclusive provider organization (EPO). Choosing from such a small slate of group plans may sound simple, but there can be challenges.
“You don’t want to sign up and find that the doctor you really like and have been going to for 10 years isn’t in the plan you chose,” says Dr. Keith Davis of Shoshone, Idaho, named 2014 national Family Physician of the Year by the American Academy of Family Physicians. “That could steer your decision.”
Like work-based health insurance, individual coverage that you buy directly from insurers on the private market also presents more of a question of “Which plan?” than “How much?” And, selecting the right individual market plan has not been easy.
“You couldn’t do an apples-to-apples plan comparison because the plans looked so completely different,” says Bach. “There was no way to categorize them.”
That challenge eased dramatically late last year with the opening of the state health exchanges, America’s first public health insurance marketplace, created by President Barack Obama’s landmark Affordable Care Act.
The one-stop, online marketplaces provide easy-to-browse summaries of every policy in your state that is exchange-approved to comply with the Affordable Care Act. For ease of shopping, the exchanges organize their plans into four metal categories: from the highest priced/lowest deductible platinum plans on down through gold and silver to the lowest priced/highest deductible bronze plans.
Jen Mishory, deputy director of Young Invincibles, an advocacy group for consumers aged 18 to 34 years old, says the new federal minimum coverage requirements for exchange policies further simplify shopping for coverage.
“On the exchanges, you now have the 10 essential health benefits, so you know that you’re getting a plan that covers a lot of the services that young people need, such as free annual checkups, access to prescription drugs, and mental health and maternity services,” she says.
Follow these steps to find the right health insurance plan for you:
Sources: Amy Bach, Dr. Keith Davis, Jen Mishory
If your most basic answer to the “How much health insurance?” question is, “As little as possible,” then you’ll want to know that the exchanges also feature a list of compliant “catastrophic” plans for those who don’t mind risking a high deductible in exchange for the lowest-possible premium. But be forewarned: Catastrophic plans are reserved for consumers who are under 30, or who have faced hardships, including having their previous health insurance canceled.
“If you’re considering a catastrophic plan, it’s important to think about your out-of-pocket burden,” Mishory advises. “For instance, you could end up spending $6,000 or more in deductible out of pocket before you see any cost-sharing from your insurer. Maybe for you that makes sense if you’re willing to essentially self-insure to that amount.”
So, how much health insurance do you need? As reforms continue to take hold, Bach expects more consumers will come to have a better understanding of what’s “just right.”
“Once we get through this painful period where people suddenly have to pay attention to health insurance for the first time, things are going to be a lot better for everybody,” she says. “Part of what drove health reform was the need for people to take a little bit more responsibility for their health benefits. This will not only get more people into the system to balance it, but also encourage people to be more savvy consumers of health insurance.”