Shopping for a health insurance plan

  • Before buying a health insurance policy, determine your priorities.
  • Know the cost of premiums, out-of-pocket maximum and what's covered.
  • Caveats: Look out for benefit limits, exclusions and coverage caps.

Shopping for a health plan is a lot like looking for a job.

You have to figure out what you want, research companies and what they're offering, find out if you're qualified to apply, and carefully evaluate your options before making a final choice.

If you're in the market for a health plan -- whether you're self-employed or working for an employer that doesn't provide health care benefits -- use these six pointers to help guide you in your search.

6 health plan search tips
  1. Learn about health plans.
  2. Determine your health plan needs.
  3. Look further than the premium.
  4. Beware of the underwriting effect.
  5. Get the full explanation of benefits.
  6. Use some assessment tools.

Learn about health plans

While it's useful to have a general understanding of the main categories of health plans, the lines between them have become so blurred that you probably shouldn't spend too much time parsing the definitions.

That said, there are three basic types of private, individual health care coverage: indemnity plans, managed care plans and consumer-directed plans.

Indemnity plans, also known as non-network-based plans, are what people in the industry often refer to as "traditional" health insurance. You choose any provider you want, pay the bill for each service you receive and send in a form to the insurance company for reimbursement. Consumers' distaste for that last requirement is one reason pure indemnity plans are fading out of the market.

"I had one a few years ago, and even with the experience and expertise I had in the insurance business, it took me three hours a month to submit the paperwork. It was aggravating," says Jack Hungelmann, an independent insurance agent and risk manager in Edina, Minn., and author of "Insurance for Dummies."

Managed care plans are quite different, yet you may see them referred to as "indemnity-type" and "fee-for-service" plans. Ignore the labels and look at how they work.

Managed care plans are known by an alphabet soup of acronyms: health maintenance organizations, or HMOs; point-of-service plans, or POS; and preferred-provider organizations, or PPOs. They all contract with a network of doctors, hospitals and other providers and pay benefits according to whether you get your care within the network.

An HMO offers the least amount of flexibility in choosing providers. It generally won't pay anything, except in emergencies, unless you get all your care from health providers in the network. A POS or PPO will cover you if you go outside the plan, but your co-payment -- a flat fee you pay each time you receive a medical service -- will be higher. Like HMOs, POS plans have primary care doctors who coordinate patient care and usually make referrals to specialists; PPOs generally let you go your own way.

Consumer-directed plans, also called high-deductible plans, enable you to save money in a tax-favorable health savings account similar to an IRA. The deductible is the annual amount you must pay out-of-pocket before your plan starts paying benefits. According to IRS rules, the minimum annual deductibles to qualify for an HSA in 2009 are $1,150 for individual coverage and $2,300 for family coverage. The maximum annual amount you can be charged for your deductible and other out-of-pocket expenses is $5,800 for individuals; $11,600 for families.

Maximum annual HSA contributions are currently set at $3,000 for individuals and $5,950 for families, but individuals ages 55 and older can contribute an additional $1,000. In 2010, the maximum contribution amounts will increase to $3,050 for individuals; $6,150 for families.

Determine your health plan needs

Before you can judge whether a particular health plan is right for you, determine what you want and need most. If affordability is a top priority, and you're willing to forgo the freedom to choose all your own care providers rather than go without coverage, an HMO might be the answer. Availability of HMOs for individuals varies by state and carrier.

"HMOs provide more benefits for the dollar in some cases because they are managing their risk more," says Michael Malasnik, author of "What You Need to Know About Health Insurance" and an independent insurance broker who owns Arizona Benefits Connection in Phoenix.


According to Hungelmann, you can get substantial savings in premium costs by choosing an HMO over other options. "But if you'd prefer to go to the Mayo Clinic, if necessary, without having to beg for a referral, then having more choices would be an important issue," he says.

Your need for certain benefits may also dictate which plan you select. For instance, not all plans cover maternity, and those that do are considerably more expensive. If you're not interested in maternity benefits, you can skip those products and save money on your premium.

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