Feeling Confused About Your Health Insurance Choices?
Health insurance can be confusing, expensive, and there can be a lot of options to consider. If you’re feeling frustrated, unsure, or even a little shocked at how expensive everything is getting, I totally understand. Open enrollment at work has come around again, and at lunch yesterday I heard lots of groans and complaining. Everyone is trying to look over all the details to find out what changed and make their selections. Are you also having trouble as you decide which health insurance to choose? First, we’ll look at what types of health insurance may be available to you and get a general understanding of how each works. We’ll review the types of health insurance plans that are most commonly offered both through employer-sponsored plans or the Marketplace.
This post may contain affiliate links, which means I’ll receive a commission if you purchase through my links, at no extra cost to you. Please read full disclosure for more information.
This article is focused primarily on private health insurances and employer-sponsored plans. If you are 65 or older and qualify for Medicare or Medicare Advantage plans, please start with this article to take a closer look at your choices.
Types of Health Insurance
There are 7 basic types of health insurance I want to talk to you about today. In truth, I have included Medical Cost Sharing in this list, but it is not actually an insurance plan. However, Medical Cost Sharing can be a good alternative to Health Insurance for some, and I wanted to share more information about Medical Cost Sharing with you. I can’t give you a recommendation as to the best plan on this list. Truly, the best plan for you is going to depend on your needs as an individual or as a family. What I will do is discuss the pros and cons of each plan and which type of needs are best suited for each plan. I can also tell you a bit about my personal healthcare insurance choices and experiences. Let’s start with the 2 most common plans: HMOs and PPOs.
Health Maintenance Organizations (HMOs)
What is unique about HMO plans is that your healthcare costs will only be covered if you go to doctors and facilities that are in-network. An HMO will likely cover emergency care out-of-network, but generally for any other care received out-of-network, you will need to pay the whole bill yourself. This could include a consulting doctor or specialist who sees you while you are hospitalized. Read the fine print to find out what your plan may cover in the event that you need emergency care out of network. Be aware this could happen, so that if you choose an HMO plan you don’t get unpleasant surprises later.
Example: When I am traveling out of state and break a bone, and I will get treatment at the nearest hospital, which is of course out of network. My stay at the hospital will be covered at in-network rates because it was an emergency, but I have to pay the bill myself for the orthopedic doctor who saw me at the hospital.
You will of course have deductibles, co-pays, and co-insurance as you would with other insurance plans on this list. However, HMO’s do generally tend to be lower cost, either through lower premiums or lower deductibles. You are likely to have a co-pay or co-insurance each time you receive healthcare. You will also generally need a referral to see a specialist.
There are other additional positives to HMO plans besides being budget-friendly. The Primary Care Physician is a key player in this type of plan, because the emphasis of HMO plans is integrated care, prevention and wellness. I believe there is also usually less paperwork like claim forms.
Preferred Provider Organizations (PPOs)
Like HMOs, a PPO does have a list of in-network providers, but unlike an HMO, PPOs will provide some coverage for out-of-network facilities and providers. That means more freedom to choose a doctor or healthcare practice you like. However, you may have to pay more for out-of-network care. Also, getting out-of-network care covered may require additional paperwork like claim forms.
Premiums for PPOs are usually higher than for HMOs. You will have to weigh what is the best way to use your healthcare dollars to meet your own needs. The premium for a PPO may be higher, but it can save you money if you will need to use out-of-network providers. PPOs also allow you to see a specialist without a referral, potentially saving you a visit and a copay at your Primary Care Physician.
Exclusive Provider Organizations (EPOs)
An EPO is similar to an HMO in that you will only be covered for healthcare received at in-network providers and facilities. You will foot the bill yourself for any care out-of-network, except for emergency care. Here’s another time where it will be important to read the fine print, so watch out. An EPO may pay less than the provider’s rate when you receive out-of-network emergency care. When this happens, that provider is entitled to bill you for the amount that the EPO did not pay.
EPO premiums are usually more than an HMO, but less than a PPO. EPOs have a larger network than HMOs, with more providers and healthcare facilities from which to choose. You also won’t need a referral to see a specialist, but you might need pre-authorization before some procedures. If you don’t have pre-authorization, you will have to pay fees or maybe even pay for the whole procedure out-of-pocket. Did you know the average cost of a CT scan in the US is more than $3,000? Ouch! While your provider may also check if pre-authorization is required before a test or procedure, it’s important you also understand your health insurance plan’s requirements to prevent receiving a big bill.
Point-of-Service plans (POS)
POS plans are the middle ground between HMO and PPO plans, sharing some characteristics with each. With a POS, you will have coverage for both in-network and out-of-network healthcare. You will pay more out of pocket for care out-of-network than you would in-network. Generally, emergency care is covered at the same rate for in-network and out-of-network. POS plans do require a referral to see a specialist.
POS plan premiums are more expensive than an EPO or HMO plan, but that doesn’t mean that they are necessarily a bad deal. You will tend to have lower out of pocket costs with a POS plan each time you receive care. If you need a plan that allows flexibility when choosing providers, then a POS plan may be a good fit. These plans are also less common. You are not likely to see many of these plans on the marketplace or offered by your employer.
High-deductible Health Plans (HDHPs)
A HDHP is actually either an HMO, PPO, EPO, or POS plan but, as the name suggests, with a much higher deductible. With an HDHP, you will have a lower premium each month. However, you will have high out of pocket costs until the deductible is met. Once you reach the maximum out of pocket amount, any further healthcare costs will be covered by the insurance in full. Preventative care is generally free even if you haven’t yet met the deductible.
Sometimes a HDHP may be paired with a Health Savings Account (HSA). You select an amount of your paycheck that you want to contribute to your HSA, or your employer may even contribute. Money contributed to the HSA is not taxed as income. Then, when you have healthcare costs, you can use money from your HSA to pay for it. If you choose an HDHP with an HSA, you need to keep your receipts for medical expenses.
Catastrophic Health plan
If you are under the age of 30, you are eligible for a catastrophic health plan. Those over 30 may be eligible if they meet certain exemptions. The unique characteristic of a Catastrophic Health plan is low premiums and very high deductibles. A catastrophic plan generally has the lowest premiums of any of the other plans listed here, but you will pay all costs out of pocket until you meet your deductible. Preventative and primary care is covered even if deductible is not met.
On the plus side, once you have met your deductible, there are no co-pays or co-insurances. Everything is generally covered 100% after you meet your deductible.
Medical Cost Sharing
Medical Cost Sharing is not an insurance, but for some people it may be the best choice. While Medical Cost Sharing is not insurance, it does meet the government requirement for health insurance here in the US. It also protects your family from large, unexpected healthcare costs just like a health insurance would do.
Medical Cost sharing plans are organizations with members that all agree to help share one another’s healthcare costs. They are generally non-profit, so no one is taking their cut of your premiums. The money you pay goes nearly in full to pay for healthcare costs of members, with a small amount going to administrative costs of running the organization.
How does Medical Cost Sharing Work?
There are many different Medical Cost Sharing organizations out there. Each has their own processes for submitting medical bills and making your gift payments. With a Medical Cost Sharing organization, rather than a premium, you pay a gift amount in order to be eligible for sharing of your own healthcare costs. Medical Cost Sharing organizations may have different plans and levels of sharing. Gift amounts could be a fixed amount each month or they could be variable depending on the organization. Some may cover preventative care, but for many Medical Cost Sharing plans preventative care will be out of pocket.
When looking for Medical Cost Sharing organizations, there are a few things to look at carefully before signing up. First, is the organization reputable with a long history of good service and management? Second, how do they handle pre-existing conditions? Each organization may have a different policy on that. Lastly, what is the process for submitting medical bills and for reimbursement?
My Medical Cost Sharing Experience
I actually currently use Medical Cost Sharing to meet my family’s healthcare needs. My husband works for a small, family-owned business that does not offer insurance. And as I no longer work full time, I am not able to get employer-sponsored health insurance anymore. So we started looking around, and the best option for us was Christian Healthcare Ministries (CHM). With CHM, there are 3 different levels of plans so it fits our budget. We pay a fixed monthly gift amount, making it easy to budget for each month. There is an online portal where I can quickly and easily submit my medical bills for reimbursement. We do pay for our own preventative care, but the sharing for a medical incident is great!
As of the day I’m writing this article, the Gold plan for CHM for 1 person is only $240 for the monthly gift amount (similar to your insurance premium). With the Gold plan, if a medical incident over $1000 dollars, CHM will cover any and all medical expenses over and above that $1000. And if I have another medical incident over $1000 in that same year, CHM shares ALL of it because my Personal Responsibility of $1000 for the year. For comparison, the cheapest plan available to me on the Marketplace at Healthcare.gov is $330 per month with an $8450 deductible, Ouch!
Medical Cost Sharing can save you money!
With Medical Cost Sharing
I’ll give you an example of what it would look like to receive healthcare with a Medical Cost Sharing plan. For our family of 3, the Gold plan at CHM would cost $720 per month. My son has a Child Well visit, and needs a vaccine. The bill is less than $150, which I will pay in full. This is because CHM does not provide cost sharing for an incident less than $1000.
If we had to purchase a traditional Health Insurance Plan…
With the cheapest insurance plan available on the Marketplace, my premium would still be $878.45 for our family of 3. Primary care like child well visits is covered at 100%. So the insurance pan would have paid the $150 and I would have paid $0.
With Medical Cost Sharing
Later that year, I need surgery. I can get surgery anywhere I want, because Medical Cost Sharing plans don’t limit which provider you use. I inform the surgery center that we are private pay, and we receive a discount. The bill is around $4,000. After surgery, I need to submit my medical bills, and it’s very easy with CHM’s online portal. When I get the bill, I also set up a payment plan with the surgery center with a small monthly payment. In a few weeks, I have my reimbursement check from CHM for $3000. I only paid for $1000 out of pocket for the surgery. Now I’ve met my personal responsibility of $1000 for the year. If I get injured later in the year and need more care, it’s fully covered.
If we had that traditional Health Insurance Plan…
Remember that high deductible with the plan on the Marketplace? My son’s $150 bill would have been covered since it’s preventative/primary care. But other healthcare costs aren’t covered until I meet the deductible, so I would have paid the full $4000 for surgery out-of-pocket. Plus, I would have been paying higher premiums every month… I would have spent $4751.40 more on healthcare and premiums if I bought insurance from the Marketplace instead of using CHM. In case you were wondering, I did the math with some of the traditional health insurance Gold Plans on the Marketplace as well. CHM won in every comparison I did!
I’m so glad that I have Christian Healthcare Ministries (CHM) for my family. While it may not be the right choice for everyone, it is definitely worth the time to look into it.
To check the current rates and plans at Christian Healthcare Ministries (CHM), click here!
To read my article about our personal experience with CHM during maternity care and miscarriage, click here.
Health Insurance Terms
HSA
Health Savings Account, this is a tax-advantaged savings account used to pay for healthcare-related expenses. This is used alongside a High-deductible Healthcare Plan. Funds can be rolled over from one year to the next, but are reserved for healthcare-related expenses only until the age of 65.
Premium
The amount that you pay at regular intervals in order to have health insurance coverage (often monthly or biweekly)
Deductible
The amount that you are responsible to pay out of pocket before your insurance will begin to pay for healthcare expenses. A deductible is an annual amount, and will restart again with the new year.
Co-pay
The set dollar amount that you pay out of pocket for a medication, procedure, test or doctor visit after you have met your deductible. For example, $20 for each session of physical therapy.
Co-insurance
A percentage of the expense for a medication, procedure, test or doctor visit that you will pay out of pocket, after you have met your deductible. For example, you pay 20% of the cost of your Mammogram and the insurance pays 80% of the cost
In-network
Doctors, hospitals, clinics and other medical providers and facilities that have an agreement with your insurance to provide care to their members. The insurance company will usually negotiate a reduced rate for services with these providers.
Out-of-network
Doctors, hospitals, clinics, and other medical providers and facilities that do not have an agreement with the insurance company
Out of pocket costs
Money that you pay yourself to cover your medical bills.
Facility
A place providing a medical service, including hospitals, urgent care, doctor’s office, surgery center, laboratory, and others
Provider
The medical professional, such as a doctor, nurse, therapist, radiologist, or others that provide your medical treatment
Primary Care Physician (PCP)
Often called your family doctor, this is a doctor who works in an outpatient clinic and provides general healthcare. They are often the person you see for annual check-ups, physicals, and the first person you see when you have a healthcare concern.
Factors to Consider When Choosing an Insurance Plan
Are My Providers in Network?
In my opinion, the first question to ask when choosing between insurance plans is: “Are my providers in network?” I don’t know about you, but once I’ve found a doctor I like and I’m comfortable with, I want to keep them. I don’t want to have to explain my medical history over and over again to new doctors. Also, I don’t want to take the chance on getting a doctor I’m not comfortable with or don’t trust.
If my provider is out-of-network and I want to keep seeing him or her, I would avoid HMOs or EPOs. Instead I’d choose a PPO, POS, or Medical Cost Sharing plan.
How often did your family require medical care in the past year?
Of course, the next year may not be exactly like the previous year, but it is a good predictor of what to expect. In general, a plan will either have larger monthly premiums with lower costs at the time you receive care, or a smaller monthly premium with higher costs at time of care. Personally, my family is young and pretty healthy. We do not need healthcare services frequently, so we would do best with lower monthly premiums. If you frequently need healthcare services, you may be better off financially if you have a plan with a larger monthly premium, but with little to no cost each time you receive care.
Do you frequently travel?
If you frequently travel outside of the area where your in-network providers are located, you need a plan that has better coverage for out-of-network care. These would include PPO, POS, or Medical Cost Sharing plans.
Are you more comfortable with predictable healthcare costs or are you OK with varying expenses?
If you have a plan with a higher monthly premium and more coverage, you will know in advance what your healthcare costs will be. A set monthly amount goes to pay the premium. Then, each time you receive healthcare, the bills will be small or may be completely covered.
If you have a lower premium with higher costs when you receive healthcare, it will be hard to predict how much money you will pay for healthcare and when. I’m totally comfortable with that, because we have a healthy emergency savings fund. Not everyone will feel that way. If you are worried about how you would cover unpredictable healthcare expenses and want to know more about emergency funds, check out my article about budgeting and this one about how to set up an emergency fund.
Now, when it’s time to make your health insurance selection for the coming year, you can choose with confidence! Do you have any questions, comments, or Health Insurance experiences you would like to share? Comment below or email me at [email protected]. I would love to hear from you!
