How to Pick a Health Insurance Plan

With most Americans now required by law to carry health insurance or pay a penalty, finding the best plan at the right price is more important than ever. Consumers who take the time to understand the process stand to gain the most value from their health care dollars. Here are some things to consider when shopping for a plan: 

Open enrollment refers to the time of year when people can sign up for individual and family coverage. If you miss the deadline, you typically must wait another year to buy insurance, unless you qualify for a special enrollment period. The open enrollment period to purchase 2016 plans sold in the government-run marketplaces ends Jan. 31, 2016. If you have job-based coverage, check with your employer about the company’s open enrollment period – many companies hold open enrollment in the fall.

Most Americans get health insurance through their employer. Folks who buy insurance on their own can find commercial plans in the private marketplace by contacting a broker or working directly with insurance companies. They can also shop for commercial individual and family plans in the government-run marketplaces (such as HealthCare.gov) created by the Affordable Care Act. Many people will qualify for tax subsidies that lower the cost of private health insurance, and in some cases, the amount they pay when they go for medical care or fill a prescription. People with limited incomes can apply for free or low-cost coverage through Medicaid and/or the Children’s Health Insurance Program. Adults over 65 and some individuals with disabilities qualify for coverage under Medicare.

The health insurance marketplaces operated by the federal government and 21 states are the only sites that offer tax credits (toward the cost of premiums) and subsidies (for out-of-pocket expenses), depending on income and family size. For example, people earning up to 400 percent of the federal poverty line ($47,080 for individuals and $97,000 for a family of four) qualify for tax credits. In addition, plans sold in the government-run marketplaces are considered “qualified health insurance plans,” as required by law. These plans are guaranteed to include a package of essential health benefits and cover at least 60 percent of the total cost of medical expenses covered by insurance.

Health insurance plans sold in and outside of the government-run marketplaces are organized into five categories – platinum, gold, silver, bronze and catastrophic – based on how an individual and the insurer will share costs. For example, platinum plans have a higher premium but lower out-of-pocket expenses, while bronze plans have the lowest monthly premiums but the highest out-of-pockets costs. People younger than 30 and individuals with low incomes can purchase catastrophic plans to cover worst-case scenarios.

No matter where you shop, review these key elements when comparing plans: health care provider network (the doctors and hospitals you can use); drug formulary (covered prescription medications); premium (the cost of insurance, even if you never use it); deductibles (the amount you must spend before coverage kicks in); copayments (a fixed amount paid when you seek care); and coinsurance (the percentage you owe on the total cost of a service). Also carefully review the plan’s benefits. Although all plans must include 10 categories of essential health benefits, coverage details vary among plans and states, so read the fine print.

You may qualify to shop outside the traditional open enrollment period during a “special enrollment period” if you experience a qualifying life event, such as marriage, divorce, the birth or adoption of a child or the loss of your job-based coverage. You typically have up to 60 days after the qualifying event to enroll in coverage.

Americans who forego coverage risk paying a penalty when they file their federal tax returns. If you don’t have coverage in 2016, you’ll pay a penalty of either 2.5 percent of your income above the tax filing threshold, or $695 per adult ($347.50 per child) – whichever amount is higher. If you already have coverage, make sure to renew or pick a new plan for 2016 to avoid paying the penalty. If you’re uninsured, visit the government-run marketplace to determine if you’re eligible for premium tax credits and other savings. Some people may qualify for an exemption from the federal mandate to have health insurance, including those who would need to pay more than 8 percent of their family income for coverage.