Key Factors to Consider When Choosing Health Insurance

Choosing the right health insurance can feel overwhelming, but breaking it down step-by-step can help simplify the process. At the heart of the decision is balancing your personal risk factors with your financial situation. These factors lay the foundation for selecting the right plan. As you work through your options, remember that trade-offs will be necessary. Here's a guide to the key considerations you should keep in mind when shopping for health insurance:

1. Brand: What Does the Company’s Reputation Say?

Health insurance companies are required to report on various performance indicators, including how quickly they reimburse claims, their customer support, and how well they assist providers. These factors contribute to their overall quality rating.

• Quality Rating: Make sure to check the insurance company’s ratings for performance in these areas.

2. Access to Care: How Restrictive is the Plan?

One of the most important aspects to consider is how easily you can access healthcare under a specific plan. The size of the network (doctors, hospitals) and the rules around referrals and prior authorizations can significantly affect your experience.

• Network Size: How many doctors and hospitals are in-network?
• Referral Requirement: Do you need a referral to see a specialist?
• Prior Authorization Requirement: Will you need pre-approval before undergoing certain treatments or procedures?

3. Cost Sharing: What Are You Paying vs. What’s Covered?

Another critical consideration is the amount you’re willing to pay out of pocket versus what the insurance will cover. Generally, the more the insurance pays, the higher your monthly premiums will be.

• Metal Level: Plans are categorized into Bronze, Silver, Gold, and Platinum levels, with varying degrees of coverage and costs.
• Plan Design: Look at specifics like deductibles, copays, and coinsurance.
• Drug Formulary: What medications are covered, and how much will they cost?

4. Lifestyle Risk: What’s Your Personal Risk Level?

Your personal health and lifestyle play a significant role in determining what kind of health insurance plan is best for you.

• Health Status: Are you generally healthy, or do you have chronic conditions?
• Social Determinants: Factors like income, location, and access to healthcare services can influence your healthcare needs.
• Hobbies: Do you engage in activities that increase your risk of injury or illness?

5. Budget: What Can You Afford?

It's important to think about your financial capacity. Health insurance costs can be offset by government subsidies depending on your income, but you still need to factor in your monthly budget and your ability to handle unexpected expenses.

• Government Subsidies: Are you eligible for financial assistance based on your income?
• Monthly Budget: How much can you afford to spend on monthly premiums?
• Emergency Fund: Do you have savings to cover unexpected healthcare costs?

6. Risk Tolerance: How Much Financial Risk Are You Willing to Take?

Risk tolerance refers to your comfort level with handling potential healthcare expenses. Are you okay with lower premiums but higher out-of-pocket costs? Or do you prefer higher premiums for more comprehensive coverage?

• Personal Beliefs: Your financial strategy may be influenced by your personal views on risk and insurance.
• Family Safety Net: Can you rely on family support during a financial emergency?
• Financial Preparedness: How financially secure are you in the face of unforeseen healthcare expenses?

Expected vs. Unexpected Risk

When choosing a health insurance plan, consider two key goals:

• Providing the best financial outcome for your current healthcare needs.
• Protecting yourself financially from unexpected medical situations.

Expected Risks

These are events that are predictable, routine, or likely to occur over time:

• Routine doctor visits for check-ups or preventive care.
• Medications for chronic conditions like high blood pressure, diabetes, or asthma.
• Maternity and prenatal care (though unexpected in some cases).

Unexpected Risks

These are the events that catch you off guard, are sudden, or are unlikely but possible:

• Accidents leading to emergency room visits or hospitalization.
• A serious illness that requires extensive treatment.
• Unexpected complications from medical treatments.

Most of us like to believe we’re in above-average health, with above-average habits and a dash of good luck. But life doesn’t always work that way and the reality is that both expected and unexpected medical events can affect anyone.

To help you understand your personal risks, we’ve created Price My Risk, a simple tool that shows you the estimated costs for both expected and unexpected healthcare risks. Learn yours at Price My Risk.