Updated September 24, 2020.
Enrolling in health insurance is an important financial decision. Health insurance can save you money on your health care, which offers good financial protection. This season, make sure you are making the best choice for your health and financial planning. Below are some pitfalls that you’ll definitely want to avoid:
Open Enrollment for health insurance coverage for the calendar year 2021 is November 1, 2020 to December 15, 2020. Don’t miss it!
“Unless you have special circumstances, you will not be able to purchase a new plan or switch out of your existing plan if you miss these important deadlines,” says Dr. Nicole Rochester, MD, private health advocate, and CEO of Your GPS Doc, LLC.
Some employers have a different enrollment period. Your employer’s human resources department should be reaching out to share that information with you, if it hasn’t already.
A Special Enrollment period allows you to enroll in health insurance at a time aside from Open Enrollment. These occur if you have a qualifying event, like getting married, having a baby, or moving to a new state.
Dr. Sam Kina, Senior Vice President of Economics and Data Science at Picwell, says, “Few people understand basic terms, like deductibles, coinsurance, copayments and out-of-pocket maximums. Learn these concepts before comparing your options.”
Health insurance lingo can be confusing and intimidating, especially if it’s your first time purchasing health insurance. Make sure you know the terminology so that you can better understand health insurance plans and make a good choice.
BestCompany’s health insurance guide has a vocabulary section that can help clarify health insurance terms.
Most health plans have rules about what health services they cover, especially when it comes to pre-existing conditions.
Meghan Nechrebecki, MSPH, Founder and CEO of Health Care Transformation, says, “Make sure the services you know you will need are covered by the insurance plan. This can be found in the Evidence of Coverage document.”
Reading the Evidence of Coverage document will help you understand what medical services are covered and help you determine if a health plan is right for you.
Health insurance plans also have networks. Seeking health services from in-network providers is often cheaper than seeking them from out-of-network providers.
Suzanne Garber, executive producer and director of PBS documentary “GAUZE: Unraveling Global Healthcare,” says, “It’s important for individuals to check the in-network status of all of their current/regular doctors (primary care, pediatrician, gynecologist) along with any that might be necessary in the year ahead (obstetrician, orthopedist, cardiologist, physical therapist, etc).”
Some plans don’t offer out-of-network coverage. When you look at a health insurance policy, consider how much you travel in addition to whether your current doctors are covered.
Good coverage doesn’t necessarily come with lower premiums.
Adam Hyers of Hyers and Associates, Inc. says, “Consumers must be aware of discount plans sold today that are not actual insurance. The rates are attractive, but the coverage is very flimsy and generally won’t pay much for a serious health incident.”
The real cost of health care and health insurance can be tricky to pin down. Suzanne Garber says, “The lack of transparency in U.S. health care makes an educated decision about selecting a health care plan very difficult and is one of the reasons we advocate for published pricing of every procedure by every health care practitioner — most other countries mandate this already.”
The amount health insurance saves you can also be difficult to understand because it depends on the medical services received and the negotiated prices agreed upon by insurance companies and health care providers. These negotiated prices vary depending by insurance company and health care provider.
Garber says, “Take the time to crunch the numbers and estimate what health care will really cost you based upon what your usage has been in the past and what risks or major events are likely to come up in the new year.”
Understanding what you’ll need in 2021 and what that might cost will help you look at more than just the monthly premium.
Rochester says, “If you don't read the information about the deductible, copays, and coinsurance, you may end up with huge medical bills that could have been avoided by paying a little more each month in premiums.”
You should also consider what out-of-network services will cost. Garber says, “Don’t overlook the maximum out-of-pocket or not properly estimate any out-of-network provider charges (usually from specialist visits), which can add up quickly.”
Taking time to understand the monthly premium, in-network and out-of-network costs, and out-of-pocket expenses, like copayments and deductibles can help you evaluate the value of a health insurance plan.
The health plan you are considering may have coinsurance instead of copays. This means that you would have to pay a percentage of the bill instead of a fixed copayment amount.
“Another pitfall that individuals fall prey to is the difference between a set contribution (whether co-pay or out-of-pocket) versus a percent contribution,” says Garber.
Coinsurance is a two-edged sword in health insurance plans. In some instances it may be beneficial, in others it may be detrimental.
Garber says, “For example, it may look that the better option for “Emergency Room” may be a co-pay of $500 instead of 20 percent, as ER visits can be quite costly. However, if an insurance company has a contracted rate with the hospital, they may receive a discount, which may then be passed on to you. An example of this is a recent ER visit, which cost ~$700. The insurance company had a 50 percent discount, which left the remainder $350, of which I owed $35—a much better deal than had I opted for the $500 co-pay option.”
Nechrebecki disagrees. She says, “Avoid coinsurance! This means you have to pay a percentage of the bill instead of a defined amount. Medical bills these days can be massive and unexpected.”
Understanding the difference between coinsurance and copayments will help you evaluate the cost of a health insurance plan.
Some health insurance advisers recommend Health Savings Accounts (HSAs) in addition to a health insurance plan. These funds are tax-deductible and can be used for medical expenses not covered by insurance.
Shobin Uralil, Co-founder and COO of Lively, says, “Instead of picking the same health plan from last year, which will likely cost you more this year, consider switching to a High Deductible Health Plan (HDHP). HDHPs will likely lower your monthly premiums and get you exclusive access to a health savings account.”
If you’re at a relatively healthy point in your life, choosing an HDHP to allow greater investment in an HSA could be a good option.
Kina says, “Once you pay your premiums, you never get that money back, even if you don’t use any medical care. Instead, consider taking the premium savings from switching to a low deductible plan and putting it in an HSA.”
Be sure to be strict with your budget and put the money you are saving by choosing a lower premium into your HSA. This can be a smart money move for paying future health care costs not covered by insurance.
“HSAs are like a 401(k) for healthcare. Because HSA money is yours for life, next year, you will already have health savings to fall back on," adds Uralil.
Flexible spending accounts (FSAs) are also a great option to consider along with purchasing a health insurance plan. The difference between an FSA and an HSA is that the funds in an FSA must be used within the year or the money is lost. The money in FSAs is also not tax-deductible.
Knowing the dates and understanding health insurance terms, the cost of plans, and the coverage they provide will help you make sure you have coverage and choose the best health insurance policy for you.