Through my years writing health insurance, many clients asked: Which health insurance policy is the best? The answer always lies in their circumstances.
The best health insurance policies are the ones that fit your household’s budget for premiums and out-of-pocket expenses. They cover all medical needs your family has or may encounter, and the issuer is financially strong with solid claims payment history.
The same insurer may offer different policies geared toward the young, the old, the healthy, and high-risk people. Some programs are also geared toward families and single people. Some health insurers provide coverage built for certain occupations. Whatever your health insurance needs, the chances are good that a niche exists to fit your health- and lifestyle profile. This article shows you how to navigate the health insurance maze to find the right policy for your needs.
As an insurance agent for individuals and small businesses, I helped clients navigate this maze of insurance options. Understanding the client’s financial situation from a holistic viewpoint has always been essential. Once needs and goals are established, it becomes possible to narrow choices down to a few excellent policies.
How Do You Determine Health Insurance Needs?
Choosing a health insurance policy should always be part of a larger financial plan. Financial planners often tell their clients that a strong financial plan must consist of the following:
- Retirement planning
- Insurance planning
- Debt management
Budgeting comes first because it allows you to form good financial habits and afford to save, invest, and insure. It also guards against the ugly debt monster.
Health insurance is important for all people, regardless of income or wealth status. While those with lower incomes and net worth have fewer assets to protect, they still must safeguard their future. Ruinous medical bills can lead to damaged credit ratings and legal claims against future earnings and assets, resulting in wage garnishments, bank levies, and property seizures.
Managing risk through insurance requires assessing possible negative events and purchasing the policies that protect you against them. These policies must fit within the household’s budget while offering sufficient protection to prevent an unforeseen event from upending your goals.
Stress testing your finances is the best way to know if your health insurance coverage is ample. For example, if you suffered from an illness costing X dollars in medical treatments and keeping you out of work for Y number of months or years, would the proceeds from your applicable insurance policies allow you to support your family and continue towards your financial goals?
You can run stress tests against all your insurance policies to understand how well you are protected against risk, including your health-, life-, disability-, homeowners-, renters-, auto-, and supplemental coverages.
How Do You Know What Type of Health Insurance Policy You Need?
Health insurance policies are built on differing foundations. Some are geared toward catastrophic coverage, while others pay generously for routine and ongoing care. Certain policies provide better coverage for specific conditions. There are policies built for low-, medium and high-income households.
Once you understand how much protection you need and what you can afford to spend, it is time to decide which type of policy you need. Once you determine the type, you can choose between the individual options.
The main types of health insurance include the following:
- Government Sponsored Healthcare (Medicare, Medicaid, CHIP)
- Employer-Sponsored Coverage
- Marketplace Plans (Subsidized and Unsubsidized)
- Private Market Plans, full coverage
- Private Market Plans, limited coverage
- Supplemental Health Insurance
What Is Government Sponsored Healthcare?
Outside of the military and federal employee systems, the federal government sponsors three major health insurance programs: Medicare, Medicaid, and CHIP.
Medicare offers the most comprehensive and affordable coverage for senior citizens, but it is not without costs, and supplemental policies are a good idea for most retirees.
Medicare consists of Parts A, Part B, Part C, and Part D.
Medicare Part A
Part A is a hospital policy. This coverage pays a percentage of the cost for bills related to hospitalization, such as emergency care, intensive care, surgeries, medications, room and board, nursing care, and other expenses incurred in the hospital.
The government makes Part A available at no cost, but eligible citizens must enroll.
Medicare Part B
Part B is a medical policy covering the cost of doctors not seen in the hospital, such as primary care physicians and specialists, including oncologists, neurologists, and rheumatoid specialists.
The government requires a premium from Part B enrollees, which can be deducted from Social Security benefit checks.
Medicare Part C
Medicare does not cover 100% of the cost of care. There is an 80% co-insurance requirement for Part A and Part B. This leaves patients on the hook for 20% of their healthcare costs.
Medigap policies, also known as Part C, cover these out-of-pocket expenses. Part C policyholders must pay an extra premium for this coverage.
Medicare Part D
Part D plans cover prescription drugs.
The government requires a premium for Part D, which enrollees can have deducted from their Social Security benefits.
Medicare Prescription Drug Plans
Similar to Medigap, these plans cover some of the out-of-pocket costs of prescription drugs.
Medicare Advantage Plans
Medicare Advantage Plans are run by private companies that receive reimbursement from the government. They cover everything that Original Medicare covers, but if you are willing to pay a little higher cost, they offer some additional benefits:
- Specialized Needs Plans (these are built for certain medical needs, such as for nursing home patients or policyholders suffering from chronic diseases)
- Pay Fee for Service Plans reimburse policyholders for any doctor’s visit, eliminating the need to stay in a network
- Dental insurance
- Vision insurance
- Wellness programs
To get the best Medicare coverage, seniors need Parts A, B, C, and D. Medical- and prescription drug costs continue to climb higher than inflation. Most seniors on a fixed income cannot afford to pay out-of-pocket. In addition, Medigap policies are a must for most seniors to prevent unaffordable medical bills that can spoil retirement plans.
Seniors should consider a Medicare Advantage Plan if they would use the extra benefits. For example, dental costs without insurance can be staggering. A Medicare Advantage Plan covers many of those costs.
CHIP is a federal government program that provides health insurance for children from low-income families. It also extends coverage to their parents or caregivers.
With $0 premiums and no or low co-pays and enrollment fees in most states, CHIP is usually the best health insurance option for those who qualify.
The value of Medicaid depends on whether you live in a state that expanded it under the ACA. If you live in a state that declined expansion, Medicaid is exceedingly difficult to qualify for, even if you have a very low income.
If you live in a state that expanded the program, Medicaid is usually the best option for those who qualify. Most states offer several plan options. Though costs are typically the same, plans cover different hospitals and providers, so selecting one with robust coverage in your area is key.
In most states, Medicaid comes with $0 premiums and no out-of-pocket expenses.
Qualifying is based on adjusted gross income (AGI). An individual or family qualifies if AGI is under 138% of the federal poverty line ($12,800 for individuals in 2021). Because AGI is considered instead of gross income, some income, such as tax-deductible business expenses and retirement contributions, do not count towards the 133% of the federal poverty line calculation.
Is Employer-Sponsored Coverage the Least Expensive?
It depends on who you ask.
Well-funded employer-sponsored plans are amongst the best deals in healthcare. Coverage options tend to be robust, with both HMO and PPO options available. Deductibles are usually lower than private plans, and they often cover a higher percentage of medical bills after deductible (90% versus 80% or less).
Premiums are usually lower for the employees because employers cover an average of 86% of the cost for individuals and 71% for families.
The chances are good that your employer plan is less costly and more comprehensive than what you can buy on the private market or Marketplace (unless you qualify for subsidies). However, if your employer offers an expensive or limited plan, it’s probably worth checking out what coverage you can obtain elsewhere.
What’s the Difference Between Platinum, Gold, Silver, and Bronze Marketplace Plans?
The difference between these “metals” plans lies in the percentage of out-of-pocket costs you must pay up until your yearly maximum, at which point the insurance pays 100%. Your contribution is determined according to these percentages:
- Platinum (10%)
- Gold (20%)
- Silver (30%)
- Bronze (40%)
You pay your portion of these costs as deductibles, co-pays, and co-insurance.
Which is better?
As the names imply, Platinum and Gold provide the most coverage. They are arguably the best choice for many consumers because out-of-pocket expenses in the thousands of dollars (very possible with Silver and Bronze) are a hardship for most people.
However, if you rarely visit the doctor and have enough savings and disposable income to afford an occasionally sizeable medical bill, the premium savings on a Silver- or Bronze plans may be worthwhile.
How Do You Qualify for Marketplace Subsidies?
If you qualify for subsidies on the Marketplace Exchange, you are unlikely to find more comprehensive coverage for a lower cost elsewhere, making the Exchange your best bet. Your subsidy may also make a Gold- or Platinum Plan more affordable.
What If You Do Not Qualify for Marketplace Subsidies?
If you make more than 400% of the federal poverty level (FPL) for your family size, you are ineligible for subsidies. In that case, the premiums on Marketplace policies are likely higher than what you can find on the private market.
However, though private market premiums average less, that does not mean they provide a better value. It is essential to compare them against Marketplace plans regarding what they cover and potential out-of-pocket costs.
Do All Marketplace Plans Cover the Same Treatment Options?
No. For this reason, you cannot judge whether one Marketplace plan or another is better for you based on the premiums and coverage percentages alone. The same applies to private market plans.
You must read the Summary of Benefits to discover if all the services you need are covered. For example, some plans cover bariatric surgery while others do not. Therefore, for someone needing that operation, a more expensive plan that covers it is the better option.
How Do Private Market Plans Differ from Marketplace Plans?
When you look for coverage on the private market, be sure to determine if the plans are ACA compliant. ACA-compliant plans cover many more services and have no pre-existing condition exclusions, so they are more costly.
When considering an ACA-compliant, non-Marketplace plan, be sure to compare it to the options you have on the Marketplace. Sometimes, the deals offered on the Marketplace are better based on the benefits provided, even if the premiums are somewhat higher.
As with Marketplace plans, it is important to read the Summary of Benefits to determine if the plans offer the benefits your family needs.
ACA non-compliant plans can deny your application or exclude certain types of coverage based on your medical history. They may also not offer benefits for certain types of treatment, such as prenatal or mental health. As a result, they are not the best option for many people.
However, suppose your budget is limited, and you are not qualified for Marketplace subsidies. In that case, they may be the only affordable option, and they are far better than having no coverage at all.
What Are Supplemental Health Insurance Plans?
These plans are not health insurance but rather supplemental plans meant to be carried on top of a regular policy. These supplemental plans pay benefits if you are diagnosed with a specific health condition. For example, a cancer policy provides cash payments should you fall ill with a covered disease. These funds can help with out-of-pocket medical expenses, prescription drugs, living costs, and other expenditures that may occur during your illness.
Ideally, a financial plan includes robust health insurance coverage and supplemental coverage to defray out-of-pocket medical- and extraneous expenses incurred from a serious illness or injury.
Selecting the Best Health Insurance Policy
Though there are multiple sources from which to obtain a health insurance policy, there are some universal rules for finding the best health insurance:
Firstly, the plan must fit your budget. Determining what fits goes beyond the monthly premiums. You should also consider potential out-of-pocket expenses and their impact on your finances when deciding on deductible and co-insurance levels.
Secondly, the Summary of Benefits should guide your choice. You always want a policy with robust coverage for any conditions you or your family members have. In addition, make sure that the policy includes all types of medical conditions because you never know what your needs may be in the future.
Thirdly, the financial strength and reputation of the insurer are important considerations. You want to do business with a company that pays claims promptly and does not try to save money by fighting claims for crucial medical procedures. The financial strength and reputation of the company will give you a view into how it handles claims.