As open enrollment for 2018 continues, millions of Americans are signing up on the insurance marketplace provided by the Affordable Care Act (Obamacare) or through plans offered through their employers and looking for the cheapest option.
Buoyed by reports that say 80% of marketplace plans are $75 or less, many people are simply looking at what they’ll pay on a monthly basis — their premium — and choosing insurance based off that figure. Is this the best course of action? Not necessarily.
The plan with the lowest monthly premium is not always the best option
Research from the last couple years shows that many consumers continue to pick the wrong health plan. Could this be because of the dazzling array of options? Many employers are simplifying their insurance menu, but it’s having little effect.
One study that looked at health insurance plans offered by a U.S. firm sums it up this way: “We find that a majority of employees – and in particular, older workers, women, and low earners – chose dominated options, resulting in substantial excess spending.”
The study added: “Most employees would have fared better had they instead been enrolled in the single actuarially-best plan. In follow-up hypothetical-choice experiments, we observe similar choices despite far simpler menus. We find these choices reflect a severe deficit in health insurance literacy and naïve considerations of health risk and price, rather than a sensible comparison of plan value.”
Now, we don’t want to say that simple because you don’t want to pay higher premiums, that you’re doing it all wrong. Responsible consumers are doing their due diligence in considering what will be coming out of their wallets month to month, but the way the health care plans are set up, there are other factors to weigh.
How to choose the best health insurance plan for you
Instead of just looking at premiums, it’s best to also consider co-pays (what you pay for in-person doctor or hospital visits), co-insurance (the percentage of your medical costs you’re liable for) and out-of-pocket maximums (the most you’ll pay in one year).
“If you shop by premiums alone, you could spend a lot more in out-of-pocket costs than if you had gone with a higher premium plan,” says Kev Coleman, head of research and data at HealthPocket, a technology company that compares and ranks health insurance plans.
Here’s another reason why you don’t want to strictly look at monthly premium costs: Many health plans, especially the high-deductible ones, are being offered with Health Savings Accounts, a relatively new innovation that lets you use a debit card to pay for future medical costs with pre-tax dollars.
Here’s the bottom line: If you think you or a family member under your coverage is going to be frequenting the hospital throughout the year, perhaps for a serious medical condition, chances are you’ll reach your deductible quicker. That means choosing a plan with a higher monthly premium and lower deductible could save you money. Those are typically Obamacare’s Platinum and Gold plans.
On the other hand, if you don’t think you’ll hit your deductible, meaning you’re unlikely to incur huge medical bills and in relatively good health, a low monthly premium with a high deductible plan would make the most sense (Silver and Bronze plans when it comes to the ACA).
The federal exchange marketplace started November 1 and will run until December 15, 2017. Obamacare coverage begins on January 1, 2018. Most companies are currently in an open enrollment period that lasts for a period of weeks that varies from employer to employer.