How to Compare Health Insurance Plans

Do you know when the most wonderful time of the year is? No, it’s not Christmas. We’re talking about open enrollment season, baby! That’s right! The magical time of year when you get to compare health insurance plans to see which one is right for you!

Okay, you got us. Probably nobody gets that excited about comparing health insurance plans. But when it’s time to choose, it’s important to know what each plan covers, how much it costs, and where you can use it, right?

This stuff can feel complicated, but it’s easier than it seems. We put together some practical learning steps to help you feel confident about your options. 

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Learn How to Save Money on Health Insurance

We get it. Health insurance is full of weird jargon and acronyms. It’s like trying to do sudoku on the subway—confusing and just a little scary. Well, consider this your health insurance map and cheat sheet all-in-one, because we’re going to take you through the various types of plans and how they work!

First, if you have a job with an employer who provides health insurance, talk to your workplace health insurance administrator. They should be able to explain how to choose between the health insurance options you have at work.

If your company doesn’t offer a health plan or if you’re self-employed, we’re here to explain how to compare health insurance plans “in the wild.” Let’s go over the main types of available plan networks:

Preferred Provider Organization (PPO)

Preferred provider organization—the words get longer as the name unfolds! Let’s just say PPO. These are health plans that contract with hospitals and doctors to create a network of (you guessed it) preferred providers.¹

PPOs also have coverage for doctors outside of their networks, but there’s a catch for the flexibility. You’ll pay more out of pocket—often a lot more—than if you see the plan’s preferred providers. (See what we did there?) Emergency care is often the exception to the rule.

These plans are the most popular for people who get their health insurance through work, with 47% of covered workers enrolled in a PPO.²

PPO Pros and Cons

Pro: Most PPOs have a decent selection of providers to choose from in your area. Just be sure you know which providers accept your plan before getting any treatment so there are no surprises.

Con: Higher premiums make PPOs more expensive than other types of plans like HMOs.

Health Maintenance Organization (HMO)

A health maintenance organization is a health insurance plan that usually only covers care from doctors who work for (or contract with) that specific plan.³ So unless there’s an emergency, your plan will not pay for out-of-network care. Another restriction: HMOs often work only in a specific geographic area. Your healthcare coverage will be defined either by where you live or where you work.

HMO Pros and Cons

Pro: Lower out-of-pocket expenses make HMOs attractive.

Con: There’s not much flexibility. When it comes to choosing providers, it’s like what your teacher told you in preschool: You get what you get, and you don’t get upset.

Exclusive Provider Organization (EPO)

Ready for another acronym? An exclusive provider organization is another type of managed care plan (like an HMO) where services are only covered if you use doctors, specialists or hospitals in the plan’s network (except in emergencies).

Unlike HMOs however, EPOs do not require a primary care physician (PCP) referral to see a specialist. Sound appealing? This might be the right network plan for you if you want the freedom to see specialists without a referral and you don’t mind being limited to healthcare providers in your network.

EPO Pros and Cons

Pros: Premiums are usually lower. Plus, there’s no need for a PCP referral to see a specialist.

Cons: You’re limited by a smaller network of healthcare providers. Most services require pre-authorization from the insurance company.

Point of Service (POS)

Despite what the acronym suggests, this is a pretty good plan.

A point-of-service plan combines the features of HMOs and PPOs by providing different benefits based on whether you use in-network or out-of-network providers. POSs do provide some coverage for seeing an out-of-network provider, and your PCP will coordinate the care.

POS Pros and Cons

Pros: You’ll find more provider options to choose from. Your PCP will coordinate your specialist care.

Con: Referrals are required.

Cross-eyed yet? To clear things up, we summarized all the features we just discussed in the handy table below.

When you’re shopping for a plan on HealthCare.gov or your state exchange, the plans are shown in four “metal” categories. No, not like Mötley Crüe. More like Michael Phelps. The plans are tiered according to how much they cost and what they cover: Bronze, Silver, Gold and Platinum. (Okay, it’s true: The Crüe did have some platinum records and Michael Phelps never won a platinum medal at the Olympics.)

Key fact: If you’re eligible for “cost-sharing reductions” under the Affordable Care Act, you must pick a Silver plan or better to get those reductions.⁴

It's good to know that plans in every category provide some types of free preventive care, and some offer free or discounted healthcare services before you meet your deductible. The way it basically works is this. Bronze plans have the lowest monthly premiums but the highest out-of-pocket costs. As you work your way up through the Silver, Gold and Platinum categories, you pay more in premiums, but less in deductibles and coinsurance.

But as we mentioned before, the extra costs in the Silver category can be minimized if you qualify for the cost-sharing reductions. So you’ll want to make sure you’re getting the maximum value of those reductions when you’re shopping for health plans. Reductions can lower your out-of-pocket healthcare costs a lot, so get with a health insurance pro through our friends at Health Trust Financial who can help you find out what you may be eligible for.

The table below shows the percentage that the insurance company pays—and what you pay—for covered expenses after you meet your deductible in each plan category.

When you choose your health insurance plan, here’s something to pay close attention to: extra costs beyond your monthly premium.

Other costs, often called “out-of-pocket” costs, can add up quickly. Things like your deductible, your copay, your coinsurance amount and your out-of-pocket maximum can have a big impact on the total cost. Here are some expenses to keep close tabs on:

• Deductible – the amount you pay before your insurance company pays anything (except for free preventative care)
• Copay – a set amount you pay each time for things like doctor visits or other services
• Coinsurance - the percentage of healthcare services you’re responsible for paying after you’ve hit your deductible for the year
• Out-of-pocket maximum – the annual limit of what you’re responsible for paying on your own

One of the best ways to save money on health insurance is to use a high-deductible health plan (HDHP), especially if you don’t expect to regularly use medical services. Just like the name says, these are health plans with high deductibles.⁵ You’ll pay a lot more out of pocket for healthcare costs before your plan kicks in, but these plans also have lower monthly premiums.

You can apply this high deductible/low premium strategy to any of the health insurance network plans we discussed earlier (HMOs, PPOs, EPOs or POSs).

Here’s the thing that makes HDHPs truly awesome—they can be combined with a Health Savings Account (HSA). That’s an account that lets you set aside money tax-free to pay for qualified medical expenses. You may be asking yourself, Wait a minute. Who determines just what they mean by “high” deductible?

That’s a great question. The IRS does. And for 2022, the IRS defines a high-deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. An HDHP’s total yearly out-of-pocket expenses (including deductibles, copayments and coinsurance) can’t be more than $7,050 for an individual or $14,100 for a family.⁶ (This limit doesn't apply to out-of-network services.)

And the HSA is a great feature of HDHP plans because you can contribute up to $3,650 for an individual and $7,300 for a family tax-free for 2022.⁷

Even better, this money rolls over if you don’t use it, and you can even invest the money in your HSA so that it grows tax-free. That’s awesome! Being able to open an HSA is great for your future.

Find Out About Healthcare Cost Sharing

When choosing your health insurance plan, don’t forget about healthcare cost-sharing programs. These work pretty much like the other health insurance programs we described already, but technically they’re not a form of insurance. Allow us to explain.

Health cost-sharing programs still have monthly premiums you pay and defined coverage terms. So, what’s the big difference? Instead of an insurance company paying your medical bills, the cost-sharing program sends you the money you need for medical services. We’ll talk more about this awesome option below. (Hint: We have a RamseyTrusted partner for this we highly recommend!)

Get Expert Help to Compare Health Insurance Plans

Choosing the right health insurance plan is a crucial part of your overall financial plan. The two key factors are getting enough coverage to cover a big chunk of your medical expenses while also making sure you’re not paying for more coverage than you need. (After all, health care needs vary a ton based on everything from age to marital status to family size.)

If you’re not getting health insurance from your employer, we have two bright ideas for you! The first is to get in touch with an independent insurance agent through our RamseyTrusted partner Health Trust Financial. If you’re trying the DIY route and have any lingering questions about health insurance plans, the experts are the ones to ask. And they’ll do more than just answer your questions—they’ll also find you the best price!

Or maybe you’d like a way to combine getting great health care coverage with the opportunity to help others in a time of need. Who wouldn’t? Health cost sharing could be just the thing. Our trusted partner Christian Healthcare Ministries (CHM) can help you figure out your options.

CHM helps families share health care costs like medical tests, maternity, hospitalization and surgery. Thousands of people in all 50 states have used CHM to cover their health care needs. Plus, they’re a RamseyTrusted partner, so you know they’ll cover the medical bills they’re supposed to and honor your coverage.

Ready to get excellent health care coverage in place? Connect with CHM today!