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Bill Of Health: Choosing a health insurance plan

By Rachel Esterline Perkins on November 1st, 2010 • Health, Insurance, Insuring your stuff, Life
Originally appeared in: Winter 2010

When you're young, healthy, and strapped for cash, it's easy to forget about health insurance costs -- but going without it is a gamble you just shouldn't take. Hospitals charge the uninsured 88% more than they did a decade ago, and the average hospital stay costs $21,400. Not to mention that in 2014 most uninsured people will be required to buy health insurance under the recently passed Affordable Care Act. There's no substitution for health insurance, and it may end up saving your pocketbook as well as your health

Insurance planning

For young adults, the easiest approach to insurance is to remain on a parent's plan if possible. Under the new rules of the Affordable Care Act, anyone signing onto new plans with their parents is eligible to remain covered until they're 26. For those who can't lean on their parents' plans, group plan insurance options are sometimes available through employers, colleges or universities (for students), and other organizations such as alumni associations or freelance guilds.

Group plans often give people the most coverage for their dollar because the risk to the insurance company of having to pay out money is spread between all members. Lower risk translates into lower costs to policy holders. The downside is that if the group has a large population of older people and/or people with chronic health conditions, the young and healthy in the group will also bear the burden of increased costs. If this is the case, Amy Danise, senior managing editor of insure.com, suggests researching individual health plans to see if you can find something more affordable.

Deciphering the acronyms

Health insurance provider options can seem like nothing more than an undecipherable alphabet soup of acronyms, but don't be intimidated. HMOs, PPOs, POSes, and indemnity plans are four main health insurance options.

  • A health maintenance organization (HMO) is a network of health care providers. The plan is prepaid with no deductibles. HMOs require you to choose a primary care physician (PCP) from a list of participating providers contracted with the HMO. The PCP acts as a gatekeeper to other health care services, providing referrals when needed. HMO policies only cover visits within the network, unless you obtain preauthorization.
  • A preferred provider organization (PPO) also has a network of health care providers, but you're free to seek services outside of the network if you're willing to pay more. Services are typically pay-as-you-go and the PPO reimburses you after claim submission. PPO plans may also have a deductible.
  • Point of service (POS) plans allow you to choose a PCP like an HMO, but it's okay to pursue out-of-network coverage like a PPO. POS plans may also have a deductible.
  • Indemnity plans are the most flexible plans when it comes to choosing where you receive care as there is no network, PCP, or required referrals. Once the deductible is met, the plan's benefits kick in. These plans usually cover around 80% of expenses.
Pay scale

The first step to determining cost is figuring out what type of plan you want, then start comparing coverage and prices. "The higher your deductibles and cost-sharing/co-payments, the lower monthly premium you will pay," Danise says. "But that also means you will pay more if you get sick or injured." Though sticking to a budget should be considered when shopping for a plan, don't choose an insurance plan solely on price. It's important to make sure the plan adequately covers your needs.

According to Kim Holland, secretary-treasurer of the National Association of Insurance Commissioners, health history is also a major factor in the cost of insurance. "Previous illnesses, accidents for which you've been treated, even seasonal allergies could affect your premium," she says. Despite this, Holland warns against not disclosing past treatments or diagnoses. If you fail to disclose information, the insurance company can cancel coverage, and you could be responsible for repaying expenses up to that date. (Starting in 2014, under new rules from the Affordable Care Act, insurance companies will no longer be able to deny coverage based on a person's medical condition.)

According to ehealthinsurance.com, the average individual plan premium for a person between the ages of 18 and 24 is $106 per month, with an average deductible of $2,322. Find the health insurance plan that fits your needs by comparing co-pays, deductibles, premiums, and network coverage. To compare health plans, visit ehealthinsurance.com or insure.com.

 

The Bottom Line

Two-thirds of college students between 18 and 21 years old admit to giving little or no thought as to how or where they will obtain health insurance after school, according to a recent survey by UnitedHealthcare. Don't just go with the flow. Make sure you're covered.

Sources: ehealthinsurance.com; aetna.com; census.gov; insureuonline.org; investorwords.com; ahrq.gov; nytimes.com; finweb.com; uhcsr.com; uhc.com; ullico.com; freeadvice.com; healthreform.gov; lifehappens.org

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