Choosing a Health Plan Under the ACA

With so many options available, it can be very difficult for consumers to know how to choose the health insurance plan that's best for them. With a little understanding of basic terms, however, the choice becomes a lot easier for most people. Here are some of the basic things to keep in mind as you choose a health insurance plan for you and your family.

Deductibles

Your deductible is the amount you must pay out of pocket in a year before your insurance plan begins to pick up your health care expenses. For example, if you have a $1,000 deductible, you would pay the first $1,000 in health care expenses before your insurance company will share the costs with you. The higher your deductible, the lower your premium will be, everything else being equal.

Coinsurance

This is the percentage of your health care expenses your plan will pick up after your annual deductible has been met. In an 80/20 plan with a $1,000 deductible, your insurance company will let you pay the first $1,000, and then pick up 80 percent of covered expenses after that. You will be responsible for the other 20 percent - up to the annual out-of-pocket limit. For individual plans that limit is $6,850 for 2016, and for family plans (other than self-only coverage) the out-of-pocket limit $13,700.

Plan Categories

The plans being sold over the exchanges come in five different tiers: Bronze, Silver, Gold, Platinum and Catastrophic.  Lower tiers have lower premiums, but offer less protection. Your coinsurance percentage will be higher, and your annual deductible will likely be higher as well. You can see the specifics by clicking on each plan on the market place website. Some states, such as California, have standardized these plans.

Low premiums are not always best

Health insurance is designed to protect you against some potentially pretty devastating medical costs. The most important factor to consider isn't always a very low premium, but what your experience will be if you have a serious medical condition and have to file a claim. However, in any case, you still get the benefit of the annual out of pocket limit.

Is the right to choose from any doctor in town important to you?  

Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) generate significant premium savings by restricting choices to their network. Out-of-network non-emergency care may cost much more out of pocket or may not be covered at all. If premium savings are very important to you, HMOs and PPOs can be excellent options. If you want to be able to select any doctor, and your preferred doctor is not on the network, then you may want to consider other options, such as indemnity plans.

Do you want prescription drug coverage?

Generally, if you want prescription drug coverage, you have to select that option - and generally pay a bit more premium each month.

Consider individual factors, as well

Do you regularly use health care services and normally have substantial expenses? It may be worth it to buy a higher tier plan because you know you'll get the benefit of a lower deductible and a better coinsurance rate. If you are reasonably healthy and rarely use health care services and have no particular reason to think you will in the next year, it may make sense to opt for a lower tier.

Take advantage of the open enrollment period

As long as you enroll during the annual open enrollment period, acceptance is guaranteed, regardless of your health. The carriers must accept you. However, if you don't enroll during open enrollment period, and you don't qualify for an exception or special enrollment period, then it may be difficult to get insured. If you don't have qualified health coverage during the year, you may have to pay a special tax. For tax year 2016 the penalty will be $695, or 2.5 percent of your income, whichever is greater.