Here’s how to pick a health insurance plan

The author ponders his
health insurance options.
Hollis
Johnson/Business Insider

• I just started a new job at Business Insider, and had to pick
  a
  health insurance plan for the first time.
• Figuring out which plan to choose was really complicated —
  and I’ve been writing about healthcare for years.
• Here’s what I learned about how to pick a health insurance
  plan, and why I didn’t just go with the cheapest option.

I recently got a new job here at Business Insider.

And for the first time, I had to pick a health insurance plan,
from among the four that our parent company, Insider Inc.,
offers.

I should be pretty well-positioned to do that. I’ve been writing
about healthcare for years, and I’m married to a doctor.

Yet I found the choices confusing, and had a tough time figuring
out which plan would be the best one for me. So I asked a couple
experts (and the Internet) to help me pick the
right plan.

Here’s what I learned.

The
standard advice for picking a health insurance plan goes
something like this: choose one with a monthly cost (known as a
premium) that you can afford, and that covers the drugs and
doctors that you need.

If you’re relatively healthy and don’t expect to go to the doctor
much, pick a plan with higher out-of-pocket costs and lower
monthly premiums. If you need to see a doctor more or take
prescriptions regularly, you might want a more expensive
insurance plan that costs more each month.

Comparing insurance plans — it’s complicated

It turns out, though, that actually picking the right plan is a
lot more complicated.

I asked David
Anderson, a researcher at Duke who used to work at a health
insurance company, to take a look at my options. (He also wrote
up a
blog post on how he picks his own family’s insurance—I found
it really helpful, and it inspired the picture at the top of this
article).

I’m thankfully pretty healthy, so I don’t really go to the doctor
or take prescriptions much at all.

Anderson ran a couple simple scenarios for me: one in which I
have to go to the emergency room for something relatively simple,
at a cost of $1,000. And one where something terrible happens
(getting hit by a bus, let’s say), and I end up needing $50,000
of medical care.

Anderson found something surprising. In either case, the plan
where my total costs would be lowest was my company’s “high
deductible” plan. That’s might not always be the case, depending
on the specific medical care that I needed. But it’s worth
digging in to understand why — and why I still didn’t choose my
company’s cheapest plan.

Here’s part of the analysis that Anderson did. I’ve rounded some
of the figures, because Insider asked me not to reveal too many
details of our plans. All of these costs are for a single
individual who gets all of his or her care from doctors and
hospitals that accept Insider’s health insurance (what’s known as
being `in-network’).

Olivia Reaney/Business Insider

You’ll often hear people talking about insurance “deductibles.” A
deductible is the amount of money you have to spend out of your
own pocket on medical care, before your health insurance kicks in
at all. But you’ll notice that in the chart above, I don’t
mention deductibles at all.

Instead, I’m focusing on another feature that’s just as
important. That’s the out-of-pocket maximum, which is a term for
the total amount your insurance plan will require you to spend on
medical care in a single year. Once your spend more than that
amount, the health insurance will cover the rest of your care.

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(When your spending is higher than your deductible but below your
out-of-pocket maximum limit, you’ll still be required to pay some
of the costs of seeing a doctor or picking up a prescription.
This can be a flat $25 or $50 to go in to a clinic, known as a
copayment, or it can be calculated as a percentage of the cost of
a visit, in which case it’s called coinsurance).   

A note: If you don’t have access to a health-policy researcher to
run this analysis, one quick trick is to add up your total annual
premium and the maximum out-of-pocket limit of your insurance
choices. That’ll give you a quick sense for how much you could
wind up paying, in total, if something really bad happens.

What does a deductible do, anyhow?

Your health insurance company should also do a similar analysis
for you, though it’s typically buried in the middle of a document
that you get from HR or from the insurance company, called the

Summary of Benefits and Coverage.

Above, you can see that the high deductible plan (called an HSA
plan, which refers to a kind of savings account that goes along
with it) has a big financial head start on the other options,
because Insider offers it to employees for free — there’s no
annual premium. And the company will give you a few hundred
dollars to spend toward your medical care, too. The next-cheapest
plan costs nearly a thousand dollars a year.

I should note that our high deductible plan is actually pretty
generous. It limits the total amount that you could end up
spending on healthcare in a given year to about $3,000.

Above that, all your care is free. The main caveat is that the
limit only applies to care that you get from doctors who are
in-network with the insurance.

All in all, it’s a really good choice for a lot of people.
Margaret Bowani, who oversees the health insurance here, told me
that she picked it for her own family, and that it’s also popular
with a lot of the company’s younger employees.

Ashish Jha, a physician and health policy researcher at Harvard,
has written about his own experience using a high deductible plan
for his family. I’d definitely recommend
reading his article before going with a high deductible plan.

Avoiding a financial catastrophe

I didn’t end up picking the high deductible plan. One big reason
to have insurance is to reduce the chance of a financial
catastrophe. And on that score, I was worried the HSA plan would
come up short.

There are three other plans listed.

I’m pretty much ignoring the EPO plan—it might be a good option
for someone who needs to see a doctor regularly and is willing to
stay within a more limited network of clinicians. The plan
doesn’t offer any coverage if you go to a doctor or hospital that
isn’t included in its network. It’s a lot more expensive than the
HSA plan and wouldn’t make sense for me, because I don’t need
much care.

The two PPO plans offer a
broader selection of doctors than their less expensive
counterparts. The ‘High PPO’ plan has a lower deductible and
out-of-pocket spending limit, but its upfront cost is much
higher. Since I’m hoping that I won’t end up needing much medical
care, that’s not a good option for me, either.

That leaves the ‘Low PPO’ plan, which is the one I ended up
picking.

The PPO plans, in addition to their broader networks, will also
pay for out-of-network care, though it would be really expensive.
The HSA and EPO plans doesn’t cover any care provided by doctors
or hospitals that aren’t in their network, except in an
emergency.

Why I chose a more expensive plan

It’s tough to tell which doctors are being left out of the
smaller network—you can look up individual clinicians or
facilities, but it’s impossible to get a more holistic view of
who’s in and who’s out.

I’ve heard enough
horror
stories about people getting five- and six-figure bills for
care their insurance didn’t cover, and the data back me up that

it’s a really big problem. While nothing short of a
change in federal law can stop that from happening
entirely, I figured that picking a plan with some out-of-network
coverage could help (New York has some state laws
that protect me, too).

Dalia Remler, a health economist at the City University of
New York’s Baruch College, has also
written about why out-of-network coverage can be important if
you’re sick, based on her own experience trying to find a
neurosurgeon to treat a rare kind of tumor.

For what it’s worth, both Anderson and Tom Loach, the director of
carrier relations at the insurance-shopping site eHealth, told me I’d
probably be fine with the more limited coverage.

“You really can’t make a bad decision because you’re not going to
use it anyway,” is what Loach said.

Still, I figured I’d opt for better protection. So I’m spending
about $1000 a year for the ‘Low PPO’ plan.

Hopefully, when next year comes around, I still won’t be going to
the doctor much, and that thousand dollars will have been money
wasted.

But I know there’s a small chance it’ll have been well
worthwhile. Who knew that healthcare could be so
complicated?

Want to tell us about your health insurance experience? Email
the author at [email protected]. 

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