In October of 2009, I decided that I would no longer run the 9-5 gauntlet. And with that decision came a few immediate changes in my life. Working from home and for myself meant that I could set my own schedule, make my own decisions and only have myself to blame when something I’ve implemented did not work out. For me, the upside to this decision was infinite because I was slowly getting beaten down by “the man” and couldn’t take it anymore. Unfortunately though, there were downsides to my decision, two of which I’m dealing with right now.
The first of these downers is the amount of taxes I now pay as an independent contractor. Unknown to me at the time was that I would owe a self-employment tax that my previous employer use to pick up. Half of my social security and Medicare taxes were paid for when I had that office job, but now I foot 100% of the bill. The second and more important change was that I no longer had health or dental insurance from my employer. Truth be told, five months since my decision you still won’t find me visiting any hospitals or dentists because I still don’t carry any medical or dental insurance. I’m relatively healthy and now that I never leave the house, I have only my apartment to fear for an accident. But I’ve tempted fate long enough and now it’s time to find my own health insurance plan.
Like any important decision, this one is going to take a little time and a lot of research before I decide on the plan that’s right for me. Before spending thousands of dollars a year, I’m going to educate myself as best I can on the coverage that suits my needs, and that means going through the following step-by-step process.
1. Why I NEED Health Insurance
Something I learned at the age of five when biting through an electrical cord is that I’m not invincible. Even though I keep myself in relatively good health with exercise and home cooked meals, routine check-ups and emergency care are necessary to keep myself that way. Should the time come when I am unfortunate enough to need expensive medication or a medical procedure, I want to make sure that I “can afford” to stay alive.
My finances are certainly not where I want them to be, but without health insurance, I am taking a huge risk in saving a few bucks now for a potential catastrophe later. All of my current payments and bills will now take a backseat to making sure I’m alive long enough to pay them. The cost of surgery without insurance would derail all of the progress I have made over the last few years.
2. Understanding the Medical Mumbo Jumbo
When you carry health insurance through your employer, you are usually limited to the types of coverages available to you. Because you only have to pay a fraction of what you would had you worked on your own, the downside to having limited options is outweighed by the money you save over time. For me, I have the entire health care system available (99% of the health care system would be more accurate), and I want to review the most common plans taken out by consumers today.
- PPO: PPO stands for “Preferred Provider Organization” which means that my coverage will only extend to a list of doctors and hospitals that the insurance company provides. Should I want to visit a doctor that is not on my PPO list, I will probably be responsible for 100% of the costs. PPO’s are the most common of health care plans for individuals like myself, and as long as I can find a doctor and hospital that I like, I would imagine this is the plan for me.
- HMO: HMO stands for “Health Maintenance Organization” and those three letters continue to make consumers cringe. HMO’s are usually the plan you will find provided by your employer because it caters to group rates. While generally the cheapest of all health insurance policies, the rules and regulations that need to be followed in order to be covered are very strict. Getting medical treatment from anyone outside your HMO group must be first cleared by the HMO. It’s important to know exactly what is and is not covered because going in blind to a visit can result in a hefty bill later.
- HSA-Eligible Plans: HSA plans are extremely similar to PPO’s in the sense that you can choose which doctor and hospital you want to visit. The added benefit to this plan is that pre-taxed income can be put aside in an interest bearing account, known as a Health Savings Account (Hence the HSA) so when you file your taxes at the end of the year, less of your income is taxed. If you’re wondering why you wouldn’t always choose this plan vs. a PPO, the HSA-Eligible plans have a much higher deductible than that of a PPO.
- Indemnity Plans: If you’re more of a free bird that likes to take care of things on your own, then the indemnity plan is perfect for you. Indemnity plans are much more expensive then their above brethren, but you have the freedom to choose any doctor or hospital you want and usually any coverage or treatment you want as well. An indemnity provider will pay a certain percentage of every visit, medication or procedure and all of the reimbursement paperwork is taken care of by you, not the insurance company. Freedom comes with a heavy price in the medical insurance world.
In addition to the plan types, there are a few health insurance terms that you will need to know in order to get the best coverage possible.
- Copayment: The copayment is the amount of money that you will owe before any service is provided. For example, if your insurance provider says your office visit copayment is $20, that’s just how much each doctor’s visit will cost you. The remaining costs, whatever they are, will be paid by the insurance company.
- Deductible: Your deductible is the amount of money you will be asked to pay for your medical expenses each year before your insurance will take full effect. Should you have a $1,000 deductible and need a procedure that costs $5,000, you will be required to pay $1,000 out of pocket and the insurance company will pay the remaining $4,000. Unlike auto insurance deductibles which are applied with each claim you submit, deductibles for health insurance are for the entire year. So if you have multiple procedures in one year, you are not required to meet the deductible each time.
- Coinsurance: A sneaky little tactic that insurance companies use is providing coinsurance, which is the money covered after your deductible. Assuming you have already paid your deductible for the year and have a coinsurance amount of 20%, you will be asked to pay 20% of all future medical costs out of pocket. A 0% coinsurance amount means that after your deductible, you are 100% covered. So if you can find a 0% coinsurance at a reasonable price, that might save you thousands in the future.
3. Deciding Just How Much Coverage I Need to Carry
Because I am on an extremely tight budget right now, I won’t be able to get all of the coverages I would want. But I will be able to find the ones that I need. Luckily for me, I’m young, have no pre-existing medical conditions and have only myself to care for, so the plans I will be shopping for should all be relatively inexpensive (when compared to what’s available). The five questions you should ask yourself before deciding which coverages are best to suit your needs are:
- How many times do I plan to visit the doctor for routine check-ups this year?
- How much money did I spend on health-care last year?
- Do I have any pre-existing medical conditions?
- Am I looking for a specific benefit in my coverages or is this a general plan?
- What is my budget for health insurance?
The last one is the most important one because you should never let money get in the way of your health. If you find that the coverage you feel most comfortable with is a little out of your budget, do your best to cut the fat from other areas before deciding against a lesser health insurance plan. You’re no good to anyone if you’re not healthy.
4. Comparing Health Insurance Quotes Online
EHealthInsurance.com continues to be the best site for comparing health insurance plans. In fact, it was just voted by Kiplinger to be the best health insurance website around. The process is very simple and will only take a few minutes of your time. After filling out my zip code, gender, age and whether or not I’m a student that uses tobacco, all of the available coverages in my area are displayed.
My apologies for the poor graphic above; the site constraints make it tough to see, but I will gladly explain what I view when doing the search. Each plan is listed with 6 categories. The first that you can see is the provider name, followed by the plan type (PPO, HMO, etc.), then the yearly deductible, followed by the coinsurance percentage, office visit costs and finally the monthly cost of the plan, which again is legible in the graphic. Generally, the plans will be laid out from cheapest to most expensive. Of the 131 plans available to me, only two would cost more than $300 per month. But 10 would provide me a deductible of $500 or less. Not too shabby.
In addition to the coverage prices and options, you will also find links under each plan. These links help with choosing a doctor within the plan, the full details of what the plan provides, and any reviews that have been written by consumers. If you are looking for a specific provider or cost, you can change the search terms on the left hand navigation bar so your results are closer to what you are looking for. Taking a brief look right now at what’s available to me, I’m extremely confident that I won’t need to go any further than EHealthInsurance.com to find the best plan.
5. Making the Leap and Applying for Health Care Coverage
It should be noted that the quotes you see in the example above may be different than the one you end up paying. Each provided quote assumes the same information for every applicant, which is that you are an extremely healthy individual with no pre-existing medical conditions. After you have decided on the coverage that works best for you, go through the entire process of entering your personal information on the insurance companies secure website and find out what your actual monthly cost is. Whatever the increase in cost is for your first selection, you can expect to see the same type of increase on any of your other selections.
Health insurance has been a hotly debated topic for decades now and even more so with Congress passing a law to nationalize our health care system. Freedom to choose your own doctors and coverage amounts may not be available much longer, but while they are, make sure you put your fears to rest and go about the right way to find a health care provider.
If you’d like to compare health insurance plans and costs, visit eHealthInsurance.com.
Published or updated March 5, 2013.