How to pick a good health insurance plan
When it comes to selecting a health insurance plan, the premium is the most important factor for many shoppers, especially those in good health. But price shouldn’t be the only factor you base your selection on, even if your primary concern is financial (as opposed to factors like provider networks, drug formularies, and quality ratings).
If you’re currently enrolled in an out-of-market plan (because you weren’t previously eligible for subsidies) or if you have a bronze plan because it was the option that fit your budget under the previous subsidy rules, you’ll want to be sure to compare. all options available in your area for 2023.
Even if your income was previously too high to be eligible for a subsidy, you may find you’re eligible for a subsidy in 2023, or qualify for a larger subsidy that makes a stronger plan fit your budget .
The main thing to keep in mind for 2023 is to make sure you’re enrolled in a Marketplace plan (and the option that best fits your needs and budget) to take advantage of enhanced subsidies.
If you’re currently enrolled in something like a short-term plan or a health care sharing ministry plan, you’ll want to reconsider your options this fall. you may be pleasantly surprised at how affordable the coverage is and how many options you have.
consider provider networks and lists of covered drugs
If you have preferred medical providers and/or take any prescription medications, those factors are likely to be among the first to consider when shopping for health coverage.
Each health plan creates its own provider network and drug formulary (list of covered drugs). And even if two plans have the same drug on their formulary, they may cover it differently (at a different tier, for example, with different out-of-pocket costs).
If you’re transitioning from an employer-sponsored health plan to the individual market, keep in mind that provider networks and drug formularies can be very different in the two markets, even if the same insurance company health offers plans. Don’t assume a plan will cover your medications and include your doctors in its network just because of experience you’ve had with another plan from the same insurer in the recent past.
determine your worst case scenario.
The worst case scenario is fairly easy to determine. simply add the total annual premiums plus the out-of-pocket maximum for each plan and see how they add up. If you qualify for a premium subsidy (considering they are larger and more available due to ARP), be sure to use the premium after the subsidy for each plan when calculating how much coverage will cost.
You can find this even before you create an account with the exchange, using the exchange’s plan search tool. it only takes a minute or two and you don’t need any identifying data.
the aca’s cap on maximum out-of-pocket costs makes this type of financial comparison easier than in the past. In 2023, ACA-compliant plans will have an out-of-pocket maximum of no more than $9,100 for an individual or $18,200 for a family. And as has been the case since 2016, all family plans must have individual out-of-pocket maximums built in. That means no individual person on a family plan will have to pay more than $9,100 out-of-pocket for in-network care, even if the family deductible hasn’t been met yet.
But some plans, especially at the gold and platinum levels, as well as silver level plans for people who qualify for cost-sharing reductions, have maximum out-of-pocket limits that are significantly lower than those amounts. and they also cover more expenses before the out-of-pocket maximum is reached. it’s important to keep those factors in mind when comparing the total cost of various plans.
back of envelope comparison
let’s look at a hypothetical example for kelly, a 35 year old single applicant who doesn’t qualify for subsidies (this is possible even under arp and inflation reduction law; depends on cost of baseline plan relative to patient income) home; although more people now qualify for subsidies, some still do not). she is considering three different plans: a bronze, a silver, and a gold. all of them cover preventive care at no charge, as required by the aca.
For this comparison, we assume that the gold plan is more expensive than the silver plan. But since 2018, that hasn’t always been the case, due to the cost of cost-sharing reductions (CSRs) added to silver plan premiums in many states.
The following plan descriptions are oversimplified for ease of calculation. Although bronze, silver, and gold plans pay an average of 60%, 70%, and 80% of total average health care costs, respectively, their plan structure varies significantly from policy to policy, even within the same metal tier .
Some state-run exchanges offer standardized plans, and the california exchange requires all plans to be standardized. But in most states, it can be challenging to make an apples-to-apples comparison of plans, even within the same metal tier. Some plans have separate deductibles for services like hospital stays and prescription drugs, some have copays for office visits while others count office visits toward the deductible. there’s no way to really compare plans without reading at least some of the fine print. but for the sake of our back-of-the-envelope comparison, we’ll only look at deductibles, coinsurance, and maximum out-of-pocket exposure.
- the bronze plan is $270/month and has an $8,500 deductible with all claims applied to the deductible. After the deductible, Kelly would pay 40% of her claims until she reaches an out-of-pocket maximum of $9,100.
- The silver plan is $350/month, has a $3,000 deductible, and Kelly will be responsible for 30% of the claim after deductible, until she reaches an out-of-pocket maximum of $9,000.
- gold plan is $420/month, has a $1,000 deductible, and kelly will pay 20% of her claims after deductible until she reaches the $8,000 out-of-pocket maximum.
- Bronze: $3,240 + $9,100 = $12,340
- silver: $4,200 + $9,000 = $13,200
- gold: $5,040 + $8,000 = $13,040
- Bronze: $3,240 + $4,200 (total claim applied to deductible) = $7,440
- Silver: $4,200 + $3,000 (deductible) + $360 (30% of remaining $1,200) = $7,560
- gold: $5,040 + $1,000 (deductible) + $640 (20% of remaining $3,200) = $6,680
- In 2014, 65% of people who signed up through healthcare.gov (the federally run exchange) selected silver plans.
- In 2015, silver plans accounted for 69% of healthcare.gov enrollees.
- 71% of healthcare.gov members chose silver plans for 2016, along with 59% of members in states with their own enrollment platforms.
- 71% of exchange enrollees chose silver plans in 2017.
- 63% of exchange enrollees chose silver plans in 2018.
- 59% of exchange enrollees chose silver plans in 2019.
- 57% of exchange enrollees chose silver plans in 2020.
- 55% of exchange enrollees chose silver plans in 2021.
- 56% of exchange enrollees chose silver plans in 2022.
(Note that these are just examples; in the real world, prices and coverage vary significantly by plan, area, and a person’s age, and most people qualify for subsidies that offset some cost).
We can easily calculate the worst case scenario for all three plans: multiply the premium by 12 months and add it to the out-of-pocket maximum to see the total financial exposure for each plan:
But for most people, big claims don’t happen very often. And while some people may not use their coverage at all during the year, most people fall somewhere in between. Especially if you have a pre-existing condition, you can be relatively sure that you will incur at least a few claims over the next year. That’s where it’s useful to judge each plan based on how it would perform for relatively minor but still expensive claims.
what if kelly breaks her arm and incurs a claim totaling $4,200 after the network negotiated discount? Here’s her total spending for the year (premiums + out-of-pocket costs) with each plan:
If the only health insurance claims you make are for preventive care, a bronze plan will end up being the least expensive option because premiums are lower and preventive care is covered at 100% in all plans. But if you have other claims, a plan with a higher metal level could save you money over the course of the year, even if the premiums are higher. So even if price is the biggest factor in your decision, it’s important to remember to include the cost of a claim as well as the cost of the plan itself.
but don’t focus entirely on the cost of claims
On the other hand, don’t get so enamored with low out-of-pocket costs on stronger plans that you inadvertently end up paying more than you need to. We often see plan comparisons where the difference in premium is greater than the difference in potential out-of-pocket savings.
For example: A plan with a $1,000 lower deductible than a competing plan, but costs $100 more per month and offers similar coverage after the deductible. buying it would mean spending an extra $1,200 on premiums, potentially saving $1,000 if you have a major claim. That’s why it’s important to spend a little time crunching the numbers before selecting a plan.
And if one of the plans you’re considering qualifies for an HSA, don’t forget to consider the tax savings you’d get if you contributed to an HSA during the year. Assuming you’re willing and able to make contributions to an HSA, you’ll want to subtract the tax savings from the total amount each plan will cost you, so you can get an accurate overall picture of how each plan would affect your finances.
if your plan has tiered networks, pay attention to out-of-pocket costs
It’s also important to note that some plans have tiered networks, which have lower copays and deductibles as long as you go to doctors and hospitals in the higher tier. There is some controversy surrounding tiered network plans, but they tend to be popular with consumers, offering a good mix of low cost sharing (assuming the patient sticks with tier one providers) and affordable premiums. /p>
If you’re considering a plan with a tiered network, pay attention to out-of-pocket costs for preferred and non-preferred provider tiers, and run the numbers both ways. If you choose a plan with a tiered network, your best bet will be to use doctors and hospitals in the higher tier. But it’s also important to understand what your costs will be if you end up needing to see in-network providers that aren’t at the top tier.
silver plan cost-sharing subsidies
Silver plans have proven to be by far the most popular option on exchanges, accounting for more than half of all signups in the first nine years of aca’s implementation.
One reason for the popularity of silver plans (and the high percentage of silver plan members receiving premium subsidies) is cost-sharing reductions, or CSRs (also known as cost-sharing subsidies). If your household income is no more than 250% of the poverty level, you are eligible for cost-sharing subsidies in addition to premium subsidies (in case you have questions about the income rules, this is how household income is calculated). home according to the aca).
During the 2022 open enrollment period for health plans, more than 10.2 million people signed up for plans through healthcare.gov (the exchange platform used in 33 states) and nearly 5.5 millions of them signed up for plans with built-in corporate social responsibility benefits. .
For 2023 coverage, 250% of the poverty level is $33,975 for a single person in the continental United States and $69,375 for a family of four. however, csr benefits are strongest for people with incomes below 200% of the poverty level, which is $27,180 for a single person and $55,500 for a family of four (this is all based on 2022 poverty level figures, used to determine subsidy eligibility for 2023 coverage). Although the Trump administration announced in October 2017 that cost-sharing grant funding would be discontinued, the same cost-sharing grants remain available.
Cost-sharing subsidies are automatically included in silver plans for members whose income makes them eligible for cost-sharing subsidies. cost-sharing subsidies are not available at the other metal tiers and do not appear among the plan selections available to people with incomes too high for csr eligibility. These plans have lower out-of-pocket maximums and a higher actuarial value than a regular silver plan – they will save you money when you need to use your health coverage. and you can apply your premium subsidy to the purchase price.
Cost-sharing subsidies are generally not as well understood as premium subsidies, but as long as applicants actively compare the basics of each available plan, rather than just looking at premiums, silver plans that include cost sharing subsidies will be highlighted as options that offer exceptional value. For most applicants, they will be more expensive than bronze plans, but will provide significantly better coverage. Your out-of-pocket maximum will be lower than comparable priced plans, and you’ll also cover more medical expenses before the out-of-pocket maximum is reached.
gold plans: better value in some areas
We’ll get into the details in a moment, but the key point of this section is that you may find some gold plans in your area that cost less than the silver plans. In some areas, we’ve even seen $0 premium gold plans for some enrollees in recent years. If you’re not eligible for cost-sharing reductions (CSRs, also known as cost-sharing subsidies) and low-priced Gold plans are available in your area, they may present the best value.
now for the how and why: although the trump administration eliminated funding for csr at the end of 2017, csr benefits continue to be available to eligible members. The Congressional Budget Office estimated that the elimination of CSR funding would increase average Silver plan premiums by about 20% in 2018, and most insurers added the cost of CSR to their premiums (this is known as “ silver charge”). indiana and mississippi are the only states where silver loading is not allowed as of 2022.
because premium subsidies are based on the cost of silver plans (specifically, the benchmark plan in each area), most of the premium increase to cover the cost of csr ultimately follows paid by the federal government, in the form of higher premium subsidies.
but due to reduced csr funding, silver plans in some areas now cost more than gold plans, and some members may qualify for premium-free gold plans after applying their subsidy. for people with incomes below 200% of the poverty level (about $27,180 for a single person in 2023; note that previous year’s poverty level figures are used for these calculations), the best option is probably A silver plan for 2023, as out-of-pocket costs are much lower due to the RSC, and the ARP/Inflation Reduction Act’s enhanced premium subsidies will offset much of the higher premiums.
but people with incomes above 200% of the poverty level might be better off with a gold plan instead of a silver plan if the premiums are fairly similar (csr is available up to 250% of the poverty level, but its effects are much less significant once you exceed 200% of the poverty level).
because the cost of csr is now added to silver plan premiums in most areas, there are still gold plans that are less expensive than silver plans in some areas. consumers should shop carefully and see all available options before making a decision; don’t assume prices will follow the patterns we saw prior to 2018, when premiums generally rose steadily from one metal level to the next.
Although premium subsidies offset the increased cost of silver plans for most people, silver plans are disproportionately expensive in most areas for people who are not eligible for premium subsidies. If they buy a silver plan, they pay not only the regular cost of coverage, but also the cost of CSR, since that cost is included in the premiums for silver plans in most areas.
This is a big part of the reason silver plan selections have declined since 2017; people who don’t get premium subsidies are generally better off with a plan in a different metal tier. But again, eligibility for subsidies has been expanded under the ARP and Inflation Reduction Act, so there aren’t as many people who don’t qualify for subsidies.
consider quality ratings
After you’ve narrowed down the options based on premiums, out-of-pocket costs, how available plans will cover your prescriptions, and which plans your preferred medical providers have in-network, you may also want to consider quality ratings. many of the marketplace plans available in your area will have star ratings on the quality rating system.
This is another piece of the puzzle, but for most people, it should be a way of narrowing down the options after you’ve considered the other points outlined above, rather than a starting point.
Please note that not all plans have star ratings; if a plan is too new or doesn’t have a large enrollment, it may just say it’s not qualified. That’s not a reason to avoid a plan, as it may be a great plan that’s just new to the market.
one size does not fit all
If your household income is no more than 200% of the poverty level (this equates to $46,060 for a family of three signing up for 2023 coverage), a silver plan with built-in cost-sharing subsidies is probably right for you. the best option for you, and will likely provide a better overall value than bronze, gold, or platinum plans.
This might also be true for people with incomes between 200-250% of the poverty level, but as noted above, a gold plan might be a better value in some areas, due to the way some states and insurers are adding the cost of csr to premiums.
People who have moderate pre-existing conditions and expect to file claims within the next year will likely be better served by a higher-tier plan (or a silver cost-sharing plan if they qualify), regardless of premiums.
But very healthy claimants may find they prefer the lower premiums of a bronze plan, despite the potential for higher costs if they need to file a claim. And members with very serious medical conditions, who know they’ll reach their plan’s out-of-pocket maximum no matter which plan they select, might find they’re also better off with a lower-cost bronze plan (or a qualified HSA plan). plan at any metal level), as the combined total cost of premiums and out-of-pocket exposure could end up being less.
There is no one size fits all when it comes to health coverage; each person’s health history, risk tolerance, and budget should be considered when selecting a plan.
The personal assistance of a boater or broker will be invaluable if you are having difficulty comparing the various options available to you. (You can call one of healthinsurance.org’s partners at (866) 683-3949 to speak with an Exchange-certified and licensed broker who can enroll you in a plan that complies with ACA.)
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinion pieces and educational articles on the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by the media covering health reform and by other health insurance experts.