How to Choose a Private Health Insurance Plan

What if you don’t have access to health insurance from an employer’s group plan or a Medicare plan…and you’re not sure the federal and state ­exchanges created by the Affordable Care Act (ACA/Obamacare) will work best for you? You may be able to find private plans better tailored to your particular needs. Some private plans can offer wider provider networks and, in some cases, lower premiums. Keep in mind that if you lose your job, although you can continue with your employer’s plan under Cobra temporarily, Cobra can be very expensive, making a private plan all that much more attractive. 

Reasons to opt for a private plan as an alternative to Obamacare… 

You earn too much to get an ­Obamacare subsidy from the federal government. Subsidies can save you thousands of dollars on annual premiums and typically make Obamacare cheaper than a comparable private plan. Helpful: Go to the Kaiser Family Foundation calculator (KFF.org/interactive/subsidy-calculator) for estimates of premiums and subsidies in ACA plans. 

You don’t need the 10 essential health benefits required of ACA-compliant plans. Private plans can be cheaper because they often don’t cover preexisting conditions or costs for such things as maternity and newborn care, pediatric services and mental health and addiction counseling. If these factors aren’t a priority, why pay more to include them? Note: You no longer have to pay a federal tax penalty for not having ACA-compliant health insurance, although Massachusetts, New Jersey, Vermont (starting in 2020) and Washington, DC, do penalize their residents.

How to Choose 

Figure out your health-care needs and priorities in the coming year by examining what kind of ongoing medical needs you have and what services and costs you’ve incurred in the recent past. Four questions to ask…

Do I have favorite doctors or medical facilities? Some private plans allow you to use almost any doctor or health-care facility. Others limit your choices or charge you more if you use providers outside their networks. Most common network types…

Health Maintenance Organization (HMO). Your coverage includes visits to a primary care physician (PCP) you choose from the HMO’s approved providers. Your PCP acts as a gatekeeper should you need to see any in-network specialists. Care outside the network isn’t covered except in emergency situations. HMOs are best for consumers who want to keep premiums low and don’t mind less flexibility in choosing doctors or medical facilities. 

Exclusive Provider Organization (EPO). These are similar to HMOs in that you choose from the EPO’s ­approved providers. But unlike HMOs, EPOs allow you to see an in-­network specialist without a referral.

Preferred Provider Organization (PPO). These tend to have higher premiums than HMOs…but also larger networks of providers, no required ­referrals and coverage for part or all of the cost of going out of network. 

Am I likely to incur many out-of-pocket medical expenses? It’s important to not focus just on premiums but also consider other costs, including deductibles (the amount you owe for covered services before insurance kicks in)…co-payments and coinsurance (payments you make each time you get a medical service)…and out-of-pocket maximums (the most you have to spend for covered services in a year before insurance pays 100% of the costs of covered benefits). In general, it makes sense to choose a plan with higher premiums and lower out-of-pocket expenses if you see doctors frequently or need a lot of emergency care…regularly require ­expensive or brand-name medications…have surgery planned in the near future…or have been diagnosed with a chronic condition that requires ongoing medical attention. Choose a low-premium, high-out-of-pocket plan if you are in good health and rarely see doctors. 

Are there strategies that help me save on my taxes? When evaluating cost, also consider choosing a plan that allows you to open a Health Savings Account (HSA). These are sometimes called High-Deductible Health Plans (HDHPs). These plans—which tend to have lower monthly premiums than plans with lower deductibles—can be an HMO, PPO or EPO. If you have an HDHP, you can fund an HSA with pretax contributions, which can be used to pay out-of-­pocket health-care costs. HSAs can work especially well for retirement planning. Contributions to an HSA roll over from year to year if you don’t spend the money on health care…and they can be invested and grow tax-free. Starting at age 65, you can use the funds for anything you want without penalty, but you’ll pay income tax at the time of withdrawal for nonmedical expenses.

Do I just need short-term health insurance? If you are in excellent health and want bare-bones coverage between jobs or if you retire before age 65 and have time before Medicare eligibility, short-term plans, which are not available on ACA exchanges, can be an inexpensive option. These plans, ranging from 30 to 364 days, are renewable for up to three years and have monthly premiums starting as low as $100 for individuals and $300 for a family of three. They can protect you from huge medical bills for a serious illness or injury, but they come with some heavy restrictions. For example, most provide no coverage for preventive care such as physicals or for prescription drugs. Deductibles can be very high, and they reset every time you renew your policy. Note: Four states have banned the sale of all or most short-term plans—California, Massachusetts, New Jersey and New York.

Where to Find a Plan

Typically, insurers who participate in ACA exchanges in your state will offer ACA noncompliant plans that they can sell directly to individuals. In addition, other insurers may offer alternative specialty insurance such as short-term plans. 

Go to eHealthInsurance.com, which lets you compare plans and has search tools to pinpoint the private plans you may want.

Consider plans offered by membership organizations, such as unions, alumni associations and/or ­professional/trade organizations. As a member, you may be eligible for discounts or access to a group-membership health insurance plan with attractive premiums. 

Get help from a health insurance agent in your area if you have trouble comparing and navigating different plan features and prices…or you don’t want to do the legwork yourself. Keep in mind that you may not get the best-priced ­options or plans for your situation because agents typically restrict their recommendations to the insurers they represent or from whom they receive compensation. Find an agent through the National Association of Health ­Underwriters, NAHU.org.