Looking through health insurance policies can be scary and overwhelming. It’s often one of your biggest expenses as a self-employed individual and one of the top 6 things I think you should consider before becoming self-employed.
I fret over this decision almost every year because I want to choose the right coverage for my family and get a policy I can afford. It’s also a decision that l have to live with for the next 12 months unless I have a qualifying event that allows me to switch policies.
The truth is, most of the time you won’t know if you’ve made the right decision until the end of the year, but here are 6 things to consider before you purchase your health insurance policy.
#1 Estimate How Much You Typically Spend In Out-of-Pocket Costs Towards Covered Services
Your out-of-pocket costs include any money you pay towards your deductible as well as your co-pays and coinsurance. I focus mainly on out-of-pocket costs you pay towards covered services because these are the ones that are going towards both your deductible and your maximum allowable amount. If you have doctors that are out-of-network and are going to remain out-of-network on your new plan, then this is an expense that does not go towards your deductible.
We use a health savings account and have for several years, so it’s easy for us to go back over and see what we spend every year on medical expenses. I typically average out the last two years. Then I estimate how much I spent on out-of-network doctors and fuel for trips to the doctor, which are both allowable expenses that you can withdraw from your HSA account. Finally, I deduct my out-of-network doctor and fuel expenses from my total out-of-pocket expenses. I then create a health insurance comparison sheet to determine my risk versus reward in choosing a plan with a higher premium and lower deductible or a plan with a higher deductible and lower monthly premium. How much we typically spend on our out-of-pocket costs along with the annual premium amount helps me evaluate the best plans for our typical medical needs.
#2 Determine If Paying For a PPO or POS is Worth The Cost
In our state, we can typically choose between an HMO, a POS, or a PPO. The HMO plans are always less expensive than the other two. POS and PPO plans allow you access to more doctors or provide some coverage for you if you choose to go outside of your plan’s network of physicians. I do love the option of being able to choose outside of our network, but when I took a closer look, I realized that it wasn’t that beneficial for our situation.
The reason that I choose not to go with a PPO or POS is that the benefits I was going to receive if I went out-of-network were significantly reduced from what they were in-network. Therefore, I was only getting a partial benefit, but I still had to pay a lot of extra money every month to have the luxury of more choices. Since almost all of my doctors are in-network, I decided this was not worth the extra money and that is was more cost effective to pay the full out-of-pocket price to the couple of doctors we see that are out-of-network. Every insurance company and policy is different, so just make sure you read the fine print because you don’t want to end up paying for something that you don’t get any benefit from.
#3 See If Your Plan Requires a Referral to See a Specialist
This is a major part of my decision every year. I never choose a plan that requires I go to a doctor and get permission to see another doctor, but that is just from some of my life experiences. You might not have a problem obtaining a referral, or you might not feel the need to see a specialist. In that case, this might not be any big deal.
#4 Can You Go To The Doctor and Just Pay Your Co-pay Even If You’ve Not Met Your Deductible
I’ve noticed over the past couple of years that other options are popping up allowing you to go to the doctor and just pay your co-pay even if you’ve not met your deductible. I thought about choosing one of these plans this year but ultimately decided against it. Even so, I believe that this is an excellent option. These plans only make you pay towards your deductible for certain services. Just be sure to look over and see when it requires you pay your deductible first.
#5 Calculate The Savings an HSA Might Bring
We have had an HSA for the last several years now, and my accountant said it was the best decision we ever made concerning our health insurance. We do our best to maximize our benefit by contributing the maximum allowable amount when possible. You can use your HSA to pay for many qualified medical expenses.
#6 Verify That Your Doctor’s Are In-Network
If you’ve no interest in changing doctors, then make sure they’re all considered in-network and don’t rely on your insurance company’s website. I strongly suggest that you call your doctor’s office because there are many flaws in websites. One of my primary doctors was listed as an in-network provider, but when I checked with my doctor’s office, they said that they do not accept the particular insurance that I was looking at.
It pays to do a lot of research in the beginning because unless you qualify for a special event, then you will be stuck with your insurance policy for the next 12 months and you want to ensure that it protects you and your family.
If you are interested in checking out other options besides traditional health insurance companies, then check out my post on health insurance options for the self-employed.
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