Which health insurance will you choose?
On the surface, it’s a simple question—but it’s one that can be fraught with much anxiety.
For those who have health coverage through work, the process can be as simple as reviewing your company’s health plan comparison sheets, calling your benefits hotline, clicking a few buttons—and voilà, you’ve made your elections.
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But for all those self-employed people out there—contractors, freelancers and all-around one-man bands—choosing a health plan isn’t quite so easy a process.
It can feel more like you’re working on a senior thesis, with all the fact-finding and research you have to do. But instead of gaining more clarity, you can often end up more confused than when you started.
Metal plans? HMOs? Coinsurance? Oh, my!
To show just how difficult it can be, we asked two self-employed people facing vastly different health care choices—one wants bare-bones solo coverage, the other has to cover a family of four—to share the difficulties they’re encountering in choosing a health plan for 2016.
Then we asked Sarah O’Leary, founder and CEO of ExHale Healthcare Advocates—a Dallas-based company that helps consumers and businesses navigate their health care options—to offer advice on what factors should come into play with their decision-making.
Her guidance could help those of you out there who can’t just run down the hall to pick your resident HR rep’s brain.
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The Healthy Single Guy
Who: Rick Rockwell, 39, health and fitness consultant, Sacramento, Calif.
My Health Care Scenario: “As someone who works in the fitness industry, staying healthy is important to me. Currently, my main job is to manage a website that reviews health supplements, but I’ve also been a personal trainer, wellness coordinator and health instructor for more than 10 years.
That means I exercise four to five days a week. I don’t drink or smoke. I take vitamins and protein supplements. And I try to eat well. I’ve only been to the doctor once in the last three or four years—I don’t even go for annual checkups.
So it’s frustrating that, because of the Affordable Care Act (ACA), I’m forced to buy insurance that I’ll rarely use.
Fortunately, for 2015 I qualified for tax credits on a basic plan I got through my state exchange, which helped push my premium below $100. But I have to shop for a new policy for 2016 because I’m now in a higher income bracket and no longer qualify for the same tax breaks.
I’m dreading picking a new plan—I think the process is a pain, and I don’t want to shell out a lot every month for something I won’t use.
So my goal is to pay as little as possible. The bare minimum coverage is all I really need—just something to have in case of an emergency.”
What the Health Care Pro Says: For starters, O’Leary says Rick should consider recalibrating how he thinks about health insurance. “[Just as] we’re required to carry auto insurance, we’re now required to carry health insurance—or risk the penalties if we choose not to,” she says.
So Rick’s most-affordable option would likely be a bronze health plan, which tends to have low premiums but pays for only 60% of medical costs.
Plus, there are risks to his chosen profession. “As a personal trainer, he could have a weight fall on him and be in a situation where he needs his insurance,” she adds.
Unfortunately, Rick doesn’t qualify for the most bare-bones catastrophic health plans designed to provide coverage only in the event of a serious accident or illness.
“You only qualify for a catastrophic plan if you’re under 30 or you are over 30 and can certify that you can’t afford coverage or are experiencing financial hardship,” O’Leary explains.
So Rick’s most-affordable option would likely be a bronze health plan, a category of ACA coverage that tends to have low premiums but pays for only 60% of medical costs, on average.
Premiums can vary greatly by region or state, but O’Leary says Rick could find comparable bronze plans on the California health exchange and on the open market—adding that there could be one administrative advantage to shopping off the exchange.
“When people are sure they aren’t going to receive subsidies, they’ll sometimes choose to go on the open market because you don’t have to fill out the same [type of] application that’s necessary for Healthcare.gov or the state exchanges—it’s just a little bit easier,” she explains. “But you have to make sure it’s a legit, quality plan that meets minimum ACA requirements or risk getting penalized through your taxes.”
If Rick doesn’t travel much outside of his immediate area, he could save further by choosing an HMO bronze plan, O’Leary suggests. HMOs typically offer low premiums because they cover only in-network doctors, but they often have restricted service areas.
If he goes the HMO route, Rick could potentially reap some tax benefits by opening a health savings account (HSA). That’s a type of account to which he can contribute pre-tax dollars to cover medical costs—as long as he has a high-deductible health plan.
O’Leary suggests one other avenue Rick could explore: “If he belongs to a professional association or union, [he should find out] if they offer a health plan, which might be another way for him to save money [on his health care costs].”
The Working Mom
Who: Yoon Kang-O’Higgins, 40, museum educator, Seattle
My Health Care Scenario: “In January, my health benefits changed because I decided to scale back at work, going from being a full-time employee to a part-time contractor.
Because the art-education consultancy where I work is based in New York and I’m a remote employee in Seattle, I wasn’t eligible for the same insurance options as the other staff [when I was full-time]. So my employer and I picked a plan through a Seattle-based provider, which they paid for.
That plan covered my entire family, which includes my husband, Mark, 45, and our two sons, Oisin, 11, and Ronan, 10. Mark is an artist and art instructor at two colleges, but he’s a freelancer, so he doesn’t receive health benefits through work.
When I switched to contractor status, my employer stopped paying for my insurance, so I took over the monthly premiums, which run $1,042 per month for a silver plan, with a $2,500 family deductible.
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Now that it’s open-enrollment season, I’ve started research on the health exchange, but it’s hard to comparison shop because I heard my current plan will be changing—although I don’t know how yet.
Another option has also emerged: The private foundation where I work a few days a week has offered me access to their health plan, but I’d still need to pay a portion of the premium because I’m part-time.
The foundation’s insurance provider estimated I’d have to pay about $1,000 a month, but with a high deductible—something like $10,000. I’m not sure it’s worth it.
Other than an annual X-ray Ronan gets to monitor an elbow condition, which costs us a few hundred dollars out of pocket, no one in my family has a chronic health need. So I feel like choosing a plan for us shouldn’t be so difficult.
It would make our lives easier to stick with what we have, but if it doesn’t make sense economically, we’ll switch. I’m just feeling decision paralysis because of all the details I have to sift through.”
“People are feeling the pinch of costs, so they don’t want to spend a lot on premiums. But we encourage them not to let that cloud their judgment.”
What the Health Care Pro Says: O’Leary cautions Yoon not to fall into the common trap of making decisions based solely on premiums—potentially saving $100 a month isn’t enough reason to make a switch.
Rather, she suggests that Yoon put in the elbow grease to create a spreadsheet so she can compare factors like premiums, deductibles, co-pays, coinsurance, prescription drug costs, total out-of-pocket costs and out-of-network coverage for any plan she’s considering.
“People are feeling the pinch [of costs], so they don’t want to spend a lot on premiums,” O’Leary says. “But we encourage them not to let that cloud their judgment. [Many factors] fit into the equation of what makes a quality plan for you.”
Even if Yoon sticks with her current plan, changes are afoot—so it’s important that she confirm that her family’s preferred doctors will continue to be covered.
“Don’t just take the website’s word for it. Call up your doctors and make sure they’re in-network,” O’Leary suggests. “And when you get your insurance card in January, double-check and triple-check that info, because you have a small window to appeal if you feel they’ve changed the network since you signed up.”
Ultimately, O’Leary says that if Yoon has been happy with her coverage, her plan remains affordable, and she doesn’t anticipate big surgeries or procedures, she shouldn’t feel pressured to switch.
O’Leary does, however, offer up a strategy that could potentially help lower the cost of Ronan’s annual elbow X-ray.
If Yoon’s plan doesn’t cover it at 100%, she can shop around to see how much that same X-ray would cost at different imaging centers, or use a site like Healthcare Bluebook to do a price search in her area. She can then use that intel to negotiate the price up front at a chosen facility.
“[People don’t realize] the amount of negotiation that can be done for non-emergency tests and procedures,” O’Leary says. “The money you could save by being a smart shopper can be significant.”
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Unless specifically identified as such, the individuals interviewed or otherwise listed in this piece are neither clients, employees nor affiliates of LearnVest Planning Services and the views expressed are their own. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies. LearnVest, Inc., is wholly owned by NM Planning, LLC, a subsidiary of The Northwestern Mutual Life Insurance Company.