The time to purchase a new health insurance plan for 2018 is almost here. Depending on the state in which you live, there will be a many options for you to consider.
Open enrollment begins November 1, 2017, and runs through December 15, 2017. In order to have coverage on January 1, 2018, you must either renew the plan you have or select and enroll in a new plan by December 15, 2017.
There are several things to consider in preparation for open enrollment. First, open enrollment isn’t just for people who don’t have health insurance. Every year those who pay for their own health insurance must shop for a new plan, or re-enroll in their existing plan. It is important for individuals to realize they have a choice, and shopping for a new health insurance can save money– sometimes hundreds, if not thousands of dollars.
Understanding the most critical terms will help you discern what is most important for you and your family when shopping for a health insurance plan. For example, knowing what a deductible is, understanding coinsurance and looking at pharmacy benefits are critical before purchasing a plan. Here are some of the most critical facts you need to know:
Deductible: This is how much you have to pay out of pocket before your health insurance kicks in. The higher the deductible, the lower your monthly insurance costs. More and more Americans have a high deductible, sometimes over $10,000, so it’s important to think about how much routine medical expenses you will have during a year. If you see a doctor several times a year, have a high chance of being hospitalized and take prescription drugs, it might be better to pay for a plan with a smaller deductible, which will lower your out of pocket cost overall.
Coinsurance: After you have had enough covered medical bills to meet your deductible, your health insurance company will begin paying for in-network care, but that doesn’t mean they will pay 100 percent of the costs. In many cases you will be responsible for coinsurance, which is a percentage of costs in excess of your deductible that you are responsible for. If you have 80/20 coinsurance, your health insurance company will pay 80% of your medical bills after you have reached your deductible, and you are responsible for the remaining 20% of costs.
If you have a health insurance plan with a Health Savings Account, there usually are no coinsurance.
Pharmacy Benefits: If you take prescription drugs, review what your health insurance plan will cover. Every plan is different. Some plans have a combined medical and pharmacy benefit deductible, while many others have a separate deductible for prescription drugs. If the majority of your medical expenses are due to prescription drugs, get the lowest prescription drug deductible possible.
Subsidy: Many Americans qualify for cost assistance from the federal government when they apply for a health insurance plan. The subsidies — also know as Premium Tax Credits — are based on your income. Depending on your family size, you could earn more than $100,000 a year and be eligible for some amount of subsidies. Even if you don’t believe you are eligible for a tax subsidy on your health insurance, run a quote and see if you qualify for any savings. And, remember, there are two kinds of subsidies: One that lowers your monthly cost, and the other that reduces the size of your deductible.
Penalty: If you don’t carry health insurance for three months or more, you are subject to a tax penalty that is payable to the IRS when you file your taxes. In 2017 anyone who is not exempt from this provision will have to pay $695 per adult per household and $347.50 per child or 2.5% of total household income, whichever is greater. 2018’s penalty situation is a bit more unclear. There are many exceptions to this rule, however about six million people pay a tax penalty each year for not having health insurance.
The good news about purchasing health insurance is that you are not stuck with the same insurer for a long period of time. During the 2018 Open Enrollment Period, you can switch to any insurance company. The rest of the time, if you have a qualifying life event such as a permanent move to a new state or having baby, you can change the type of health insurance coverage you have. It takes patience and time to enroll in health insurance coverage each year, but it gives you the control to pivot to a new plan if your lifestyle demands a change. It pays to shop around. And remember, no one can be denied coverage because of a pre-existing medical condition.