Money Crashers | How to Choose the Best Health Insurance Plan for Your Family

Choosing a health insurance plan is challenging. But choosing the right health insurance plan is downright stressful, especially since health insurance isn’t cheap. It’s tempting to go without it, but if you face an emergency or chronic diagnosis, you’ll probably wish you had opted to pay the premium.

But with so many options to choose from, how do you choose the best health insurance plan for your needs? First, it pays to understand the pros and cons of each type of plan.

Basic Plan Types

There are four basic categories of plans in the health insurance marketplace: bronze, silver, gold, and platinum. These plans vary based on the average percentage of health care expenses they pay out. The higher the value — gold and platinum — the more they pay toward your medical expenses and the lower your out-of-pocket costs.

When shopping for insurance, you’ll hear a lot of initialisms tossed around, such as HMOs (health maintenance organizations), PPOs (preferred provider organizations), and POSs (point-of-service plans). There are also fee-for-service plans and long-term care insurance. Some plans limit your access to health care providers outside your network, while other types allow you to see almost any doctor. Here’s how these plans stack up against each other.

HMO Plans

Advantages: Your out-of-pocket costs are often lower and a lot more predictable. You usually don’t need to submit a claim to be reimbursed for your expenses.

Disadvantages: Services provided by a doctor or specialist outside your network are generally not covered except in the case of an emergency. You almost always need a referral from your primary care physician to see a specialist.

PPO & POS Plans

Advantages: PPOs and POSs are much more flexible than HMOs, as they often cover out-of-network medical costs. Also, the prices aren’t typically as high as with a fee-for-service plan.

Disadvantages: It’s often more difficult to predict your out-of-pocket costs.

Fee-for-Service Plans

Advantages: You don’t need prior approvals or referrals to get medical care anywhere you want and from whomever you want.

Disadvantages: You pay higher premiums and deductibles. You generally also pay for medical services upfront, then submit a claim to your insurance company to get reimbursed.

High-Deductible (Catastrophic) Plans

Advantages: High-deductible plan premiums are typically much lower than with PPO or POS plans. And out-of-pocket expenses are negotiated between the insurance company and the health care provider, which often leads to lower out-of-pocket costs.

Disadvantages: If you need high-expense health care, like surgery, you must meet your deductible before your insurance pays anything, and deductibles are very high. For instance, in 2019, the IRS defined a high-deductible plan as one with a minimum of $1,350 for an individual and $2,700 for a family, though deductibles can climb much higher. However, you can drastically reduce your out-of-pocket expenses from this type of plan by adding a Health Savings Account from Lively (more on this below).

Long-Term Care Insurance

It’s unfortunate, but Medicare and most health insurance plans limit or exclude long-term care. If you want coverage, you must apply for a separate long-term care insurance plan.

The cost of your plan depends on several things, such as your age, the maximum number of days or years the policy will pay, and the maximum amount the policy will pay per day. As you plan for retirement, consider the cost of long-term care insurance.

Hybrid Health Plans

Hybrid plans typically have office visit copayments as low as $20. They offer affordable yearly deductibles, which often start at only $500. However, your deductible does not apply to urgent or emergency room care, doctor visits, physical therapy, and many routine doctor office services like lab tests and X-rays. However, you get 100% coverage with no out-of-pocket costs after you meet your out-of-pocket maximum.

How to Choose the Right Plan to Meet Your Needs

Some health insurance plans are better than others. That’s a given. In 2020, is expanding the health insurance plan quality ratings program to all states. Based on a scale from 1 to 5 (with 5 being the highest), quality ratings account for member experience, plan administration, and overall medical care, enabling you to compare plans and make an informed decision. Although important as a guideline, ratings shouldn’t be the sole indicator of a plan’s quality.

Asking yourself the following questions will help you make the best decision.

1. What Are the Coverage Limits?

One of the key things to consider when choosing a health insurance plan is the lifetime benefit maximum. A lifetime benefit maximum is the maximum dollar amount your health insurance plan pays out during your lifetime for nonessential health care services like acupuncture, orthotics, chiropractic services, wigs, and hearing aids. Lifetime maximum benefit clauses do not apply to essential services, such as emergency services, medically necessary hospitalization, pregnancy, or newborn care.

It’s essential to understand the limits of your coverage, especially if you have a chronic illness like diabetes and need something classified as nonessential — such as orthotics — or a lifelong condition like hearing loss and need hearing aids.

Even if you don’t have a chronic or lifetime condition, if you utilize services like acupuncture, chiropractic care, or anything else considered nonessential under your plan, calculate how the lifetime benefits maximum will affect you.

2. What Are Your Out-of-Pocket Expenses?

If you have to see the doctor frequently or have an expensive procedure or diagnosis, out-of-pocket expenses really start to add up throughout the year. That’s why it’s important to look at each plan’s requirements for out-of-pocket expenses like deductibles and copays or coinsurance.


A deductible is the amount you pay for medical care before your health insurance plan starts to pay. For example, if your plan’s deductible is $1,000, you’ll pay 100% of all eligible medical expenses until your bills total $1,000. After you meet your deductible, your health insurance kicks in.


A copayment, or copay, is a fixed amount you pay for any covered medical service, usually at the time of the service. Copays for visits to your primary care physician are generally about $25, though they’re even lower on some plans. But copays vary from service to service for things like lab tests, prescriptions, and visits to a specialist.


Instead of copays, some plans make you pay coinsurance. Coinsurance is the percentage of your medical bill you pay, with the rest paid out by your health insurance plan after you meet your deductible. The most common coinsurance is an 80/20 split, which means you pay 20% of each bill and your insurance covers 80%. For example, if you visit your doctor and receive a bill for $200, you pay $40, and your insurance pays the remaining $160.

Out-of-Pocket Maximums

Your out-of-pocket maximum is the most you’ll have to pay for covered services in a plan year. After you pay this amount on copays, coinsurance, and deductibles, your health plan pays 100% of the costs for any covered benefits. However, your out-of-pocket maximum doesn’t include your monthly premiums or anything you spend for services your plan doesn’t cover.

For example, let’s say that at the beginning of your plan year, you find out you need knee-replacement surgery, and it will cost the allowable cost of $30,000. Your plan has a $1,500 deductible, and your coinsurance is 20%. Your out-of-pocket maximum is $2,200. After paying your deductible, your 20% coinsurance totals $5,700. But because your out-of-pocket maximum is set at $2,200 and you already paid your $1,500 deductible, you’ll pay only an additional $700. The insurance company will pay the rest.

3. What Is Your Health Like?

Choosing the right plan for you usually comes down to a balancing act between deductibles and premiums. The more you’re willing to pay on your premium each month, the lower your deductible usually is.

Typically, high-deductible plans are best for people who are generally healthy. That includes people who don’t have any chronic conditions, don’t make frequent visits to their doctor, and don’t anticipate any high medical costs in the coming year, such as costs for a pregnancy. Because many of these plans allow you to pay a copay when you visit your doctor rather than paying toward your deductible, a few visits per year won’t break the bank for a healthy person. And the premiums are much cheaper.

On the downside, if something catastrophic happens or you receive a chronic condition diagnosis during the plan year, you have a much higher deductible to meet before your insurance kicks in.

With a low- or no-deductible plan, you’ll meet your deductible much more quickly, but you’ll typically pay a much higher premium. However, these plans are worth it for people who expect their medical costs to be high in the coming year.

If you have a chronic illnesses, anticipate several trips to the doctor or hospital, or will need to see several specialists in the coming year, you’ll probably save money with a lower deductible. That’s also the case for families, particularly if the children are frequently ill or involved in sports.

And remember: If your health changes, you only have to live with your current plan for one year.

Where to Get Health Insurance

After you’ve looked at all the health insurance plan options, it’s time to look for the best insurance for yourself and your family. You can find it in a variety of places.

Many people get health insurance through their employer. Most employer plans are group plans, and the employer pays part of the premium. If your employer doesn’t offer health insurance benefits, there are other ways to get insurance, such as:

Options for People With Disabilities

If you have a disability, there are additional agencies that can help with your health insurance needs:

  • The Disability and Health section of the Centers for Disease Control and Prevention website, which has articles, tips, and information on programs
  • The Social Security Administration
  • City or county governments resources, such as your local public health agency
  • State social services agencies, such as departments of health

Alternatives to Traditional Health Insurance

With the rising cost of traditional health insurance, some people are looking for other options that provide some of the same coverage but without the exorbitant costs. Other options may include:

Health-Share Plans

Health-share plans from a company like Medi-Share are not really insurance plans. They’re membership cooperatives in which members agree to pay a share of other members’ medical bills. You pay a monthly premium, but both members and providers say total yearly costs are almost always less than with standard health insurance plans.

Direct Primary Care

Direct primary care, also known as concierge medicine, is another alternative that provides access to health care via an affordable flat membership fee. There are no fee-for-service payments for in-office treatments and tests and no third-party billing. You do pay extra for services provided by third-party vendors, such as blood work or tests specialists must do. But many concierge doctors have negotiated special rates with third-party providers, whom you typically pay directly. The doctor doesn’t mark up their services.

With direct care, you also have access to the doctor of your choice, though not all doctors provide direct care as an option. But the flat rate you pay applies only to your primary care physician. You must either pay out-of-pocket or use insurance for specialists unless you have a similar arrangement with them. And for some, it’s best to have at least high-deductible insurance in the case of an accident or a chronic illness diagnosis.

Health Savings Accounts

A health savings account (HSA) from someone like Lively offers tax advantages in addition to helping cover medical expenses. But it must be combined with at least a high-deductible health plan to cover catastrophic injuries or illnesses. Many employers provide HSAs, but they’re available for individual purchase if yours doesn’t offer them.

The IRS limits contributions to your HSA account. But payments made into your HSA are pretax, and there’s no penalty for withdrawing money as long as you use it to pay your medical expenses.

Final Word

Just like car insurance, health insurance is something you pay for and hope you never need. But when you do, it’s comforting to know you have a plan that helps with the unexpected costs of medical care.

Insurance plans are generally expensive, but not having one can cost even more. It’s no surprise that health insurance in the U.S. has historically been costly and out of reach for many people. The Affordable Care Act did a lot to make individual health insurance plans more affordable. But even so, in 2018, 27.5 million people were without insurance at some point during the year — up from 2017’s number. Undoubtedly, the main reason was the cost of health insurance.

However, health insurance gives you peace of mind you have a buffer between your bank account and high medical costs. Don’t wait until you or a family member becomes ill before finding the right plan for you.

The standard rule of thumb goes something like this: Choose a plan with a premium you can afford that also covers the doctors and drugs you want and need.

Have you selected a health plan yet? What tips do you have for saving on health insurance?

Read more at How to Choose the Best Health Insurance Plan for Your Family