Key Factors To Consider Before Changing Health Insurance Plans

Health insurance is one of the most complex and aggravating topics for both consumers and providers in the US. Speak with anyone based outside the US and they all will comment about how much better things are abroad versus here.

But as most of you would agree, having health insurance is a financial necessity in America today. Without it, if you were to get in a major accident or get seriously ill, you could literally go bankrupt. And if you live in California, Massachusetts, New Jersey, Rhode Island, Vermont, or Washington D.C. you'll be penalized if you don't have health insurance.

I've asked my wife Sydney to weigh in below on the key factors to consider before changing health insurance plans. We chose to switch health insurance plans this open enrollment season to save on cost.

Sydney handles all of our health insurance plan renewals, premium payments, doctor appointments, and medical bills. She also took care of an eye-opening ambulance bill nightmare that took a year to resolve. We'll never look at ambulances and health insurance the same way again.

The Ever Rising Costs Of Health Insurance Plans

Every year around September, I dread getting the annual notice about our upcoming health insurance renewal period. Once the packet finally comes, I quickly skim it, shudder, and then put “Compare health insurance plans” at the bottom of my to do list. I have a bad habit of delaying tasks that I find frustrating—and frustrating this is.

Not once has our plan renewed at a lower price. It's always gone up, up, and up some more. But now it has gone up a lot. How much more? Our existing PPO Gold plan for a family of four is renewing at a 10.8% increase from $2,534/month to $2,808/month. That would mean shelling out nearly $34k a year or the rough equivalent of $47k in pre-tax compensation. Ouch.

Back when we worked traditional corporate jobs, our health insurance premiums were largely covered by our employers. Heck, they were even 100% covered for many years prior to the Global Financial Crisis. But now that we're on our own, the expense is entirely on us.

As FIRE parents, we don’t qualify for health care subsidies—fortunately or unfortunately. This means it’s our responsibility to pay the maximum health insurance premiums, effectively subsidizing other families. At the same time, it’s up to us to prioritize staying as healthy as possible to minimize our own healthcare costs and support those who may not be as fortunate.

Every-Rising Health Insurance Premium Costs

To help put this year's renewal in perspective, our annual premium increases in recent years have ranged between 1% to 3%. A 10.8% increase is so far out of the norm it makes me nauseous.

The one positive is that giving up our Platinum plan (the highest tier) several years ago has saved us money. Those plans cost about $3,200-3,300 today for a family of four, that's about 16% more expensive than Gold.

And we're not the only ones experiencing higher health insurance premiums. Just take a look at the chart below.

What To Do When Your Health Insurance Premiums Are Too High

Even as expensive as health insurance is, I'm grateful to have it. We sure have needed it this year with two unexpected visits to the ER. Still, each visit cost us a little over $1,000.

Nevertheless, we want to lower our health insurance costs. And many of you will likely find yourself in this same situation at some point. So what do you do when your health insurance premiums are too high?

Here are a few high level action points to consider. Not all of them may be available to you, but they're worthwhile knowing about.

• Switch to a lower metal tier. The rank from most expensive to lowest cost is Platinum, Gold, Silver, and Bronze.
• Pick a plan with a higher deductible, some of which may be HSA eligible.
• Move to a different insurance carrier that's less expensive, but may have a smaller provider network.
• Change to an HMO plan from a PPO plan, which are generally less expensive.
• Find a new job that offers better health insurance benefits with higher employer subsidies.
• Transfer to a minimum coverage plan also known as a catastrophic health insurance plan.
• Earn less than 400% of the Federal Poverty Limit to get health care subsidies if you can.

Important Considerations Before Changing Health Insurance Plans

Since I'm unhappy with the renewal price of our existing health insurance plans, I'm shopping for a new one. Although it's not a fun exercise, it's not too complicated once you sit down and look at your options.

Here are some of the key factors I'm using in my search. Even if you're not changing plans right now, it's helpful to read through this list so you'll be better prepared when your open enrollment window starts.

1. Coverage Needs

First and foremost, think about how you expect to use health insurance. This includes preventative and specialist doctor visits, prescription medications, surgeries, and any ongoing treatments. You'll want to ensure whatever plan you pick will cover your needs adequately.

Some further things to consider in terms of coverage include:

• Your current health status
• If you have any chronic illnesses
• Follow up care needs for recent injuries
• How frequently you expect to see your primary care physician (PCP) and specialist doctors
• How easy it is to access specialists and treatments
• If preventative care is fully covered or not
• What type of hospital services are covered and how
• Maternity and newborn care if you plan to have a baby

2. Analyze The Costs

Analyzing costs before changing health insurance plans is a crucial step to ensure you're adequately covered. Nobody likes surprise medical bills. And with the way prices are these days, you don't want to wind up with 4 to 5 digit payments after a procedure or visit to the ER.

Start by reviewing your current plan's premiums, deductibles, copayments, co-insurance, and out-of-pocket maximums. This will give you a baseline for comparison. Look at your healthcare usage over the past year. Tally up the frequency and cost of routine visits, specialist consultations, medications, and unexpected medical expenses.

Next, gather information on potential new plans. Most insurance providers offer detailed summaries that outline costs and coverage specifics. Pay close attention to the premium amounts, as well as the deductibles and copayments for different services.

Once you have a comprehensive understanding of both your current and potential plans, it's time to compare them. For each plan, calculate the estimated annual cost based on your projected healthcare usage. This will help you see which plan is more financially feasible in the long run. Don’t forget to factor in any changes to your health status, as this could impact your usage and costs.

Finally, evaluate any potential changes in coverage and limitations. Some plans may have higher premiums but offer lower out-of-pocket expenses, while others may appear cheaper but come with restrictive coverage. See how the coverage aligns with your healthcare needs and preferences. Making an informed decision will help you balance affordability with the level of care you that works best for you.

3. Provider Network Size

Before switching health insurance plans, it's important to consider the size and quality of the provider network. First, check if your current doctors, specialists, and hospitals are in the new plan’s network. If you want to keep your existing providers, make sure they’ll continue to be in-network. Otherwise you could wind up paying significantly more or need to find new ones. Plans with larger networks tend to have higher premiums, but they offer more flexibility. Smaller networks may have lower premiums but could limit your options for care.

It’s also crucial to understand the type of plan you’re choosing. For example, HMO plans have smaller networks that require referrals for specialists. PPOs offer more flexibility, but can be prohibitively expensive if you go out-of-network. Some plans cover out-of-network providers at a higher cost, while others may only cover it in emergencies or not at all. Location matters too—ensure that there are enough local in-network providers nearby.

4. Prescription Coverage

Next, review prescription drug coverage. Check if your current medications are included in a new plan’s list of covered drugs. You'll also want to look at its tier system for prescriptions, which groups drugs based on cost. Some plans only offer generics and require prior authorizations. Others include brand-names and specialty drugs, but they can be a lot more expensive. So you'll want to familiarize yourself with the copays or coinsurance for the medications you need and ensure it's within your budget.

You'll also want to check if your preferred pharmacy is in-network. Some plans offer better coverage or discounts at certain pharmacies, including mail-order services. And also don't forget to consider any annual prescription deductibles. Some plans have separate deductibles just for prescriptions, which could affect your out-of-pocket costs.

5. Added Benefits & Misc.

When evaluating a new health insurance plan, it's important to consider if added and miscellaneous benefits could improve your overall care and reduce out-of-pocket costs. These benefits can include things like dental, vision, hearing coverage, wellness programs, telehealth services, acupuncture, and chiropractic care. Check which plans offer these extras and decide if they meet your needs and budget. For example, some plans may include routine eye exams, glasses, or dental cleanings, while others may not.

Wellness programs, such as discounts for gym memberships, smoking cessation programs, or weight loss support can provide value beyond medical care. Meanwhile, telehealth services could save you time and money on non-emergency visits. Lastly, if you have a chronic condition, case management or disease management programs can help coordinate care and provide extra support.

What We Ended Up Doing

With two rambunctious young kids, and feeling our own aches and pains, good health insurance is a must for our family. In order to keep all of our existing providers, switching carriers was suboptimal. So I quickly took that off the table. We also did not want to switch to an HMO plan and lose ease of access to several of our providers and specialists. Convenience and efficiency are priorities for us.

What I focused on next were largely the network size, monthly premium cost, deductible amounts, and co-insurance. In the end we kept the same provider network but downgraded to a slightly cheaper plan than our renewal equivalent.

We have a higher deductible now and slightly less co-insurance coverage. But, thankfully there aren't any major changes in co-pays or covered services. So instead of renewing at $2,808 per month, our new monthly rate is $2,628. We're still paying +3.7% more than last year, which is higher than the annual increases in recent years. But if we didn't change plans at all, we'd be paying +10.8% more.

Inflation and rising healthcare costs sure are a challenge. So may we all do our best to stay healthy and keep our medical bills as low as possible!

Final Considerations When Changing Health Insurance Plans

There are several additional factors to consider beyond costs and coverage if you want to change health insurance plans. Be sure to review the out-of-pocket maximum, which caps your annual expenses for covered services. A lower limit can protect you from high medical bills, but it may come with higher premiums.

It's also important to check the coverage for mental health and substance use services, as this can vary significantly between plans. Also check if the plan covers urgent care and emergency services, especially if you need care outside of regular office hours or while traveling.

You can also check if a plan is eligible for a Health Savings Account (HSA) or Flexible Spending Account (FSA). These accounts allow you to save tax-free money for healthcare costs. Customer service is important consideration—evaluate the provider’s reputation for responsiveness and claims handling to avoid frustration when issues arise. Additionally, check if there are any waiting periods before certain benefits kick in, particularly for services like maternity care or surgeries.

By evaluating a multitude of factors, you can select a plan that offers comprehensive care, convenience, and financial protection tailored to your needs. In summary, compare and contrast the below plan features when deciding if you should change health insurance plans.

• Metal tier (Platinum, Gold, Silver, Bronze)
• Monthly premium cost
• General deductible, prescription deductible, and ER deductible cost
• Size of provider network
• Plan type (HMO, PPO)
• Types of preventative care coverage
• Co-pay and co-insurance amounts
• Prescription coverage and medication tiers
• Ease of accessing specialists, screenings, and treatments
• Covered hospital services
• Added benefits & miscellaneous coverage
• Waiting periods and restrictions

Protect Your Family

There are many other types of insurance to consider in addition to health insurance. If you have debt and dependents, consider the benefits of purchasing a term life insurance policy.

Not sure where to start? Check out Policygenius, a leading life insurance market place, where you can get help with finding the most affordable term life insurance policy for your needs.

Thanks to Policygenius, I was able to double my life insurance benefit and lower my life insurance premiums by finding a great policy with Principal Financial Group. For seven years, I mistakenly thought my former carrier, USAA, was offering me affordable rates. I had no idea I was grossly overpaying for my coverage. Now I have better life insurance coverage for less money. Get custom free life insurance quotes with Policygenius from top carriers in just minutes.

Readers, what type of health insurance plan do you have? Have you had any pain points when switching carriers or plan types?

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