Health insurance policies have numerous acronyms and jargon. When it’s time to choose, it’s essential to know what each plan covers, how much it costs, and where you can use it.
This stuff can be complicated, but you’re in the right place. Let’s take a look at the different types of plans, so you can make an informed decision.
Preferred Provider Organization (PPO)
Even though premiums are higher, PPOs are the popular choice for people who get their health insurance through work. These health plans contract with doctors and hospitals to create a network of participating providers. While you also have some coverage outside the network, you will often pay much more than if you stay with in-network doctors. Emergency care is usually the exception to this rule.
High Deductible Health Plan (HDHP)
These plans have lower monthly premiums. However, you will end up paying much more out of pocket for health care costs before your plan is activated. On the upside, you can combine an HDHPs with a health savings account (HSA) that you can contribute tax-free to help you pay for qualified medical expenses. The HSA is a handy feature that lets you contribute up to $3,550 for an individual and $7,100 for a family tax-free. If you don’t end up using this money, it rolls over and allows you to earn interest and other earnings that are also not taxable.
Health Maintenance Organization (HMO)
This is a health insurance plan with lower premiums and out-of-pocket expenses and covers care from doctors on contract with that specific plan. On this plan, if an emergency happens, your plan will not pay for out-of-network care. Often HMOs are restricted to one particular geographic area, so you don’t have a lot of flexibility. You’ll always need to live and work within the service area.
Finally, when shopping for a health insurance plan, you will find various tiers – Silver, Gold, and Platinum. The levels are an easy way to tell you how much they cost. But remember, if you’re eligible for “cost-sharing reductions” under the Affordable Care Act, you should pick a Silver plan or better to get all the benefits.