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How you end up with the wrong health plan

Nearly three-quarters of Americans believe they are prepared to choose a good health insurance plan during open enrollment.

When choosing a health plan, it’s important to know what you don’t know. Not only are premiums rising, but plan participants are paying more for additional out-of-pocket expenses, like coinsurance and deductibles. And they may not even realize it.

Nearly three-quarters of Americans believe they are prepared to choose a good health insurance plan during open enrollment, according to a recent survey by UnitedHealthcare. But less than 10 percent of consumers could define four basic and important terms when faced with making that decision, like deductible, out-of-pocket maximums and coinsurance.

These are the types of lingo that truly matter when choosing a health plan, as they can drastically increase your expenses.

Recognize these six mistakes people make when choosing health plans so that you can make smarter decisions during open-enrollment season.

1. Focusing on your monthly premium alone.

Plans with lower premiums may look good on paper, but they typically come with higher out-of-pocket costs that can easily make them more expensive than plans with higher monthly premiums.

If you tend to make frequent medical appointments or have chronic health care conditions that require close monitoring and medications, it may make sense to choose a plan with a higher monthly premium and a lower deductible.

On the flipside, if you don’t frequently use medical services and are generally healthy, you might be willing to risk a plan with a higher deductible but lower monthly premium costs.

Making the wrong choice can cost you.

A study led by Carnegie Mellon researchers found that many workers at a large American company chose lower-deductible plans that actually cost them more over the course of the year.

Some 97 percent of the workers would have spent the same or less on health care expenses had they chosen a plan with a $1,000 deductible, rather than taking a company offer to pay more in premiums to get a lower deductible, according to the 2013 study.

2. Failing to learn the basic vocabulary of insurance plans.

Americans are becoming slightly more literate about our health insurance but there’s clearly more work to do. The 9 percent who could name four major terms in the United Healthcare survey is actually up from 7 percent last year.

  • Deductible: The amount of money the policyholder must pay each year to cover eligible medical expenses before the insurance policy starts paying.
  • Copay: A cost sharing mechanism in group insurance plans where the policyholder pays a specified dollar amount of medical visits, treatments or prescriptions and the insurer pays the remainder.
  • Coinsurance: The amount (usually a percentage) a consumer pays to share the cost of covered services after their deductible has been paid. For example, if the insurance company pays 80 percent of a claim, the consumer might pay 20 percent.
  • Out-of-pocket maximum: The most money the policyholder will pay during a year for coverage. It includes deductibles, copayments, and coinsurance, but is in addition to regular premiums. Beyond this amount, the insurance company will pay all expenses for the remainder of the year.

Most people understand it’s important to see which doctors are included in a particular plan’s network, but many don’t understand how that affects their overall bill, according to the Kaiser survey.

3. Missing the deadline for your company or for the public health care marketplace.

Most companies have open enrollment for two to four weeks in November, while the period to sign up for or change coverage in the 2018 health insurance marketplace created by federal law is from Nov. 1 to Dec. 15 in most states.

“It’s important to keep in mind that the open-enrollment period is shorter this year in most places,” says Elizabeth Hagan, associate director of coverage initiatives at Families USA, a group that advocates for health care consumers.

If you miss the deadline, you’ll likely be stuck in the same plan you currently have, even if it’s not the best choice for you. If your plan has been discontinued, you’ll likely be rolled over into a similar plan.

4. Assuming the plan will be the same from one year to the next.

Even if you were happy with your coverage this year, review your policy and what other policies are available to you.

“Always, even if you have coverage, come back and shop around,” Hagan says.

Plans change from year to year; costs change from year to year. A plan that was a good fit this year may not be the best option next year.

5. Overlooking preventive care benefits that are important.

Pay attention to what benefits are offered as predeductible preventive care, Hagan says. More people than ever are enrolling in high-deductible plans, from 19 percent of workers with insurance five years ago to 28 percent today, according to Kaiser.

While most plans are required to pay for preventive health screenings and annual checkups even if you haven’t yet met your deductible, some plans offer to cover checkups and some drugs (both prescription and over-the-counter) as predeductible benefits. Plans with more generous preventive care may be worth the investment, depending on your circumstances.

MagnifyMoney is a price comparison and financial education website, founded by former bankers who use their knowledge of how the system works to help you save money.