Choosing the right health insurance plan requires evaluating your medical needs, understanding common coverage costs and comparing network options. Taking the time to explore your health care options helps ensure you have the appropriate level of medical support for your budget and your long-term health outlook. 

Navigating open enrollment or choosing a new policy can feel overwhelming, but finding the proper coverage is a key step in supporting your physical and financial well-being. An Ameriprise financial advisor can help review your health care costs to align to your broader financial goals. 

Here is how to evaluate health insurance plans to find cost-effective coverage that meets your needs. 

Understand health insurance terminology 

Health care costs aren’t always easy to figure out. Understanding these common terms can help you avoid surprise bills and plan ahead for your health care expenses: 

• Premium: The premium is the amount you pay, typically monthly, to maintain your health insurance coverage, regardless of whether you use medical services. Think of it as the baseline cost of having insurance. When comparing health plans, it’s tempting to focus solely on the monthly premium, but it’s just one component of your total health care expenses. 

• Deductible: The amount you pay out of pocket for covered health care services before your insurance plan starts to pay. For example, with a $2,000 deductible, you pay the first $2,000 of covered services yourself. 

• Copay: A fixed amount you pay for a covered health care service after you’ve paid your deductible. You might pay $20 for a doctor’s visit or $15 for a prescription medication. 

• Coinsurance: The percentage of costs of a covered health care service you pay after you’ve met your deductible. If your coinsurance is 20%, you pay 20% of the cost and your insurance pays the remaining 80%. 

• Out-of-pocket maximum: The most you will spend for covered services in a plan year. After you spend this amount on deductibles, copays and coinsurance, your health plan covers 100% of the cost for covered benefits.

Learn more: Managing health care costs 

Choose between low- and high-deductible plans 

When choosing your health coverage, one of the most important choices is deciding between a low-deductible and a high-deductible health plan. 

• A low-deductible plan typically charges a higher monthly premium, but your insurance starts covering costs sooner. This structure provides predictable monthly expenses and lower bills at the doctor’s office. It is often the preferred choice for individuals who visit specialists frequently, take expensive daily medications or manage chronic health conditions. 

• A high-deductible plan features lower monthly premiums, but you are responsible for a larger portion of your initial medical bills. A high-deductible plan generally makes sense for healthy individuals who rarely visit the doctor and want to save money on monthly premiums. It can also act as a safety net for catastrophic medical events. A high-deductible plan generally comes with a health savings account (HSA), which has significant tax advantages if used for eligible medical expenses.   

Compare plan networks  

Health insurance companies offer various plan structures that dictate which doctors you can see, which medications and medical supplies and medical procedures are covered, and how much you will pay for care. The most common networks are: 

• Health maintenance organizations (HMOs) usually limit coverage to a network of doctors they employ or contract with. They generally require you to select a primary care physician and get a referral to see a specialist. HMOs tend to have lower premiums, making them cost-effective if you stay within their network. 

• Preferred provider organizations (PPOs) offer more flexibility. You pay less if you use providers in the plan’s network, but you can use doctors, hospitals and providers outside your network without a referral for an additional cost. PPOs are ideal if you have a preferred specialist out-of-network or travel frequently. 

• Exclusive provider organizations (EPOs) are a middle ground. Like a PPO, you usually do not need a referral to see a specialist. Like an HMO, however, you must use the doctors and hospitals within the EPO network to receive coverage, except in an emergency. 

If you already have a doctor you trust, verify that they are included in the plan’s network before making your selection. Likewise, review the plan’s coverage for any medications, treatments or procedures that are important to your ongoing care. 

Evaluate tax-advantaged accounts 

Many health insurance plans grant you access to tax-advantaged accounts that help pay for medical expenses. The two primary options are health savings accounts (HSAs) and flexible spending accounts (FSAs). 

• HSAs are only available to individuals enrolled in a qualifying high-deductible health plan. HSA contributions are made pretax and withdrawals for qualified medical expenses are tax-free. The advantage of an HSA is that you own the account, so the balance rolls over from year to year. Furthermore, you can invest the funds in your HSA, with those earnings accumulating tax-free. Beyond helping to cover immediate medical expenses, HSAs can also eventually help cover health care costs in retirement. 

• FSAs are employer-sponsored accounts that let you put money away on a pretax basis to pay for certain out-of-pocket health care costs. You can use these funds to pay for copays, deductibles and some medical expenses. However, FSAs generally operate on a “use it or lose it” basis, meaning you give up any funds left at the end of the year.

Learn more: The triple tax benefits of health savings accounts 

Consider your needs  

When choosing between a high- or low-deductible health plan, it’s important to consider your health status and anticipated medical needs for you and your family. Balancing these factors will help you choose a plan that aligns with your financial and health care priorities. 

• Low needs: Are you generally healthy, with minimal medical expenses in a typical year? You may benefit from a high-deductible plan with lower premiums and access to an HSA. 

• Medium needs: Do you have dependents? Because children often require frequent doctor visits, vaccinations and are more accident-prone, a health plan with lower copays and a broad network of providers can be particularly valuable.  

• High needs: Do you or a family member have chronic conditions like diabetes, heart disease or asthma that require ongoing treatment? Are you planning for a major surgery or procedure? If so, a low-deductible plan with higher premiums but reduced out-of-pocket costs may offer better financial security. 

Calculate your costs 

The final step in selecting the right plan is to run the numbers based on your anticipated usage. Examine your medical spending over the past year: Did you hit your deductible? How much did you spend on prescriptions? 

Use that information to estimate your total cost of coverage for each available plan: 

• Add up 12 months of premiums.  

• Combine that total with your expected out-of-pocket expenses based on your typical medical usage. Include deductibles, copays and coinsurance.  

• Consider the plan’s annual out-of-pocket maximum, given the possibility of unanticipated expenses.  

By doing the math, you can balance the cost of your monthly premium with your financial risk of large medical bills. Some health care providers may offer calculators to help make evaluating your costs even easier. 

If your spouse has health care, compare plans 

When reviewing your employer’s health insurance options, don’t forget to look at your spouse’s plan as well. In some cases, it may cost less (or offer better coverage) for your whole family to be on one plan instead of separate ones. Taking the time to compare both options can help you find coverage that fits your family’s needs and budget and ensure that your health and finances are in sync.

Bring your health care and financial priorities together 

An Ameriprise financial advisor can help incorporate your health care expenses into your overall financial strategy, now and in retirement.