11 Common Mistakes People Make When Choosing a Health Insurance Policy

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If you rush through your insurance options during open enrollment, you’re not alone. There are a few things you need to remember, however, because unlike car insurance or homeowners insurance, it’s not as easy to switch insurance carriers in the middle of the term, unless you have a valid reason to do so outside of Open Enrollment, or what’s called “a qualifying event,” such as having a baby or getting married/divorced.

Here are the common mistakes people make when shopping for health insurance. Make sure to avoid making the same ones when it comes time to choose a plan for yourself or the family:

1. Comparing Prices on Different Coverage Tiers

If you’re looking at prices on monthly premiums on a health insurance policy alone, you may be in shock when you have to pay for a doctor’s visit or for an emergency room visit. Depending on your needs, the cheapest plan will not necessarily end up being cheap, if you see doctors or nurses regularly for any type of chronic condition. See how the tier system works so you choose the right coverage level.

Look at the deductible, copay and coinsurance to see what you’re responsible for when you seek care. A platinum or gold plan will cover much more of the cost of visits and will carry a lower copay. Each plan’s pricing is different, but just be wary of comparing a bronze plan against a gold one because it will be cheaper each month, but you’ll pay more when you actually receive service. This is fine if you seek care once or twice a year, but if you see a doctor once every month or two, or you need blood draws regularly, you may end up paying more in out-of-pocket expenses.

A high-deductible health plan (HDHP) is one example of the inexpensive type of plan you don’t want if you have, say, diabetes. You’d be better off with a silver, gold or platinum plan depending on your other health variables. With an HDHP, you’re paying out of pocket until you reach a deductible but paying hardly anything each month. This would suit a 25 year old who is in perfect shape and only carries insurance if the completely unforeseeable happens that they would need comprehensive medical care.

2. Buying Insufficient Coverage

Important questions to ask about the plans you’re considering include whether or not they cover hospital expenses, like room rent, Intensive Care Unit (ICU) charges, even surgery costs.

You may assume that some things, like diagnostic tests during a hospital visit, will be covered but depending on the plan, you may not have coverage or barely any coverage at all. You’ll be billed for the remainder your health insurance plan does not pay.

Find out ahead of time what is covered and how much. A reliable and solid health plan will not only cover the aforementioned hospital bills, but it will cover related medical costs that were incurred 15 to 30 days prior to hospitalization and 30 to 90 days after hospitalization

3. Not Checking the Network of Providers

Don’t make assumptions about whether or not your doctor is covered by the insurance company and the group you select after buying a plan. Finding out that you’re not covered for services from a doctor you want to continue seeing because they are not in your group network means that you’ll have to either find another provider or pay to see your doctor on your own.

4. Not Understanding the Terms of the Policy

You may end up paying more out of pocket because you didn’t understand what a deductible is, or how much you’d owe in copays or coinsurance. You may not understand the restrictions in seeing a specialist and needing authorizations, both of which require a copay, and a specialist often charges an even higher copay. The terms of a policy may restrict or exclude certain types of coverage too. Do the research and understand what you’re paying for and what’s not included.

5. Not Reading the List of Exclusions

There may be waiting periods for certain types of ailments, which is important to check if you have a chronic condition and need coverage immediately. Although a health insurance policy cannot reject you due to a chronic condition, it may exclude coverage for certain illnesses for up to four years. Reading the fine print and asking questions is very important.

6. Confusing the Costs of a Plan

Some people buy a health insurance plan and assume everything is paid for, as long as they pay their monthly premiums, but that’s not how health insurance works. There are always out-of-pocket expenses when seeking care, so it’s important to see what your copays and coinsurance will be before you buy a policy. Even an entire hospital bill may not be covered 100% and often is not.

7. Lying About Medical History

The most common thing people lie about is smoking and having a chronic condition, like diabetes. The problem is that if you lie about your health, you may be denied a claim because you did not truthfully disclose your medical history. An insurer can even cancel a policy altogether. It’s very important to be upfront instead of lying to pay a lower rate. If health problems related to a bad habit or existing condition crop up, you may be left without coverage.

Remember that a carrier cannot reject you for having an existing condition or for being a smoker.

8. Only Buying Work-Sponsored Health Insurance

If you prefer to not have your health insurance tied to your job because you don’t want to switch providers each time you change jobs, then it’s a good idea to buy a private health insurance plan. While some people save money with an employer-sponsored plan, others pay quite a large portion of their premiums and are not able to cover their entire family without spending a lot of money anyway. It’s worth it to at least compare health insurance rates for private plans to see which works out in your favor. Make sure to ask for a family floater to get the right coverage for the whole family.

9. Buying Supplemental Coverage Only

If you have a higher risk of getting cancer, buying a supplemental policy on top of a traditional health insurance plan makes sense, but buying a hospital indemnity plan or a bunch of supplemental coverage policies instead of a traditional health insurance plan is a really bad idea, not to mention a great waste of money. Buy a traditional health insurance plan that will cover any accidents or sudden illnesses each step of the way.

10. Not Understanding the Sub Limits of a Policy

Look at the maximum value covered for an illness or event. These are called sub-limits and reflect a percentage of the total sum insured. Not all health insurance plans will have a sub-limit but those that do are often cheaper–and for a reason. Ask about these limits before you buy because if you exceed a sub-limit, it comes out of your pocket.

11. Not Checking the Plan’s Drug Formulary

Drug formularies vary from carrier to carrier and plan to plan, so if you take medication(s) or foresee needing to in the near future, you can check to make sure those medications are covered and how much is covered. Prescription drugs can be very expensive so it really matters to ask questions before you buy a plan based on premium alone. If you take certain medications, make sure to ask about the drug formulary before you buy a plan.

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Mistakes Buying Health Insurance FAQs

What if I make a mistake and buy the wrong health insurance plan?

There is often a grace period of around 14 or 15 days when you can cancel a policy, depending on the carrier. You may also be able to buy another plan if it is during Open Enrollment or a Special Enrollment Period. 

What if I get dropped by my health insurance company?

If you are dropped from your health insurance plan, your insurance company will explain the reason for the termination and the options you have, such as switching to a different plan or appealing the decision. 

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