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How do I choose health insurance?
For those who find health insurance plans confusing, here’s how they work — and how they can help you stay healthy.
In a perfect world, you’d never get sick or injured. And good health wouldn’t cost you a penny. But for that to happen, you’d probably have to never leave your house. So the best way to keep your health care costs low is to have health insurance.
We’re breaking down details that will help you buy a health plan. And we’ll show you the best ways to use it.
What is health insurance, and why do I need it?
Health insurance is a pact between you and an insurance company. You pay a monthly bill (called a premium). In return, the insurance company covers some of your health care costs.
It’s impossible to predict when big health care expenses will happen. And most people can’t afford to pay for all their care out of their own pocket. A three-day hospital stay can cost $30,000, for instance. And bills for cancer treatment can cost hundreds of thousands of dollars. Health plans shield you from those huge costs.1
So if you need costly care, health insurance can save you a lot of money.
Many health plans also cover doctor visits, sometimes at 100%. And going to the doctor regularly may help you stay healthy.
Looking for a doctor who gets you? Search for personalized care close to home.
Where can I get a health plan?
Most Americans have access to a health plan through their employer.2 But let’s say your employer doesn’t offer health insurance. Or maybe you’re unemployed or self-employed. You can buy a health plan through the federal marketplace at healthcare.gov or your state’s online exchange. You can also buy one directly from private insurance companies.
The health plan you buy must follow the rules laid out by the Affordable Care Act (ACA). The ACA offers affordable health benefits to most Americans. You can get a plan even if you have a preexisting medical problem, such as cancer or type 2 diabetes.
If you’re 65 or older, you may be eligible for Medicare.3 Some people with disabilities or end-stage kidney disease can also get Medicare. This government program has several parts you can sign up for. They include:
- Medicare Part A (hospital services)
- Medicare Part B (doctor visits)
- Medicare Part D (prescription drug coverage)
Medicare Part C (also called Medicare Advantage) is another option. Private insurance companies offer Medicare Advantage plans. They must provide the same benefits as Medicare. And they often include benefits for vision, dental and hearing. Original Medicare (Parts A and B) doesn’t cover those services.
Finally, you may also be able to get a health plan through Medicaid if you meet certain income requirements. You can also get insurance for your kids through the Children’s Health Insurance Program, or CHIP. Both are government-run insurance options for lower-income Americans.4,5
What are some key health insurance terms to know?
Health plans come with their own special vocabulary. Knowing these words will help you get the most out of your coverage:
Premium: The monthly bill you pay for coverage.
Deductible: The amount you pay out of pocket before your insurance company pays the rest.
Annual out-of-pocket maximum: The most you’ll have to pay for health services during your health plan’s year. Once you reach the max, your insurance company will pay 100% of the costs of your care.
Copayment, or copay: A fixed amount you pay for various covered health care services.
Coinsurance: The percentage of a medical cost that you pay.
Network: The doctors, hospitals and other medical facilities that are included in your health plan.
Prescription drug list: The list of prescription medications that your health plan will pay for.
Explanation of benefits: A document you may get in the mail or by email. It shows how much your insurance company charged for a health care service, how much it paid and what your share of the cost is.
What are the different types of health plans?
When you’re looking for a health plan, you might see some of these options:
Health maintenance organization (HMO): You can choose a doctor in your health plan’s network. Your doctor will have to send you to a specialist, if you need one.
Exclusive provider organization (EPO): You can see only certain in-network doctors, except in an emergency. This network may be larger than what an HMO plan offers. Depending on your plan, your doctor may need to send you to a specialist.
High-deductible health plan (HDHP): You spend more money out of pocket before your insurance coverage starts paying. In 2022, health plans with a deductible of at least $1,400 for a single person are considered HDHPs. For family coverage, the minimum deductible for an HDHP is $2,800. Those are the lowest amounts that qualify.
Point of service (POS): You can see both in-network and out-of-network providers. You’ll pay more to go out of network. And your doctor will need to send you to a specialist.
Preferred provider organization (PPO): You can see both network and out-of-network providers without needing a doctor to send you to a specialist. You’ll pay more to see an out-of-network provider.
How much will a health plan cost me?
If you choose Original Medicare, you’ll likely pay $170.10 a month in 2022. You could pay more depending on your income or don’t have a long enough work history.
For other types of health insurance, your premium will vary based on:
- Your age
- Where you live
- Whether you smoke or use tobacco
- The type of plan
- Who’s covered (you or your whole family)
When you shop for insurance, you’ll get a quote that shows the monthly bill for each policy. But those bills are only part of the cost of insurance. You’ll also have to pay copays and coinsurance when you use health services. These costs are detailed in each plan’s Summary of Benefits and Coverage. The more services you use, the more you’ll pay out of pocket.
What’s the right health plan for me?
Depending on where you live and where you get your insurance, you may have dozens of plans to choose from.6 To find the right plan, ask yourself these questions:
Can I afford the plan? This is perhaps the most important question to answer. First, you need to decide whether you can afford the monthly bill. You pay that amount no matter what. If you buy an ACA plan, you may be able to get a discount called a subsidy based on your income. Working with a broker can help you determine if you qualify.
Second, you need to figure out if you can afford the out-of-pocket costs. If the plan has a $2,000 deductible, you will need to spend that much before your coverage kicks in. Will you be able to cover that?
Are my doctors in the insurance company’s network? This is important because you’ll pay more for out-of-network care, if you can even access it.
Does the plan cover the services I need? Check the health plan’s Summary of Benefits and Coverage to see what’s covered and what isn’t. You’ll find a lot of differences in services such as annual visits to the doctor.
Does the plan cover the prescription medications I use? If the prescription drug list doesn’t include a medication you use, you may have to choose a different one in the same category. You may even have to pay the full cost yourself. Another option: You can try a less expensive choice first. This is called step therapy.
What happens if I lose my workplace insurance?If you get health insurance through your job, it lasts only while you have your job. The same is true if you are on your spouse’s health plan. If they lose or quit their job, your health insurance benefits will stop, too. But that doesn’t mean you can’t continue getting them.
If you leave your job, you can stay on your former employer’s health plan for up to 36 months. That’s thanks to a law called the Consolidated Omnibus Budget Reconciliation Act, or COBRA. But it can cost you a lot. You have to pay up to 102% of the cost. That includes the part your employer used to pay, plus a 2% fee for administrative costs.7
Another option is to buy a health plan through the ACA marketplace. In most states, you can sign up for ACA plans from November 1 through January 15. But you can also join one anytime you qualify for a Special Enrollment Period (SEP). That’s a special 60-day window to sign up for an ACA plan. You can get an SEP if you:
- Move to a new ZIP code or county
- Get married or divorced
- Have a baby or adopt a child
- Lose your job
You can choose an ACA plan if you’ve lost coverage in the past 60 days or expect to lose coverage in the next 60 days.8
You may be able to buy a short-term medical plan. These usually cover you for up to a year or until you get another employer health plan. Some even last up to three years. Short-term plans may not be the best choice if you need regular care, though. Also, the insurance company may need to see your medical records. For example, they may deny you coverage if you have a preexisting disease.9
What is a medical expense account, and why might I want one?
It lets you put money into an account to pay for certain health expenses. A medical expense account can help you save money, because you don’t have to pay taxes on deposits to the account. And in some cases, you can earn interest, income tax-free.
The most common types:
Health savings account (HSA): You can get one of these if you have a high-deductible health plan. You can create an account through Optum Financial and use it to hold money to spend on medical costs. In 2022, you or your employer can put up to $3,650 into an individual plan, or up to $7,300 into a family plan. Unlike an FSA, you don’t have to spend the money within the year. HSA funds roll over and grow year over year if they are not spent.
Health care flexible spending account (FSA): You can put part of your paycheck into this account and use the money to pay for medical costs. And you don’t have to pay taxes on that money. In 2022, you can put up to $2,850 in your account, though your plan may vary (some employers have a lower limit). You can spend it on things such as deductibles and copays.
You can also use both types of accounts to pay for:
- Acne treatments
- A ramp for your home
- At-home COVID-19 tests
- Birth control pills and condoms
- Breast pumps and supplies
- Breast reconstruction surgery
- Car mileage and lodging, if you’re traveling for health care
- Contact lenses or reading glasses
- Drug addiction and alcoholism treatment
- Fertility help
- Menstrual products
- Some allergy medications
- Some supplements
- Therapeutic massage (when working with your doctor)
Best of all, you can start using the money on the first day of your plan year. But if you don’t use it by the end of the year, you may lose it. Many FSA plans let you to roll over up to $550 per year.10 Look up more eligible medical expenses with our tool.
Stock up on all your health essentials, including vitamins, cold medicine, first-aid supplies and more, at the Optum Store. Shop now.
What is supplemental insurance, and why might I need it?
Your health plan may not cover every service you need it to. That’s where supplemental insurance can help. Here are some common types:
- Dental insurance covers routine teeth cleanings and other basic services.
- Vision insurance covers eye exams, as well as glasses and/or contacts (sometimes both).
- Accident insurance pays you a fixed amount if you get injured in an accident and have to miss work.
- Critical illness insurance pays you a fixed amount if you get a major illness that’s covered by your plan.
- Hospital insurance pays you a fixed amount for each day you spend in the hospital.
Some supplemental health plan pay your doctor or provider directly. For example, a vision plan might pay your eye doctor for an eye exam, minus your copay. Other plans pay you directly. For example, a hospital plan might pay you $1,000 per day if you need to be in the hospital, up to a certain number of days.
Where can I learn more about the health plan I’m considering?
There are a lot of ways to learn more about a health plan you may be considering buying.
- For health insurance plans you get through an employer, talk with your human resources department. They can answer questions about your plan. Or you can call your insurance company directly.
- For ACA plans, you can talk with a licensed insurance agent or broker, or connect with someone at healthcare.gov.
- For Medicare plans, you can find resources at medicare.gov, including links to the State Health Insurance Assistance Program that serves your area.
- For Medicaid, contact your state Medicaid office.
- You can also read the plan’s Summary of Benefits and Coverage for more information.
Do you feel better about signing up for health insurance now? It can be a long, confusing process. But doing a little research up front can go a long way. And the result is all about keeping you healthy.
- Healthcare.gov. Protection from high medical costs. Accessed June 24, 2022.
- U.S. Bureau of Labor Statistics. Employee benefits in the United States — March 2021. Published September 23, 2021. Accessed June 24, 2022.
- U.S. Department of Health and Human Services. Who is eligible for Medicare? Accessed June 24, 2022.
- Medicaid.gov. Medicaid. Accessed June 25, 2022.
- Medicaid.gov. Reports and evaluations. Accessed June 28, 2022.
- U.S. Department of Health and Human Services. Facilitating consumer choice: Standardized plans in health insurance marketplaces. Published December 28, 2021. Accessed June 24, 2022.
- U.S. Department of Labor. FAQs on COBRA continuation coverage for workers. Accessed June 24, 2022.
- Healthcare.gov. Enroll in or change 2022 plans — only with a Special Enrollment Period. Accessed June 24, 2022.
- Centers for Medicare & Medicaid Services. Short-term, limited-duration insurance final rule. Published August 1, 2018. Accessed June 25, 2022.
- Healthcare.gov. Using a flexible spending account (FSA). Accessed June 24, 2022.
- Internal Revenue Service. Health savings accounts and other tax-favored health plans. Accessed June 24, 2022.
- State Health Insurance Assistance Program. Local Medicare help. Accessed June 24, 2022.
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