Choosing Individual & Family health insurance is a big decision, and you want to get the best value for your money. Let's dive into how the cost structure works so you can make an informed decision that suits your and your family's needs.

While you might want to base your choice solely on which plans have the lowest premiums, that strategy doesn’t always lead to the best value. Premiums are only part of the equation. A more thorough understanding of costs—and how they’re related—can help you choose the plan that works best for you and your family.

The elements of health insurance costs¹

Health insurance plans come with two different types of expenses: One kind relates to having the coverage in place; the other relates to using the insurance when you need it.

Costs for having coverage:

• Premium: This is the monthly amount you pay to keep your insurance active. It varies based on factors like your age and where you live. You might also qualify for financial help that could lower this cost.

Costs for using coverage (out-of-pocket costs):

• Deductible: This is the annual amount you need to spend on health care services covered by your plan before your insurance starts to pay its share. Each year, this amount resets.
• Copayment: This is a fixed amount you pay for a health care service, such as $20 for a doctor’s visit. It’s due at the time of the service.
• Coinsurance: This is a percentage of the cost for a service that you pay after you’ve met your deductible, such as 20% of a hospital bill.
• Out-of-network charges: If you see a provider outside your plan’s network, you might have to pay more. Sometimes, you might not get to choose every provider, such as in emergency situations.

Insights about out-of-pocket costs

• Out-of-pocket costs apply only when you use your insurance. The more health care services you use, the higher your out-of-pocket costs may be. (Your premium stays the same regardless of how much care you need throughout the year.)
• To protect against uncontrolled out-of-pocket costs, many plans also feature an annual or lifetime out-of-pocket maximum for in-network services. Once you reach this maximum, your out-of-pocket costs will be waived for the remainder of the period. This provision is especially important if you’re hospitalized. Coinsurance for hospital overnight stays can add up quickly; if your plan has an out-of-pocket maximum, you know your coinsurance won't escalate beyond a certain point.
• Preventive services are excluded from out-of-pocket costs. There’s no copayment or coinsurance for preventive services, and they don’t count toward meeting your annual deductible.

How costs relate to Individual & Family plans

Individual & Family plans come in four categories (levels) named after different metals (Bronze, Silver, Gold, Platinum) and, as discussed in Understanding Plan Types. All four categories cover the same basic essential services; some plans choose to cover certain additional services. The main differences lie in the costs you pay for those services.

In general, plans with higher monthly premiums (Gold and Platinum) tend to charge lower out-of-pocket costs. They’re more likely to cover optional additional services, too, such as basic dental and vision care for adults or birth control and breastfeeding services.

Plans with lower monthly premiums (Bronze and Silver) generally have higher out-of-pocket costs and are less likely to include more than the minimum services required by law. This is an important distinction because it helps you predict your annual health care costs more accurately. If your plan doesn't include adult dental or vision coverage, you can still purchase separate plans for these services if you wish, but they’ll come with separate premiums and cost-sharing.

Health savings accounts (HSAs) are also a popular choice for individuals looking for more control over their health care expenses and seeking to save for future health care costs on a tax-advantaged basis. HSA funds can be used tax-free for qualified medical expenses, which include most medical, dental, and vision care, prescriptions, and some over-the-counter medications.

Contributions made to an HSA are pre-tax or tax-deductible, meaning they reduce your taxable income. The funds grow tax-free and can be withdrawn tax-free if used for qualified medical expenses.

To open and contribute to an HSA, you must be enrolled in a High-Deductible Health Plan (HDHP).

Cost reduction provisions

Depending on your income and other factors, the Marketplace has built-in provisions that can lower overall health care expenses for those with lower to moderate income. One provision is a premium tax credit², which effectively reduces the monthly premiums for people who qualify. Another is a discount program called extra savings (or cost-sharing reductions)³, which reduces out-of-pocket costs for lower-income people who qualify. To apply for the extra savings program, you must be enrolled in a Silver-level plan.

Count on Alight for help

There’s a lot to consider. For one-on-one help navigating your options in the health insurance buying process, contact Alight Retiree Health Solutions. There’s no charge for our service, and our goal is to help you find coverage that meets your unique health insurance needs.

¹ How to Pick a Health Insurance Plan
² The Premium Tax Credit: The Basics
³ Special Enrollment Opportunities