Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Evaluate a health insurance plan

To evaluate a health insurance plan you need to consider all aspects of the plan, including benefits and costs. When it comes to choosing a health insurance plan it is important to understand the benefits that you are receiving in exchange for the premiums you are paying.

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Benefits can range from complete health care coverage to catastrophic only and costs include deductibles, co-payments, and premiums. Read on for specifics.

Benefit Levels of a Health Insurance Plan

The level of benefits that you get with a health insurance plan varies widely with the type of coverage you purchase. The most comprehensive insurance plan will cover just about everything from doctor visits and wellness checks to prescriptions and extended hospital stays.

While this type of coverage is usually more expensive, you can usually vary the cost of your premiums by choosing a level of the same coverage that has a higher deductible.

Some health benefit plans are detailed enough to include coverage for dental work, mental illness, chiropractors, acupuncturists, smoking cessation programs, and alcohol or drug rehabilitation. Other programs won’t cover you for a single doctor’s visit or prescription but will pay out benefits if you are treated in the emergency room or admitted into the hospital.

The amount of coverage you buy when considering health insurance plans is going to depend partly on your own medical history, partly on your lifestyle, and also on what you can afford in premiums and other out of pocket costs. The better benefit package you can buy the more secure your health care will inevitably be.

In addition to reviewing the benefits, be sure to check any exclusion that is listed on the health insurance plan. If you have a pre-existing condition then you need to carefully review any policy that you consider. Most insurance policies automatically exclude pre-existing conditions, but they can also exclude other items.

For example, a health insurance plan may exclude dentistry, prescriptions, or even lab work. You need to know what your benefits are but also what is excluded from coverage. All this will factor into the health insurance rates you are offered.

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Costs Involved in a Health Insurance Plan

There are several costs involved in a health insurance plan and they should all be factored in to your consideration when evaluating health insurance plans. The less coverage you have the more money you can usually save on premiums, but those aren’t your only costs.

Premiums are your cost for the insurance, which is usually paid on a monthly basis. Premiums do not get used toward any expenses nor are they refundable. While you have to pay your premiums every month regardless if you use insurance that month or not, there are additional costs that will arise when you do indeed use your insurance.

The deductible is how much money you must pay cumulatively over the course of a year before your insurance company starts to pay out per your policy. This means that if you have a $500 deductible then you will pay for your medical expenses such as doctor visits and lab work until you have satisfied your deductible. Once you have paid $500 worth of medical expenses toward your deductible your insurance will begin to pay their share of the insurance. This is where another cost comes in: the co-payment.

Co-payments , similar to co-insurance, are your share of the medical expenses after the insurance has paid their share. Expanding on the example above, after you have reached your $500 deductible your insurance company will now start to make payments for your medical expenses on your behalf. If your plan has a 70/30 co-pay, then that means that the insurance company will pay for 70% of the bill and you will pay for the remaining 30%. That 30% is your co-pay.

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Sometimes your co-pay is due upfront but it may also be deferred until your insurance has paid their share. Obviously, the less co-pay you have the less you will have to pay for your medical treatment, but this usually increases the cost of your premiums. All of these costs should be factored in when evaluating a health insurance plan.

Other costs that may warrant consideration include coverage limits and out of pocket maximums. These generally tend to be quite high and unless a serious condition is met they usually do not become a factor. For example, you may have a health insurance plan with maximum lifetime coverage of $1 million. This means that once the insurance company has paid out $1 million for your medical bills your policy will have met its limits and no more benefits will be paid.

Out of pocket limits are a similar concept to coverage limitations only they work in the favor of the insured. Using the same example as above, if you have a health insurance plan with a million dollar out of pocket limitation, then once you have spent a million dollars on deductibles and co-payments then you will no longer be obligated to pay for your share of the medical expenses and the insurance company will resume full payment until they max out on their limitation.

Types of Health Insurance Plans

There are many different types of health insurance plans, from traditional to modern. The basic types that are mainly used still today are HMOs, PPOs, and HSAs. An HMO (Health Maintenance Organization) is usually one of the least expensive routes when it comes to choosing health insurance.

With a HMO you need to choose a primary care provider who will always be your main point person. If you sprain your arm and need an orthopedic you must first visit with your primary care physician who will give you a referral to a specialist based on his diagnosis. If you go to a specialist without a referral your insurance will not cover those costs. HMOs usually cost less in premiums but they tend to have a smaller network and are somewhat less flexible.

A PPO (Preferred Provider Organization) generally costs more than a HMO but it also has a little more flexibility in the network of providers. The network tends to be larger and you also have the freedom to choose to see any doctor or specialist whenever you want without the need for a referral. As with the HMO, you must always stay within the network in order to receive the negotiated rates for the medical treatment. If you go out of network your costs will be much greater.

The HSA (Health Savings Account) is a more modern approach to health insurance. Instead of paying premiums to a health insurance company, you contribute funds to a Health Savings Account. There is a maximum amount you can contribute every year, tax free, to the account and the money can generally be withdrawn to pay for almost any medical service, including over the counter prescriptions or Band-Aids. HSA plans work in conjunction with an insurance plan and while you are funding your own account with premiums the deductibles for these plans are usually quite high.

One of the best ways to evaluate a health insurance plan is to simply start by determining your needs. Review your medical history, your age, your genetics, and your lifestyle and make an educated guess as to if you are in need of basic health insurance coverage, total insurance coverage, or catastrophic only insurance. Consider your options between the types of coverage that are available to determine if you prefer a PPO or a HMO and then look at all of the different levels of benefits and associated costs.

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