Leaving My Parents’ Plan: Buying Health Insurance for the First Time
December 4, 2024 | Johanna Karlsson
Buying health insurance for the first time can be a daunting experience for any young person leaving their parent’s plan. The vast number of options, complex industry-specific terminology, and serious financial implications can quickly overwhelm even the most level-headed individual. While this transition marks a significant milestone that signals the beginning of adult independence, it’s also a time fraught with worry and confusion. Understanding some basic fundamental concepts of the healthcare industry can alleviate many of those concerns and make locking in coverage easier for first-timers.
Which Is the Least Expensive Type of Health Insurance?
Cost is one of the top concerns for most buyers shopping for the right health policy, but this is especially true for young adults stepping out on their own for the first time. Unfortunately, there isn’t a one-size-fits-all approach when deciding which type of health insurance is least expensive, as many variables can influence this factor. These variables include:
Age: Due to their advancing age, older individuals generally require more care than younger folks. For this reason, elderly insured members tend to pay higher premiums than young adults buying health insurance for the first time.
Location: The cost of healthcare tends to vary based on geographic location. If an individual lives in an incredibly rural area with limited access to doctors, they might get stuck paying more for insurance than city-dwellers surrounded by healthcare providers. Additionally, areas prone to natural disasters might see an increase in cost.
Health Status: People in their prime with minimal health issues typically pay less per month than individuals with pre-existing conditions.
Tax Bracket: Income is crucial in determining the cost of an insurance policy, as government subsidies are available to provide healthcare access to low-income families in the United States.
Family Size: Dependents increase healthcare costs. Since the average young adult often buys their first policy as an individual, they tend to pay less than married peers with children.
Additionally, it’s important to note that health insurance plans have varying costs that complicate determining expenses. While some plans have lower monthly premiums, they might have more frequent out-of-pocket costs that counteract those initial savings. Carefully examining the most popular types of plans and their pros or cons can make factoring this metric easier.
What Are the 4 Most Common Health Insurance Plans?
Typically, most individuals encounter the following most common plan types when exploring their healthcare options:
Health Maintenance Organizations (HMOs). This type of plan requires policyholders to select a Primary Care Physician from a list of in-network providers. Patients must get prior authorization or referrals to see a doctor or specialist outside of that network or receive specific treatment options. This limits options but generally offers lower monthly premiums and fewer out-of-pocket costs.
Preferred Provider Organizations (PPOs). With a much wider network of providers, PPOs offer individuals more treatment options, thus giving them more control over their care. This is especially helpful for people who need to see specialists often, as PPOs eliminate the need for referrals, speeding up the time it takes to get an appointment. The downside, however, is that these plans tend to be more expensive.
Point of Service Plans (POS). These policies combine some of the key features of HMOs and PPOs. Patients are still required to get referrals or prior authorizations, but visits to out-of-network doctors are allowed for a higher cost. This gives insured members the freedom and flexibility of a PPO without the high monthly premium. However, POS plans are often complicated and may pose other limitations on coverage not within the network.
High-Deductible Health Plans (HDHPs). If selecting this option, expect higher deductibles than traditional plans, meaning you’ll have to pay more out-of-pocket before full coverage. The main benefit to choosing a plan like this is that it has far more affordable monthly fees but at the expense of your wallet.
The best plan for each individual depends on budget, lifestyle, required care level, and preferred flexibility. Carefully consider each option or seek professional advice to ensure all health coverage needs are met.
What Health Insurance Do Most People Have?
The most common type of health insurance in the United States is employer-based private insurance, meaning a significant portion of the population gets coverage as a benefit of their job. Companies typically offer all policies, including HMOs, PPOs, POS plans, and HDHPs.
There are other options for individuals who are unemployed, part-time, or working for companies that do not offer health coverage as a benefit. The most popular choice for this demographic is a plan purchased through the Health Insurance Marketplace during the Affordable Care Act Open Enrollment period at the end of every year.
Is It Better to Have a High or Low Deductible for Health Insurance?
The decision between a high- or low-deductible health insurance plan depends on various factors, including your budget, health needs, and risk tolerance.
As previously mentioned, High-Deductible Health Plans (HDHPs) have the potential for lower monthly premiums and can be leveraged with tax advantages or a Health Savings Account (HSA) to make potential out-of-pocket costs more manageable. However, with a high price point for deductibles, it will cost more upfront before insurance coverage fully kicks in. The lower premiums can be appealing, but it’s crucial to have funds saved to cover expenses before the deductible is reached.
On the other hand, Low-Deductible Health Plans (LDHPs) provide more immediate coverage for medical expenses but usually come with higher monthly premiums. Policies like this suit individuals with chronic health conditions or those anticipating frequent medical visits. They offer more immediate financial protection, but the higher premiums can be a significant expense.
Other factors to consider when determining whether it’s better to choose a high or low deductible when buying health insurance for the first time include:
Health Needs: Assess your current and anticipated healthcare needs.
Budget: Evaluate your monthly budget and ability to save for high-deductible plans.
Employer Contributions: If your employer offers a health savings account (HSA) with an HDHP, it can significantly reduce out-of-pocket costs.
Ultimately, the best choice depends on your individual circumstances. To make an informed decision, it’s recommended that you carefully compare plans, consider your long-term financial goals, and consult with a healthcare professional or insurance agent.
Learn About Buying Health Insurance for the First Time with HealthPlusLife
Buying health insurance for the first time, just like when opting for the right life insurance policy, is a massive milestone in any young adult’s life, proving they’re independent and responsible for their well-being. When selecting a health insurance plan, it’s crucial to carefully evaluate your needs and budget. Consider the following questions:
How often do you typically visit the doctor?
Do you have any chronic health conditions?
Do you need to see specialists frequently?
Do you take prescription medications regularly?
By understanding your healthcare needs and exploring your options, you can find a health insurance plan that provides adequate coverage without breaking the bank. Don’t let first-time nerves make this huge milestone into adulthood become an anxiety fest! Our experts here at HealthPlusLife are well-versed in the complexities and nuances surrounding healthcare coverage and can help any first-time policyholder find the confidence needed to lock in the right insurance plan for them. Call us at 888-828-5064 today to get started.
Johanna Karlsson Johanna Karlsson is a veteran health and life insurance professional licensed in 50 states. She relocated from the countryside in the south of Sweden and has not looked back. After coming to the United States to attend university, she gained her degree in Public Relations. She brought her public relations skills to a local international health insurance where she discovered a new passion in insurance. After years with that company, Johanna now joins HealthPlusLife to help build a team of licensed insurance agents ready to meet your insurance needs.
