Picking health insurance can be tricky: 6 key terms to know as open enrollment starts

by | Oct 24, 2023 | Financial

Sdi Productions | E+ | Getty ImagesMany people will soon be picking their health insurance plans for 2024: November is a common month for workplace open enrollment, and the public marketplace opens Nov. 1.But choosing a health plan can be tricky.In fact, a 2017 study found many people lose money due to suboptimal choices: Sixty-one percent chose the wrong plan, costing them an average $372 a year. The paper, authored by economists at Carnegie Mellon University and the Wisconsin School of Business, examined choices made by almost 24,000 workers at a U.S. firm.More from Personal Finance:’Cash stuffing’ may forgo ‘easiest money’ you can make These credit cards have had ‘increasingly notable’ high ratesHome ‘affordability is incredibly difficult,’ economist saysHealth plans have many moving parts, like premiums and deductibles. Each has financial implications for buyers.”It is confusing, and people have no idea how much they could potentially have to pay,” Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners, based in Jacksonville, Florida, previously told CNBC. McClanahan is also a medical doctor and a member of CNBC’s FA Council.Making a mistake can be costly; consumers are generally locked into their health insurance for a year, with limited exception.Here’s a guide to the major cost components of health insurance and how they may impact your bill.1. PremiumsFrederic Cirou | Photoalto | Getty ImagesThe premium is the sum you pay an insurer each month to participate in a health plan.It’s perhaps the most transparent and easy-to-understand cost component of a health plan — the equivalent of a sticker price.The average premium paid by an individual worker was $1,401 a year — or about $117 a month — in 2023, according to a survey on employer-sponsored health coverage from the Kaiser Family Foundation, a nonprofit. Families paid $6,575 a year, or $548 a month, on average.Your monthly payment may be higher or lower depending on the type of plan you choose, the size of your employer, your geography and other factors.Low premiums don’t necessarily translate to good value. You may be on the hook for a big bill later if you see a doctor or pay for a procedure, depending on the plan.”When you’re shopping for health insurance, people naturally shop like they do for most products — by the price,” Karen Pollitz, co-director of KFF’s program on patient and consumer protection, previously told CNBC.”If you’re shopping for tennis shoes or rice, you know what you’re getting” for the price, she said. “But people really should not just price shop, because health insurance is n …

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