Quick overview

Health insurance lets you share medical risk with an insurer so a high-cost illness or injury doesn’t create financial ruin. The three building blocks to compare are:

  • Plan type — how much choice you have for providers and whether referrals are required.
  • Premium — the amount you pay (usually monthly) to keep coverage.
  • Network — the doctors, hospitals, and clinics that agree to the plan’s negotiated rates.

The rest of this article explains how those pieces interact, who is affected, common trade-offs, and practical steps to choose the right plan.

How plan types change access and costs

Health plans are commonly labeled HMO, PPO, EPO, and HDHP (high-deductible health plan). Each balances cost, flexibility, and administrative steps differently:

  • HMO (Health Maintenance Organization): Lower premiums and tighter networks. You usually need a primary care physician (PCP) and referrals for specialists. Good for predictable care and lower monthly costs.
  • PPO (Preferred Provider Organization): Bigger networks and no referral requirement; you can see out-of-network providers at a higher cost. Premiums and cost sharing are generally higher than HMOs.
  • EPO (Exclusive Provider Organization): A hybrid — broader in-network access than many HMOs but typically no out-of-network coverage except emergencies.
  • HDHP (High-Deductible Health Plan): Lower premiums with high deductibles. Often paired with a Health Savings Account (HSA) for tax-advantaged savings that pay qualified medical costs.

In my practice advising clients, I often see healthy people choose a HDHP with an HSA to lower premiums and build tax-free emergency medical savings. Conversely, people with chronic conditions frequently prefer plans with higher premiums and lower out-of-pocket costs.

(For tips on comparing beyond sticker-price premiums, see How to Compare Health Plans: Beyond Premiums.)

Premiums, cost sharing, and the math you should run

Premium is only part of the cost. Evaluate total expected annual cost by combining:

  • Annual premium cost (monthly premium × 12)
  • Deductible (amount you pay before most coverage starts)
  • Expected copays/coinsurance for routine needs
  • Out-of-pocket maximum (the most you’ll pay in a year)

Example approach: estimate how many primary care visits, prescriptions, and specialist visits you expect. Add the plan’s copays and coinsurance for those services, then add the premium. Repeat for two or three plans and compare the totals.

Important tax and subsidy notes:

  • Premium Tax Credit (marketplace subsidy): If you buy coverage through the federal or state marketplace and your income is within eligibility limits, you may receive advance premium tax credits to reduce monthly premiums (Healthcare.gov).
  • Self-employed premium deduction: Self-employed taxpayers may deduct health insurance premiums for themselves and dependents on their federal return (see IRS guidance).
  • HSA contributions: If enrolled in a qualifying HDHP, you can contribute to an HSA; contributions are pre-tax or tax-deductible and withdrawals for qualified medical expenses are tax-free (IRS guidance on HSAs).

Authoritative resources: Healthcare.gov on subsidies and plan comparisons; IRS pages on HSAs and deductions; Consumer Financial Protection Bureau on evaluating health costs.

Networks: why they matter and how to check coverage

Networks determine where you can go for care without paying dramatically more. Key distinctions:

  • In-network providers have contracted rates with the insurer and typically cost you less out-of-pocket.
  • Out-of-network providers may cost significantly more and may not count toward the plan’s in-network deductible or out-of-pocket maximum.

Practical checks before you enroll:

  1. Search the insurer’s online provider directory for your PCP and important specialists.
  2. Call the provider’s office to confirm they still accept the plan—directories can lag.
  3. For major procedures, ask the hospital and surgeon whether ancillary providers (anesthesiologists, pathologists) are in-network.

A common surprise I’ve helped clients avoid: a surgical center is in-network but an anesthesiologist or lab used during the procedure isn’t — resulting in a surprise bill. Learning how to verify network status can avoid these costs (see How Health Insurance Networks Affect Your Medical Bills).

Enrollment windows and special events

Open enrollment is the annual period when most people can enroll or change marketplace plans. Outside of that period, you generally need a qualifying life event (QLE)—such as marriage, birth, loss of other coverage, or moving—to enroll through a special enrollment period.

Employer plans follow employer-driven enrollment dates; COBRA and short-term plans have different rules and timelines. For a checklist of enrollment tasks and deadlines, see Health Insurance Enrollment: Key Terms and Deadlines.

Who this affects and eligibility basics

  • Employed individuals often get employer-sponsored coverage; employers commonly contribute to the premium.
  • People with low income may qualify for Medicaid, which varies by state (see your state Medicaid agency or Healthcare.gov).
  • People 65+ or with certain disabilities qualify for Medicare; Medicare has its own enrollment rules and supplemental options (CMS).
  • Freelancers and gig workers usually buy individual market coverage and may be eligible for marketplace subsidies depending on income.

Common mistakes and how to avoid them

  • Choosing only on premium: Compare total annual costs (premiums + expected out-of-pocket).
  • Ignoring network confirmation: Verify provider participation directly with the office.
  • Overlooking prescription coverage: Drug formularies and tiers change plan value; check your medications against the plan’s formulary.
  • Not checking prior-authorization rules: Some plans require pre-approval for certain services, which affects access and timing.

Actionable checklist before you enroll

  1. List your expected medical needs for the year: prescriptions, specialists, planned procedures.
  2. Compare total estimated annual cost across 2–3 plans (premium + expected out-of-pocket).
  3. Confirm your primary providers and key specialists are in-network by calling their offices.
  4. Check the plan’s drug formulary for your medications.
  5. Review whether an HSA-qualified HDHP makes sense for tax-advantaged savings.
  6. If buying on the marketplace, estimate subsidy eligibility to see net premiums.

Professional tips from practice

  • If you rarely use care and can save emergency funds in an HSA, a HDHP can be economical. But if you have frequent specialist visits or chronic medications, a plan with a lower deductible may save money overall.
  • When switching jobs, coordinate start and end dates to avoid coverage gaps. Consider COBRA or a short-term plan as bridge options only after comparing costs and coverage limits.

Resources and authoritative guidance

  • Healthcare.gov — marketplace enrollment, premium tax credits, and plan comparisons.
  • Centers for Medicare & Medicaid Services (CMS) — Medicare rules and enrollment (cms.gov).
  • Internal Revenue Service — rules for HSAs and self-employed health insurance deductions (irs.gov).
  • Consumer Financial Protection Bureau — consumer guidance on health costs and choosing plans (consumerfinance.gov).

For further reading on narrower topics on this site, see: How to Compare Health Plans: Beyond Premiums, How Health Insurance Networks Affect Your Medical Bills, and Health Insurance Enrollment: Key Terms and Deadlines.

Professional disclaimer

This content is educational and general in nature and does not constitute personalized financial, tax, or medical advice. Rules and eligibility can vary by state and over time—consult a licensed insurance broker, tax advisor, or benefits specialist for advice tailored to your situation.

If you’d like, I can help you compare two plan options step-by-step with your expected care needs and medications to estimate which is likely to cost less over a year.