5 Key Factors to Consider When Selecting an Insurance Policy

Choosing the right health insurance can be a daunting task, but it’s a crucial decision for protecting your well-being and finances. Health insurance not only covers medical expenses, but also helps manage costs associated with prescriptions, surgeries, and therapies. According to the Kaiser Family Foundation’s 2025 Employer Health Benefits Survey, employer-sponsored family coverage now averages over $25,000 per year, making plan selection one of the most financially significant decisions a household can make. Here are five essential things to consider before selecting a health insurance policy.

1. Understand the Type of Plan When comparing health insurance plans, it’s important to recognize that each provider offers different benefits. Evaluate multiple options to see which plan best suits your needs and those of your family. Consider the scope of coverage, including medical expenses, prescriptions, surgeries, and post-surgery care. It’s also essential to check if the policy covers therapies like physical rehabilitation, which could be necessary after surgery. Understanding the specifics of each plan will help you make an informed financial decision.

The most common plan structures available through the Health Insurance Marketplace, regulated under the Affordable Care Act (ACA), include Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Exclusive Provider Organizations (EPOs), and Point of Service (POS) plans. Each structure carries different rules about referrals, out-of-network access, and cost sharing. According to Healthcare.gov’s plan comparison guide, PPO plans typically offer the greatest flexibility for seeing specialists without referrals, while HMO plans tend to carry lower monthly premiums in exchange for more restricted networks. Marketplace plans are further categorized into Bronze, Silver, Gold, and Platinum metal tiers, which directly affect how costs are split between you and your insurer.

Sources: KFF 2025 Employer Health Benefits Survey; Healthcare.gov Plan Types; IRS Publication 969 (HSA limits, 2025).

2. Know What Your Policy Covers (and Doesn’t) Every health insurance policy has limitations, and it’s important to be aware of them. While many plans cover a range of services, such as inpatient therapy, some may exclude certain treatments or medications. For example, some policies might not cover inhalers for asthma, or may charge high co-pays for certain drugs. Make sure to review the details carefully to ensure your plan covers the treatments and medications that are important for you.

Under the ACA, all marketplace-compliant plans are legally required to cover 10 essential health benefits (EHBs), as defined by the Centers for Medicare and Medicaid Services (CMS). These include emergency services, hospitalization, mental health and substance use disorder services, prescription drugs, rehabilitative and habilitative services, laboratory services, preventive and wellness services, and pediatric services. However, the specific drugs covered under a plan’s formulary — the official list of covered medications — can vary significantly between insurers. Plans are required to cover at least one drug in every category established by the United States Pharmacopeia (USP), but that does not mean your specific brand-name medication will be included.

It’s equally important to understand your plan’s Summary of Benefits and Coverage (SBC), a standardized document that all insurers are required to provide under federal law. The SBC outlines what is and is not covered, along with your cost-sharing responsibilities. The U.S. Department of Labor requires that this document be made available to all plan participants before enrollment. Reading the SBC carefully — particularly the sections on exclusions and limitations — can prevent costly surprises later.

The Mental Health Parity and Addiction Equity Act (MHPAEA), enforced jointly by the U.S. Department of Labor and the Department of Health and Human Services, requires that mental health and substance use disorder benefits be no more restrictive than medical or surgical benefits. Despite this, enforcement gaps remain, and consumers should verify that their specific mental health providers and services are covered at in-network rates.

3. Consider the Cost of Your Plan Cost is a key factor when choosing a health insurance policy. Make sure the plan aligns with your budget while still providing the coverage you need. Whether the insurance is offered through your employer or purchased independently, ensure you can afford the premiums, deductibles, and co-pays. Review the plan’s coverage details and ensure that the benefits justify the cost, so you can feel confident in your decision.

Understanding the full cost structure of a health insurance plan requires looking beyond the monthly premium. There are at least five distinct cost components to evaluate before selecting a plan:

Premium: The fixed monthly amount you pay regardless of whether you use medical services. For ACA marketplace plans in 2025, the average benchmark Silver plan premium before tax credits is $448 per month for a 40-year-old individual, according to KFF’s Health Insurance Marketplace Calculator.

Deductible: The amount you must pay out of pocket each year before your insurer begins sharing costs. The IRS defines a High-Deductible Health Plan (HDHP) for 2025 as any plan with a deductible of at least $1,650 for individual coverage or $3,300 for family coverage.

Copayment and Coinsurance: A copayment is a fixed dollar amount (e.g., $30 per primary care visit), while coinsurance is a percentage of costs you share with your insurer after meeting your deductible (e.g., 20% of a specialist’s bill).

Out-of-Pocket Maximum: The most you will pay in a plan year. Once reached, your insurer covers 100% of covered in-network services. For 2025, the ACA caps out-of-pocket maximums at $9,450 for individuals and $18,900 for families, as set by the Centers for Medicare and Medicaid Services.

Premium Tax Credits: If you purchase coverage through the ACA marketplace and your income falls between 100% and 400% of the federal poverty level (FPL), you may qualify for advance premium tax credits (APTCs). The IRS administers these credits, and they can significantly reduce your net monthly premium. The American Rescue Plan Act extended enhanced subsidies through 2025, with some households qualifying for $0 premium Silver plans.

4. Check If You Can Keep Your Current Doctors If you already have a trusted doctor, it’s important to find out if they are included in the network of the new insurance plan. Changing plans could mean losing access to your preferred healthcare provider, which might be inconvenient or disruptive to your ongoing care. Contact your doctor’s office to confirm whether they accept your new insurance. In practices with multiple doctors, be sure to check if all, or just some, are covered under your chosen plan.

Provider networks are maintained and updated by each insurance company, and a physician who was in-network one year may not be in the following year. This is known as network churn, and it affects millions of enrollees annually. The CMS Network Adequacy Standards require marketplace insurers to maintain sufficient provider networks, but “sufficient” is defined at the state level and can vary considerably. States like California enforce stricter maximum time-and-distance standards than others.

The No Surprises Act, which took effect on January 1, 2022, and is enforced by the Centers for Medicare and Medicaid Services, provides important protections against unexpected out-of-network bills in emergency situations and from certain facility-based providers. However, these protections do not apply to all situations. For scheduled, non-emergency care, you remain responsible for verifying network status before your appointment. The law does require that providers and facilities give patients a good-faith cost estimate at least three business days before a scheduled service.

To verify network status, use your insurer’s online provider directory and then call the provider’s office directly to confirm, as online directories are frequently out of date. The Healthcare.gov plan finder tool also allows you to search for plans that include specific doctors and hospitals before you enroll, which is particularly useful during the annual Open Enrollment Period, which for 2026 coverage runs from November 1 through January 15 in most states.

5. Understand Coverage for Additional Care Some aspects of healthcare policies include what is known as “availing care,” which refers to treatments or therapies that may be beneficial but are not always deemed essential. When a doctor recommends a test or therapy, the insurance company reviews it to determine if it is medically necessary. In some cases, requests are sent to a review board for further assessment. Being aware of how your policy handles such situations can help you plan for unexpected costs.

This review process is formally known as prior authorization (PA) or pre-authorization. It requires your healthcare provider to obtain approval from your insurer before delivering certain services, medications, or procedures. According to a 2024 report from the American Medical Association (AMA), 94% of physicians reported that prior authorization delays patient care, and 33% said those delays led to a serious adverse event for at least one patient in the previous year.

If your insurer denies a prior authorization request, you have the right to appeal that decision. Internal appeals must first be exhausted, after which you may request an independent external review. The U.S. Department of Health and Human Services oversees these external review rights under the ACA, and studies have shown that patients who pursue external reviews overturn insurer denials at rates between 39% and 59% depending on the type of service. Understanding your appeal rights before you need them can make a meaningful financial and medical difference.

Step therapy — sometimes called “fail first” protocols — is another coverage mechanism to understand. Under step therapy, your insurer may require you to try and fail a less expensive treatment before approving a more costly one your doctor originally prescribed. As of 2026, more than 30 states have enacted step therapy reform laws that require exceptions for patients already stable on a medication, though enforcement and standards vary. The National Institutes of Health has published research examining both the cost-containment rationale and the patient safety concerns associated with step therapy protocols.

Conclusion Getting health insurance quotes and researching plans is an important step in planning for your future healthcare needs. Knowing what your plan covers, what it doesn’t, and how much it costs can help you make a well-informed decision. Always review the details carefully, and if there are gaps in coverage, plan ahead by setting aside funds for any additional expenses.

Taking the time to understand your insurance options can make a significant difference in how you handle medical expenses. Be sure to ask questions, take notes, and seek advice from trusted sources as you navigate the process. Conducting thorough online research can also help you understand how insurance works and how to choose the best policy for your situation. With the right knowledge, you can select a plan that meets your needs and offers peace of mind for the future.

Additional Considerations When Choosing Health Insurance

Health Savings Accounts and Flexible Spending Accounts

If cost management is a priority, pairing your insurance plan with a tax-advantaged savings account can meaningfully reduce your total annual healthcare spending. A Health Savings Account (HSA) is available only to individuals enrolled in an IRS-qualifying High-Deductible Health Plan (HDHP). For 2025, the IRS allows individuals to contribute up to $4,300 and families up to $8,550 to an HSA on a pre-tax basis, as detailed in IRS Publication 969. Funds roll over year to year and can be invested, making HSAs one of the few triple-tax-advantaged accounts available under the U.S. tax code.

A Flexible Spending Account (FSA), by contrast, is available regardless of plan type when offered through an employer. FSA contributions are also pre-tax, but they are subject to a “use it or lose it” rule — any unused balance generally forfeits at the end of the plan year (though employers may offer a limited rollover of up to $640 for 2025). For 2025, the FSA contribution limit is $3,300, as established by the IRS. Both accounts can be used to pay for qualified medical expenses including copayments, deductibles, prescription drugs, dental care, and vision care.

Medicare, Medicaid, and CHIP Eligibility

Not everyone needs to shop the private marketplace. Federal and state programs cover a significant portion of the U.S. population. Medicare, administered by the Centers for Medicare and Medicaid Services, covers approximately 65 million Americans aged 65 and older, or those with qualifying disabilities. Medicare Part A covers hospital inpatient care, Part B covers outpatient and physician services, Part C (Medicare Advantage) bundles Parts A and B through private insurers, and Part D covers prescription drugs.

Medicaid, a joint federal-state program also administered by CMS, covers low-income individuals and families. Under the ACA’s Medicaid expansion — adopted by 40 states and the District of Columbia as of 2026 — eligibility extends to adults with incomes at or below 138% of the federal poverty level. The Children’s Health Insurance Program (CHIP), administered alongside Medicaid, provides low-cost coverage to children in families that earn too much to qualify for Medicaid but cannot afford private insurance. Eligibility thresholds vary by state, and the official Medicaid.gov CHIP resource page provides a state-by-state eligibility guide.

COBRA and Short-Term Coverage Options

If you lose job-based coverage due to termination, reduced hours, or a qualifying life event, the Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue your employer’s group health plan for up to 18 months (or up to 36 months in some cases). However, under COBRA you are responsible for the full premium — both the employee and employer share — plus an administrative fee of up to 2%. This can make COBRA substantially more expensive than marketplace alternatives. The U.S. Department of Labor’s COBRA resource center outlines your notification rights and election deadlines, which are typically 60 days from the date of your qualifying event.

Short-term health insurance plans offer another stopgap option, though with important caveats. These plans are not required to comply with ACA essential health benefit requirements, meaning they may exclude pre-existing conditions, mental health services, or maternity care entirely. As of 2024, federal rules limit short-term plans to an initial period of no more than three months, with renewals allowed up to a total of four months. Several states, including California, New York, and Massachusetts, prohibit the sale of short-term plans altogether. These plans may be appropriate for a brief coverage gap but should not be treated as a substitute for comprehensive ACA-compliant coverage.

Frequently Asked Questions

What is the most important factor when choosing a health insurance plan?

The total cost of care — not just the monthly premium — is typically the most important factor. This means evaluating the premium, deductible, copayments, coinsurance, and out-of-pocket maximum together. A plan with a low premium but a high out-of-pocket maximum of $9,450 (the 2025 ACA cap for individuals) may cost significantly more overall if you have frequent medical needs.

What is the difference between an HMO and a PPO plan?

An HMO (Health Maintenance Organization) requires you to select a primary care physician (PCP) who coordinates all your care and provides referrals to specialists. Out-of-network care is generally not covered except in emergencies. A PPO (Preferred Provider Organization) allows you to see any doctor or specialist without a referral, and provides partial coverage for out-of-network providers, though at a higher cost-sharing rate. PPOs typically carry higher premiums than HMOs for the same level of coverage.

How do I know if my doctor is in-network?

Use your insurer’s online provider directory to search for your doctor by name and specialty. After finding a match, call the provider’s office directly to confirm, because online directories are updated infrequently and may be outdated. You can also ask your doctor’s billing department which insurers they currently accept. Under the No Surprises Act, enforced by the Centers for Medicare and Medicaid Services, providers must give you a good-faith cost estimate before scheduled services.

What does prior authorization mean, and does it affect my care?

Prior authorization is an insurer’s requirement that your doctor obtain approval before delivering certain services, procedures, or medications. If authorization is not obtained, the insurer may deny the claim and leave you responsible for the full cost. According to a 2024 American Medical Association survey, 94% of physicians report that prior authorization requirements delay necessary patient care. You can check your plan’s prior authorization list in the Summary of Benefits and Coverage or by calling member services.

What are the ACA’s 10 essential health benefits?

All ACA-compliant marketplace plans must cover 10 essential health benefits: (1) ambulatory patient services, (2) emergency services, (3) hospitalization, (4) maternity and newborn care, (5) mental health and substance use disorder services, (6) prescription drugs, (7) rehabilitative and habilitative services, (8) laboratory services, (9) preventive and wellness services, and (10) pediatric services including dental and vision. These requirements are defined by the Centers for Medicare and Medicaid Services.

When can I enroll in health insurance?

The ACA’s annual Open Enrollment Period (OEP) for marketplace plans covering 2026 runs from November 1, 2025, through January 15, 2026 (though some state-based exchanges have different end dates). Outside OEP, you may qualify for a Special Enrollment Period (SEP) if you experience a qualifying life event such as losing job-based coverage, getting married, having a child, or moving to a new coverage area. SEPs typically allow 60 days from the qualifying event to enroll. Medicare’s Annual Enrollment Period runs from October 15 to December 7 each year.

Can I use an HSA with any health insurance plan?

No. A Health Savings Account (HSA) is only available to individuals enrolled in an IRS-qualifying High-Deductible Health Plan (HDHP). For 2025, that means a plan with a minimum deductible of $1,650 for individuals or $3,300 for families, as established by the IRS. You also cannot be enrolled in Medicare, claimed as a dependent on someone else’s tax return, or covered by a second non-HDHP plan to maintain HSA eligibility. FSAs, by contrast, are available with most employer-sponsored plan types.

What should I do if my insurance claim is denied?

Request a written explanation of the denial (an Explanation of Benefits, or EOB) and review it carefully. You have the right to file an internal appeal with your insurer within a specified timeframe — typically 180 days from the denial notice. If the internal appeal is unsuccessful, you may request an independent external review overseen by the U.S. Department of Health and Human Services. Research shows that external reviewers overturn insurer denials between 39% and 59% of the time depending on the service type, so pursuing an appeal is often worthwhile.

How do I compare health insurance plans if I take regular prescription medications?

Locate each plan’s drug formulary — a tiered list of covered medications — before enrolling. Most plans categorize drugs into three to five tiers, with higher tiers carrying higher cost-sharing. Confirm your specific medications appear on the formulary at an affordable tier, and check whether prior authorization or step therapy requirements apply. The Healthcare.gov plan finder allows you to enter your medications and see estimated annual drug costs under each available plan, which can be a decisive factor when tiers vary significantly between options.

What is the difference between a deductible and an out-of-pocket maximum?

A deductible is the amount you pay for covered services before your insurer begins sharing costs. Once you meet your deductible, you typically pay coinsurance or copayments for additional services. The out-of-pocket maximum is the absolute ceiling on what you pay in a plan year — once reached, your insurer covers 100% of covered in-network costs for the remainder of the year. For 2025, the ACA caps out-of-pocket maximums at $9,450 for individual coverage, as set by the Centers for Medicare and Medicaid Services. It is important to note that premiums do not count toward your out-of-pocket maximum.