How to buy health insurance for the whole family

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How to buy health insurance for the whole family

While shopping for an individual health insurance can be complicated, there is one major upside: you're only shopping for yourself. You know, more or less, what you need, what you prefer, and what your budget is.

Shopping for a family, on the other hand? Health costs can be a lot less predictable. Kids are more likely to get sick than adults and are prone to random injuries, like breaking their wrist during a game of kickball in gym class or twisting an ankle after a friend dares them to jump from the floor to the top bunk of a bunk bed without using the frame as support. (Even the smartest insurance blogger was once a child.)

And if you're just starting a family, you know how expensive a pregnancy and giving birth can be if you don't have coverage or don't have the right coverage. Take this personal story from Talaat and Tai McNeely, the experts behind His and Her Money:

Without health insurance, the McNeelys wouldn't have been able to afford to have two children in close succession. However, as Talaat McNeely noted in our interview, you shouldn't just pick the cheapest plan you can find. "You want to make an informed decision... You want to make sure that you pick the best policy to fit the needs of your specific situation," says McNeely.

Out-of-pocket costs: your biggest concern

How much your health insurance costs you isn't just about the monthly bill - it's also about how much you have to spend out-of-pocket before your health insurance starts kicking in its share. This is called the deductible. High-deductible plans are "cheaper," if you're just talking about the monthly premium, but are very expensive when you consider that you have to pay thousands of dollars out-of-pocket before your health insurance pays for anything.

If you're a relatively healthy adult, there's a good chance that you won't utilize health services that much during the year. But children? Yeah, they'll need to see the doctor, and they'll often need health services unexpectedly. If you only have one kid, you might be able to deal with unexpected costs. But as your family grows, so does the likelihood that you'll be spending quite a bit on medical expenses in a given year.

When choosing a health insurance plan for your family, consider the possibility of unexpected medical expenses, and make sure you have a plan. This may mean a plan with a higher monthly premium, but a lower deductible.

If this sounds like a big trade-off, you're right. As David Weliver, founder of Money Under 30, puts it, "You can't have everything." What he means is that you rarely can find a plan that has a low monthly premium and covers most of your out-of-pocket expenses. "If you were wealthy enough to afford health insurance that gave you everything, you could probably afford to go without health insurance."

In our interview, Weliver gave sobering advice to health insurance shoppers out there: "The more you pay, the more you get. And the less you pay, which a lot of people need to look at the most affordable plans, you have to realize what you're giving up. There are options out there where you may give up one thing but you keep something else, so it's just a matter of knowing what the trade-offs are."

Remember to look into health insurance premium tax credits, as they can help you afford a plan with a higher monthly cost.

Understanding family deductible

Family health insurance plans differ from individual plans in two major ways. The first is, obviously, that family plans cost more because you have to pay for everyone in the family. The second, however, impacts the way your deductible works. If you read the section above, you probably know how important the deductible is when it comes to controlling your out-of-pocket costs.

Family health insurance plans actually have two kinds of deductibles: individual deductibles and family deductibles. As you can probably tell based on the names, each individual covered by the plan as their own deductible, but there's also a deductible for the whole family.

Let's say each member of your family has an individual deductible of $500. This means that once you spend $500 out-of-pocket on health care services for an individual family member, health insurance will start paying a share of their expenses. Other family members are not affected, however.

Your plan also has a family deductible of $1000. This means that once you spend a total of $1000 out-of-pocket on health care services for any combination of your family members, your health insurance starts paying their share.

How does this work in practice? Let's take a look at a simplified example.

Jimmy sprains his wrist after falling out of a tree during an attempt to rescue the family cat, Mr. Pickles. After getting an X-ray and a wrist-splint, the total bill comes to $600. Of that $600, $500 is paid completely out-of-pocket by the family. The other $100 is split with the health insurance company, either with a copayment or coinsurance, according to your health insurance plan.

At this point, Jimmy's individual deductible has been reached, but the family deductible still has $400 left to go.

Three months later, Mr. Pickles is stuck in the tree again, and this time, Jimmy calls in a professional: Dad. Dad, unfortunately, doesn't have much luck. He falls out of the tree and hurts his back. After much pleading from Mom, Dad goes to the doctor to get it checked out. His doctor's appointment cost $450.

While Dad's doctor's appointment didn't reach his individual deductible of $500, it did reach what was left of the family deductible. That means that of that $450, the family only spend $400 out of pocket. The other $50 was split between the family and the health insurance company.

From this point forward, everyone splits the cost of their health care services with the health insurance company, even though Mom and Dad did not reach their individual deductibles.

Family deductibles are a crucial part of controlling out-of-pocket costs for a large family. Make sure you understand the different kinds of deductibles in a health insurance plan before you make your final purchasing decision.

Use an HSA or FSA

No matter what kind of health insurance plan you purchase, you'll likely have to pay out-of-pocket for health care services at some point. When that moment comes, having a well-funded HSA or FSA can be a lifesaver.

Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) are two types of tax-advantaged savings accounts that can help you save money on health costs. When you fund these accounts, you use pre-tax money, which means you can avoid paying income tax on thousands of dollars of income.

The catch? You have to use that money on qualified healthcare expenses. Luckily, the list of qualified expenses is pretty expansive - it includes everything from breast pumps to guide dogs. (View of the full list on the IRS website.)

HSAs are only available if you have a high-deductible health insurance plan. If your family health insurance plan has a deductible of $2,600 or higher, you qualify for an HSA. HSAs are available at a wide variety of banks, and it's likely that your bank has one available. Any money that you don't use in one year will roll over into the next year, assuming you still qualify for an HSA.

FSAs are a little different, as they're available to anyone, but are sponsored by an employer. If you change employers, you'll lose access to your FSA. You also can't roll over money year over year like you can with an HSA.

HSAs and FSAs are two very useful tools for families looking to save additional money on out-of-pocket expenses. If you don't have one already, definitely start looking into your options as soon as possible. Like any savings account, your HSA or FSA is only as useful as the money you have in it.

Shop around

When you're shopping for a new TV, mattress, or other household item, do you just go out and pick the first one you find? Of course not! You shop around! And you should do the same for health insurance.

You can try shopping on Healthcare.gov or your state exchange, but they're not exactly as easy to use as Amazon.com. Plus, they're missing out on off-exchange options that may fit your needs better.

That's why PolicyGenius built a health insurance app that makes shopping for health insurance as easy as Amazon.com. PolicyGenius shows you every health insurance plan available on Healthcare.gov or your state exchange, plus the plans only available off the exchange. And it organizes them all according to your family's needs and priorities. PolicyGenius is the best way to shop for a health insurance plan for 2017.