How do I choose the right individual health insurance plan? Just follow these simple steps.
Updated November 5, 20218 min read
Table of contents
You can get financial assistance, depending on your income, for an individual marketplace plan
When choosing a plan, decide what level of health insurance (metal tier) you need
Pick an insurance company based on criteria that matters to you, like doctor network, referrals, and prescription drug coverage
Use a short-term plan only as a temporary measure
There is no simple "hack" for cheap health insurance. Sometimes you’ll have many options, leaving you with lots of questions.
We’ve boiled down the health insurance shopping process into a few simple steps. Before we start, you can check out our health insurance guide to familiarize yourself with how health insurance works. You’ll also find state-by-state guide to Open Enrollment.
If you want to get started on choosing the best individual health insurance plan for you, read on for some tips and shortcuts you can take.
If you are able to get health insurance coverage through your work, you should get it. Large companies are required to provide group health insurance for full-time employees. With a group plan, your employer pays for part of the costs, leaving you with a lower premium. The monthly premiums can even be deducted directly from your paycheck, and you can often add your spouse or dependent to your plan for an additional cost.
Since most people need health insurance, this is the most affordable way to get covered.
Getting insurance coverage this way is much cheaper than if you were to purchase a plan on your own. (We’ll discuss how to find affordable care that way later.)
Related article: Which states pay the most for Obamacare?
If you are a low-income individual, you may qualify for Medicaid. This public health insurance program provides health coverage for little to no cost. Each state runs their own Medicaid program and sets the eligibility requirements – including income limits. You can read our state-by-state guide to Medicaid.
If you are eligible for Medicaid, this is one of the best ways to get affordable care and you can apply at any time. Learn more about Medicaid here.
Self-employed people and those who do not get coverage through work can buy health insurance plans on the marketplace, created during the Obama administration under the Affordable Care Act. You can only buy a plan during an enrollment period. For 2022 health coverage you can shop during open enrollment — November 1, 2021, to January 15, 2022. (Some states have their own marketplaces, and even extended open enrollment periods.) Outside of this you will need a qualifying life event to buy a health insurance policy during a special enrollment period.
You can learn more about how to apply for Obamacare on the federal health insurance marketplace website.
Health insurance helps pay for medical expenses. But it isn’t free. That’s why it’s important to know how much you can afford to spend on health insurance on an annual basis.
The first cost in health insurance is the premium. For 2022, if you are the only person in your household and make less than $51,520 per year and don't have health insurance through your employer, you may qualify for federal subsidies, like the premium tax credit to help you pay the monthly premium. (The income limit for subsidies is based on federal poverty guidelines and varies based on your state and household size.)
If you don't qualify for a subsidy, you should aim to spend under 5% of your annual gross income on health insurance premiums. That's how much consumers spend, on average, on health insurance premiums according to the government's Consumer Expenditure Survey.
Five percent is also below the government's "affordability threshold" or “premium cap” of 9.61%. This is the max amount of your income that the government thinks you should have to spend towards health. The government considers your health care to be affordable if you spend less than 9.61% of your household income on the insurance premiums. (The percentage may change based on your income level. It is used to determine your subsidies, if they apply, and also by employers to make sure they give employees the option of affordable care.)
By aiming to spend only up to 5% of your income on the premiums, you can budget more of your money for other expenses related to your health care. Check out your health insurance options here.
If you have a private health insurance policy, it may not cover everything. You'll be responsible for paying some of these costs on your own, including:
It’s important to understand each of these parts of health insurance in order to assess what type of plan is right for you. Depending on the type of plan you have (HMOs and PPOs are the most common), you may have more of one type of out-of-pocket expense and less of another.
Learn more about out-of-pocket expenses. Note that some expenses, such as dental and vision coverage, may not be included in your health insurance plan and may require you to purchase a supplemental health insurance policy.
The Affordable Care Act has neatly categorized all individual Obamacare health insurance plans into four metal tiers: Bronze, Silver, Gold and Platinum. Every plan across all tiers covers the essential health benefits; what differs is the cost-sharing between you and the insurance company. Lower tier-plans have lower premiums, but a high deductible. Higher-tier plans generally have a lower deductible, but higher monthly premiums.
In most states, spending 5% of your income on health insurance premiums will also land you squarely within range for a Silver health plan, a middle tier plan that might be right for most people. With Silver plans, the insurer roughly covers 70% of your medical costs.
By design, Silver plans will have a deductible on the higher side (though not as high as Bronze), which is what keeps the monthly premiums lower. Make sure you have enough in savings set aside to cover the deductible, which you may have to pay in one lump sum, if, for example, you end up in the emergency room.
If you have a health condition that results in frequent medical bills, then consider a Gold or Platinum health plan. These plans cost more in terms of premium, but will pay for more costs when you actually use the care. (This is done by giving you lower deductibles, copays and coinsurance).
Depending on your state and the marketplace options, sometimes a Platinum plan (the highest level) may not cost significantly more than a Silver plan. That’s why it’s important to do some comparisons.
Learn more about metal tiers in health insurance.
Once you’ve narrowed down the metal level and price point for your plan, now you have to pick between different insurance companies. This is where many consumers may get overwhelmed, especially in states that offer coverage from multiple providers.
Do a little research among the insurance companies. A good place to start is to read through the Summary of Benefits and Coverage.
You might also find starred ratings of insurance companies on your state's marketplace. You should confirm how the ratings are developed: are they objectively applied by an independent or government agency or simply aggregated customer reviews (like you'd see on Amazon)? Remember that starred ratings are indicative, not definitive. What’s best in terms of health coverage for one person may not be suitable for another.
Instead of relying on reviews, you can come up with a few "deal-breaker" questions or make a list of must-haves. Here are some common examples and criteria to consider when comparing different insurance policies:
If you have a primary care doctor that you like to see, confirm whether they're part of the insurer's network. Rule out the plans that don’t include your doctors.
If you have any must-take expensive prescription drugs, confirm whether the insurer has that drug in their formulary (a list of their covered drugs). Rule out the plans that don’t include it in their prescription drug coverage.
Some types of health plans require you to check in with your primary care doctor before seeing a specialist physician. If the thought of needing a referral every time you see a specialist is inconvenient, rule out the plans that require this.
Plans may or may not include dental coverage. If this is important to you, consider finding out if it is covered.
If the thought of speaking to an insurance company on the phone stresses you out, check to see if the insurer offers other ways to get help, like through their website or mobile app. Rule out the insurers that don't meet your standards for online self-service.
If you don't have any many requirements for your health plan, then you are a low-maintenance health consumer. Pick a plan in the price range and metal tier you've selected. If you're not satisfied with your coverage or the insurer, remember that you will only have it until the end of the year. You can apply for a new plan when open enrollment starts again.
The important thing is to pick a plan and get covered. Not having any health insurance is a huge gamble with your health and your finances.
If you still can’t find an affordable marketplace plan, then you could consider short term health insurance, which lasts up to a year and has lower monthly premiums and deductibles. This cost however comes with a loss of benefits; short-term plans are not considered to be ACA plans, which are regulated by Obamacare.
Short-term plans don’t offer the same essential health benefits required of ACA plans, nor do they protect people with pre-existing conditions.
These plans are temporary and only meant to be used as a stopgap. Read more about short-term health insurance.
Ready to shop health insurance?