Avoid these common mistakes when choosing a private health insurance plan

Health insurance is one of the most misunderstood insurance products in the market today. The United States has one of the best healthcare systems in the world, but it is also one of the most complex and certainly the most expensive.

Due to this complexity, very few people actually know what they are getting into when they purchase private health insurance.

Below are some of the most common mistakes Americans make in selecting their private plan:

1. Choosing the cheapest plan without taking into account the coverage provided

Many Americans are rightly shocked whenever they discover how expensive a typical health insurance policy is. Even the healthiest and youngest individuals would be hard pressed to find a policy for less than $100 a month.

Be that as it is, you should still be very weary of the cheapest plans, as many of these come with very high deductibles or lack important coverages which could leave you exposed in the event of a complicated health condition arising.

2. Waiting too long to obtain your coverage or letting your coverage lapse

One thing you should never do is allow your coverage to lapse – Murphy’s Law has a way of affecting everything in life, and I can not tell you how many times I have seen it happen that a person gets into an accident days after their insurance policy expired.

Should you land in the hospital with appendicitis the day after your insurance company canceled your coverage, you could find yourself with a $20,000 bill easily.

3. Not obtaining multiple quotes prior to choosing

As with all kinds of insurance, premiums for the same policy insuring the same exact risks can vary wildly from company to company.

For this reason, it behooves you to compare as many different options as possible. If you are unsure about what your options are or how to go about the process, we recommend you check out our guide on how to choose a health insurance plan.

4. Not considering affinity groups

There are many affinity groups across the nation, to the point where almost every person in America is a member of one or another group.

Many of these groups offer benefits to their member which include discounted rates for insurance policies. Check all the groups that you can, including local chambers of commerce, former military and families (USAA), senior groups (AARP), credit unions, universities, and any other that may fit your profile.

5. Not considering the network of preferred providers

If you are already regularly visiting doctors and different healthcare providers, then this should be one of your preliminary screening criteria when choosing a plan.

Most health insurance plans today have different rates for what they consider “in-network” vs. “out-of-network”, and whenever possible you want your regular providers to be considered “in-network” for your insurance company.

6. Not taking actions that can improve your health and reduce your risks

Adopting a healthy lifestyle and healthy habits can have a two fold effect improvement in your life: you will feel better and healthier, while at the same time your health insurance premiums will be reduced.

We recommend you go over our list where we provide tips on lowering your health insurance costs, as in there we detail various techniques that can achieve exactly that – an improvement in your health along with a likelihood of reducing your health insurance premiums.

We go into deep detail for each one of the techniques in that article, so we will not delve into thos here, but there is one technique that does merit calling out whenever health insurance is mentioned as everybody should be 100% aware of this technique.

The technique which we are referring to is a very simple one: stop smoking. If you are a current smoker, there is absolutely nothing else that will even come close to providing the health benefits for you that quitting smoking can provide.

It is worth mentioning this because many health insurance companies will reward non smokers with lower premiums.

Even in the case of employer provided healthcare, many times you will have a lower premium if you choose to stop smoking.

Not always, sometimes the employer will choose to bear the cost so that all employees have the same rates – but I have seen it from time to time. 

7. Believing your coverage will cover you abroad

Insurance in the United States is regulated on a state by state basis, and health insurance is no different.

Not only will your coverage most likely not cover any incident that happens to you outside of the country, but what many people also do not realize is that your coverage will likely be very limited even outside of your home state.

Many health insurance policies will only cover on a reimbursement basis for emergencies when you need coverage out of state.

If you are embarking on a trip abroad, you should strongly consider purchasing a travel insurance policy to cover medical expenses should you run into any unfortunate health situation during your trip.


8. Not checking the healthcare.gov marketplace

Each states operates a private healthcare exchange that came about as a result of the Affordable Care Act, and you can access these exchanges by visiting the website healthcare.gov.

The intent of these exchanges is precisely to give consumers looking for a private health insurance plan a place where they can see their available options.

Some states have better options than others, but nevertheless you should always check it for your particular situation to ensure you are covering all bases.

Final thoughts

The mistakes above are some of the most common, but they are not the only ones prospective buyers make when choosing a plan. Make sure to do your due diligence when choosing a private health insurance policy, and consult with people you trust who are knowledgeable on the subject. Above all, do not feel bad if it feels complicated or you feel like you are in over your head – even professionals who have worked in the industry for years struggle with the complexity of it.

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