How to Read and Evaluate Health Insurance

By Kenneth York

Benefit Airship’s guide to understanding coverage.

Understanding Health Insurance Shouldn’t Feel Like Reading a Foreign Language

Let’s be honest — even seasoned business owners and professionals get lost in the maze of health insurance terms. Premiums, deductibles, coinsurance, PPOs, HMOs, networks, RBP — it’s enough to make your head spin.

I’ve worked in benefits for years, and I’ve seen smart people overpay for coverage that doesn’t fit their needs simply because no one ever took the time to explain how to read an insurance plan. At Benefit Airship, our mission is to help people find the best healthcare program for their health and budget — not just the most expensive one.

So let’s break it down line by line.

How to Read an Insurance Policy — Line by Line

Every insurance policy has the same key components. Understanding each one helps you compare plans side-by-side.

Line Item

Definition

How to Compare

Premium

What you pay each month to keep your insurance active.

Higher premiums often mean lower deductibles — but not always better value. Compare total annual cost.

Deductible

The amount you pay out-of-pocket before your insurance starts sharing costs.

Look at how often you actually meet your deductible. People can pay more for low deductibles they never reach.

Coinsurance

The percentage you pay for services after meeting your deductible.

Lower coinsurance means the insurer covers more — 80/20 means the insurance covers 80% of medical bills after the deductible. 80/20 is better than 70/30. 

Copay

A flat fee for routine services (like doctor visits or prescriptions).

Check whether copays apply before or after deductible. That detail matters. You typically pay the copay at the medical facility.

Out-of-Pocket Maximum (OOP Max)

The most you’ll pay in a year for covered services. After that, insurance pays 100%.

This is your worst-case number. In an expensive year, this is the cap on your risk.

Network Type

Determines which doctors and hospitals you can see.

PPO = freedom; HMO = structure; Open = flexibility. Choose based on your lifestyle.


Understanding Co-Insurance

If your deductible is what you pay before insurance starts helping, then co-insurance is what you share after that point.

Here’s how it works:

  • Once you meet your deductible, your insurer begins paying a percentage of your medical costs.

  • You and the insurer split the bill according to your plan’s co-insurance ratio.

For example:

  • You’ve met your $2,000 deductible.

  • Your plan has 80/20 co-insurance — meaning the insurer pays 80%, and you pay 20%.

  • If you have a $10,000 hospital bill, you’d owe $2,000 (20%), and insurance covers $8,000.

That 20% continues until you hit your out-of-pocket maximum, at which point the plan covers 100% of eligible expenses for the rest of the year.

Pro Tip: Don’t confuse co-insurance with a copay. Copays are flat fees for specific visits or services (like $25 to see your doctor). Co-insurance is a percentage of the total bill, which can vary depending on the procedure.

How to Compare:

  • Plans with lower co-insurance (like 90/10) usually have higher premiums.

  • If you’re healthy and rarely use your plan, a higher co-insurance rate (like 70/30) may save money in the long run.

  • Always check whether co-insurance applies to in-network only or also out-of-network services.

PPO, HMO, and Open Networks

Here’s a quick breakdown of the three main network types:

  • PPO (Preferred Provider Organization):
    You can see any doctor you want — no referral required. Out-of-network care is usually covered, but at a higher cost. Great for people who travel or want flexibility.

  • HMO (Health Maintenance Organization):
    Lower premiums, but you must stay in-network and get referrals for specialists. Great for those who value structure and lower costs.

  • Open Access or Open Network:
    Offers PPO-like flexibility but with negotiated pricing or RBP models (see below). Often used by modern, flexible plans like those from Benefit Airship.

What Is RBP (Reference-Based Pricing)?

Reference-Based Pricing (RBP) is a newer approach that doesn’t rely on traditional insurance networks. Instead, it bases reimbursement on a percentage above Medicare rates.

Example:

A hospital charges $10,000 for a procedure. Medicare might pay $4,000. An RBP plan could pay $4,800 (120% of Medicare).

Benefits:

  • Often 20–40% lower premiums.

  • Freedom to choose any provider.

  • Transparent pricing.

Caution: Some hospitals may bill patients for the difference (called “balance billing”), so it’s important your plan includes advocacy and negotiation support — which ours does.


Understanding Prescription Tiers

Prescription coverage is broken into “tiers.”

Tier

Type of Medication

Typical Cost

Tier 1

Generic drugs

Lowest copay ($10–$20)

Tier 2

Preferred brand-name drugs

Moderate copay ($25–$50)

Tier 3

Non-preferred brands

Higher copay ($75–$100+)

Specialty Tier

High-cost specialty medications

Often coinsurance (e.g., 20–30%)

Tip: Always ask your doctor if a Tier 1 or Tier 2 generic equivalent exists. Many people save hundreds each month with that one question.


How to Research Your Provider Network

Before choosing a plan, always verify:

  1. Your primary doctor and preferred specialists are in-network.

  2. Hospitals near you are covered — especially emergency or surgical centers.

  3. Use the insurer’s online directory but confirm directly with your provider’s office (those directories are notoriously outdated).

If you travel frequently, check for nationwide coverage or telehealth options.


How Deductibles and Out-of-Pocket Maximums Work (Real Example)

Let’s say you need knee surgery that costs $30,000.

  • Your deductible is $2,000 — you pay that first.

  • After that, your plan has 20% co-insurance, so you pay 20% of the remaining $28,000 = $5,600.

  • Your total so far: $7,600.

  • If your out-of-pocket max is $8,000, that’s your total risk. Once you hit it, insurance covers 100% of everything else that year.

Understanding this math helps you plan your maximum financial exposure. Think of it like setting your “investment risk” in healthcare.


Elective Surgeries and Coverage Gaps

Elective procedures (like LASIK, cosmetic surgery, or some orthopedic operations) may not be covered. Always check your plan’s exclusions.

Some procedures are “conditionally covered” — meaning you need prior authorization or proof of medical necessity. 

If you’re considering elective surgery, ask:

  1. Is it covered?

  2. What’s my deductible and coinsurance?

  3. Can I use a supplemental plan to offset the cost?

Common Mistakes and How to Avoid Them

  1. Assuming expensive means better. The best plan is the one that fits your actual health and budget.

  2. Ignoring the network. If your doctor isn’t covered, it doesn’t matter how great the plan looks on paper.

  3. Not checking prescriptions. Drug tiers vary widely. Always confirm your medications are covered.

  4. Skipping supplemental coverage. Accident or hospital indemnity plans can cover deductibles and major costs.

  5. Forgetting to compare total cost. Add premium + deductible + expected out-of-pocket to find your real annual cost.

Think of Insurance Like an Investment

Here’s the mindset shift: health insurance isn’t just protection — it’s an investment decision.

You’re balancing:

  • Premiums: Your guaranteed cost.

  • Deductible: Your risk exposure.

  • Out-of-pocket max: Your worst-case scenario.

Ask yourself:

  1. How much am I likely to spend on medical care this year, and what’s the smartest way to finance that through premiums, risk, and coverage?

  2. You might be better off choosing a lower-cost plan and using savings or supplemental policies (like accident or critical illness coverage) to bridge the gap.


How to Save Money and Get Better Coverage

Here are smart strategies I recommend to clients every day:

  • Consider lower-cost coverage + supplemental plans. Pairing a mid-range plan with an accident or hospital policy can cover your deductible at a fraction of the cost of a high-premium plan.

  • Take advantage of preventive care. Most plans cover annual checkups, vaccines, and screenings at no cost. Use them.

  • Shop prescriptions. Compare prices through your pharmacy, manufacturer programs, or Benefit Airship’s Power Rx program.

  • Ask about telehealth and direct primary care. Many virtual visits cost a fraction of in-person appointments.

The Bottom Line

There isn’t one “best” insurance plan — there’s only the best plan for you.

At Benefit Airship, our job is to guide you through the details, help you compare your options, and make sure you’re getting great coverage for the right price. Sometimes that’s a high-end major medical plan. Sometimes it’s a lower-cost program with supplements. The key is understanding what you’re paying for — and what you’re getting in return.

The more you understand your policy, the more power you have over your health and your money.