Here's What Happens When You Pick the Wrong Insurance Plan During Open Enrollment

Many people are fortunate enough to have health insurance coverage through their jobs. But if you're not in that boat, then it's important you put coverage in place independently. Otherwise, you might end up having to raid your savings account or rack up a giant credit card tab if you have an illness or injury that requires costly treatment.

If you don't have access to employer health insurance, and you're not yet 65 and old enough for Medicare, then you may be looking at buying a marketplace plan through HealthCare.gov. The good news is that if you're buying one of these plans, you can't be denied coverage based on pre-existing conditions as long as you enroll at the right time. And the right time is almost upon us.

On Nov. 1, open enrollment for marketplace insurance plans will begin, and it will last through Jan. 15. If you don't apply for health insurance during this time, you'll have to wait until next year's open enrollment to sign up unless you experience a qualifying life event (which could include the loss of a job and the employer health plan that came with it).

Meanwhile, if you're gearing up to choose health coverage during open enrollment, you have an important decision to make. If you pick the wrong insurance plan, it could cost you big time.

A tough choice

If you're new to choosing marketplace converge, you should know that health plans come in four tiers:

• Bronze
• Silver
• Gold
• Platinum

Bronze plans commonly charge the lowest premiums, while platinum plans charge the highest. But the more you spend on premiums, the less you're likely to spend on costs like copays and deductibles, and vice versa.

You'll need to look at the big picture when choosing your plan. Picking the wrong one could have you spending more money on healthcare during the year.

Let's say you're buying coverage just for yourself and you select a bronze plan with a monthly premium of $300. That may be more appealing than a silver plan with a monthly premium of $400, since you're paying $3,600 for the year off the bat instead of $4,800.

But what if the bronze plan comes with a $2,800 deductible and the silver plan comes with a $1,200 deductible? If you don't end up getting hurt or sick at all during the year, and you're only covering your premiums, then the bronze plan might work out better for you.

But if you're forced to cover that entire $2,800 deductible, then you've lost money right there. In that case, you're talking about spending $6,400 for the bronze plan for premium plus deductible instead of $6,000 for the silver plan. And that's not even taking copays into account.

On the flip side, one thing you may not want to do is buy a plan with the highest premiums. You could end up paying for coverage you don't end up needing.

A gold plan with a $500 monthly premium might come with a deductible of just $800. But you're paying $6,000 a year for coverage. If you only see the doctor once for a minor illness and have to pay $200 into your deductible, you've just spent $6,200 when you could've spent $3,800 instead on a bronze plan.

How to find the right health insurance plan

One of the toughest things about choosing health insurance during open enrollment is that you can't see into the future. As such, you can't predict just how much you'll actually use your coverage.

But one thing you can do is consider your medical needs from previous years. If you normally find yourself needing a doctor a lot or have medical conditions to manage, then a bronze plan may not be your best choice, because in that scenario, you may be more likely to have to cover a large deductible in full.

If you have children, take that into account, too. Kids tend to get hurt and pick up germs at school. Buying the lowest-tier plan could mean spending more by having to cover costlier copays and meet a huge deductible.

You'll also want to consider one fringe benefit of choosing a plan with a higher deductible -- HSA eligibility. Plans with higher deductibles that are compatible with HSAs could open the door to a world of savings on your taxes. The good news is that when you pull up a list of your plan choices through HealthCare.gov, it should show you which plans are HSA-compatible so you don't have to guess at that information.

Finally, give yourself time to compare your plan choices. Rushing through the process of choosing healthcare coverage could make it so you're less likely to pick the best plan for you.