Top 5 Mistakes to Avoid When Buying Health Insurance

Buying health insurance is one of those decisions that feels both important and overwhelming. You want coverage that fits your family or business without paying for things you don’t need—but the fine print, plan types, and endless options can make it hard to tell what’s really worth it. That’s why so many people end up making the same common mistakes when choosing a plan.

From focusing only on the monthly premium to skipping network checks or forgetting about prescription coverage, small oversights can lead to big surprises later. Understanding what to look for—and what to avoid—can save you hundreds of dollars a year and spare you the stress of uncovered bills. The good news? Most of these mistakes are easy to avoid once you know what to watch out for.

At TSM Insurance, we’ve seen how quickly good people can get stuck with the wrong plan simply because no one explained the details. Our goal is to make health insurance simple and affordable for every California family and small business. Here are the five mistakes to steer clear of when buying health insurance—and how to make smarter choices from the start.

Why People Overpay or End Up With the Wrong Health Plan

Finding the right health insurance can feel like navigating a maze. It's no surprise that many people make choices that leave them either underinsured, overpaying, or simply frustrated. These common health insurance problems often stem from a few core misunderstandings about how coverage works and what really drives costs.

How Confusion About Terms Leads to Costly Choices

Health insurance has its own language, with terms like "deductible," "coinsurance," and "out-of-pocket maximum." When these terms aren't fully understood, it's easy to make a decision based on incomplete information. For instance, someone might choose a plan with a very low monthly premium, not realizing it comes with a $9,000 deductible. If a medical emergency happens, they are suddenly faced with a massive bill they weren't prepared for. This confusion is one of the primary reasons people experience financial strain, even when they have insurance.

The Real Cost of Picking the Wrong Coverage Level

There are two sides to this coin. Some people buy too little coverage to save money on premiums, leaving them dangerously exposed to high costs if they get sick or injured. An accident or a serious diagnosis can lead to bills that far exceed what they saved on premiums.

On the other hand, some people buy too much coverage. A healthy young person might not need a top-tier Platinum PPO plan with an extremely low deductible. They could be overpaying by hundreds of dollars each month for benefits they are unlikely to use. The key is matching the coverage level to your specific health needs and financial situation.

Why Rushing Through Enrollment Can Hurt Later

Open Enrollment periods can feel hectic, and it’s tempting to just pick a plan quickly or let your old one auto-renew without a second thought. However, rushing this decision is a significant misstep. Insurance plans, provider networks, and your own health needs can change from year to year. A plan that was perfect last year might not be the best fit this year. Taking the time to review your options carefully prevents a year's worth of regret and ensures your coverage keeps up with your life.

Mistake #1 – Choosing a Plan Based Only on the Monthly Premium

The monthly premium is the most visible cost of any health insurance plan, so it's natural to gravitate toward the lowest number. However, this is one of the most common and costly health insurance mistakes you can make. The premium is only one piece of the puzzle, and it often has an inverse relationship with your other costs.

The Hidden Costs Behind “Low Premium” Plans

Plans with very low monthly premiums, often called "catastrophic" or Bronze-level plans, are designed to protect you from worst-case scenarios. They come with very high deductibles and out-of-pocket maximums. This means you will have to pay for nearly all of your medical care yourself—from doctor visits to lab tests—until you’ve spent thousands of dollars. While your monthly budget might look better, a single unexpected medical event can wipe out those savings in an instant.

Why Deductibles and Copays Matter More Than You Think

Your total healthcare spending is a combination of your premium and your out-of-pocket costs (deductible, copays, and coinsurance). For many people, especially those who see a doctor regularly or have chronic conditions, a plan with a slightly higher premium but lower, more predictable copays and a smaller deductible is actually the more affordable choice. It provides better cash flow and protects you from large, unexpected bills for routine care. Think of it as paying a little more for predictability.

How to Balance Monthly Costs With Real Coverage

The right approach is to look at the total potential cost. Start by estimating your family's likely medical needs for the upcoming year. Then, compare plans by adding the total annual premium to the plan's out-of-pocket maximum. This calculation shows you the absolute most you would have to pay in a worst-case scenario. This helps you compare the true financial risk of a low-premium, high-deductible plan versus a higher-premium, low-deductible one, allowing you to find a balance that fits your budget and risk tolerance.

Mistake #2 – Ignoring Your Network of Doctors and Hospitals

You’ve found a plan with the perfect balance of premiums and deductibles. But there’s a critical question you need to ask before you sign up: Are your doctors in the network? Ignoring the provider network is a recipe for financial disaster and a major disruption to your healthcare continuity.

What “In-Network” Actually Means for Your Bills

An insurance plan's network is the group of doctors, hospitals, specialists, and labs that have a contract with the insurance company. This contract sets pre-negotiated, discounted rates for services. When you use an "in-network" provider, you are charged these lower rates, and your insurance covers a larger portion of the bill.

If you go "out-of-network," the provider has no contract with your insurer. They can charge their full rate, and your insurance will cover very little, if any, of the cost. This is how people end up with "surprise bills" for thousands of dollars.

Why Checking Your Doctor’s Coverage Can Save You Thousands

Let's say you visit your trusted family doctor, not realizing they are out-of-network for your new plan. Your doctor charges $200 for the visit. Your insurance plan might only reimburse you for $50 of that, leaving you to pay the remaining $150. Worse, that $150 might not even count toward your main deductible. For more expensive services like surgery or a hospital stay, going out-of-network can easily result in bills reaching tens of thousands of dollars. Taking five minutes to check the network is one of the highest-return investments you can make when buying health insurance.

How to Verify Network Access Before You Enroll

There are a few reliable ways to do this.

1. Use the Insurer's Online Directory: Every insurance company has a provider search tool on its website. Be sure to search for the specific plan name (e.g., "Blue Shield Gold PPO"), as networks can differ even within the same company.

2. Call the Doctor’s Office: The most foolproof method is to call your doctor’s billing department directly. Ask them, "Do you accept [Plan Name] from [Insurance Company]?" They can give you a definitive yes or no.

3. Work With an Advisor: A local insurance advisor who serves communities like Modesto and the Central Valley will have deep knowledge of which doctors and hospitals participate in which networks, saving you the legwork.

Mistake #3 – Overlooking Prescription Drug Coverage

For millions of Americans, regular prescription medications are a non-negotiable part of their health and budget. Yet, many people forget to investigate how a potential health plan will cover their specific drugs. This oversight can lead to paying hundreds or even thousands of dollars more than expected each year.

How Formularies Determine What You’ll Pay

Every insurance plan has a list of covered prescription drugs called a formulary. This is not a simple "yes" or "no" list. Drugs on the formulary are sorted into tiers.

• Tier 1: Typically includes generic drugs with the lowest copays.

• Tier 2: Includes preferred brand-name drugs with a medium copay.

• Tier 3: Includes non-preferred brand-name drugs with a higher copay.

• Specialty Tier: Includes very high-cost drugs for complex conditions, which often have very high coinsurance instead of a copay.

A drug that costs you a $10 copay on one plan might cost you 50% of its price on another, or it may not be covered at all.

Common Medications That May Not Be Covered

Don't assume that a common medication will be covered. Insurers frequently adjust their formularies. A drug that was a preferred brand last year might be non-preferred this year if a cheaper generic alternative becomes available. Some plans might require "prior authorization" (special approval from the insurer) or "step therapy" (requiring you to try a cheaper drug first) before they will cover a more expensive medication.

What to Ask Before Choosing a Plan With Prescriptions

Before you commit to a plan, make a list of all the medications your family members take. Then, use the insurance company’s online tools to look up each drug on the plan’s formulary. Find out:

• Is the drug on the formulary?

• What tier is it in, and what will my copay or coinsurance be?

• Are there any restrictions, like prior authorization or quantity limits?

Answering these questions upfront is essential for anyone who relies on prescription medications.

Mistake #4 – Not Comparing Multiple Health Insurance Carriers

Many people get a quote from one well-known insurance company and call it a day. Others simply enroll in the plan their employer offers without looking at other options. This is a missed opportunity because not all carriers are created equal. Different companies can offer vastly different prices and benefits for similar plans.

Why Every Carrier Prices Risk Differently

Each insurance carrier has its own way of assessing risk and its own negotiated rates with provider networks. One company might have a strong network in Northern California and offer competitive prices there, while another might be more competitive in Southern California. One might offer better rates for young, healthy individuals, while another is better for families. You won't know which company offers the best value for your specific needs until you compare them side-by-side.

The Benefits of Using an Independent Local Advisor

This is where an independent insurance advisor shines. Unlike a "captive" agent who only works for one company, an independent advisor represents multiple carriers. They can pull quotes from all the major players in the California market—like Blue Shield, Anthem, Health Net, and others—in a single step. They do the shopping for you, providing an unbiased view of the landscape. This saves you an enormous amount of time and gives you confidence that you are seeing the best options available.

How Comparing Plans Helps You Spot Hidden Value

When you compare plans from different carriers, you start to see the nuances. One plan might have a slightly higher premium but include rich dental and vision benefits for children. Another might have a larger network that includes a top-rated hospital you prefer. A third might offer wellness perks like gym membership discounts. Comparing plans helps you look beyond the basic costs and find the hidden value that makes a plan a truly great fit for your family.

Mistake #5 – Waiting Too Long to Review or Update Your Coverage

Health insurance is not a "set it and forget it" product. Your life changes, and your health insurance plan should change with it. Many people make the mistake of letting their plan auto-renew year after year without giving it a second thought, potentially missing out on better coverage or significant savings.

How Life Changes Affect Your Plan Needs

Think about what can happen in a year. You might get married, have a baby, have a child move out, or develop a new health condition. Any of these life changes can dramatically alter the type of health plan that's right for you. A plan that was perfect for a single person is not going to be adequate for a new family. A new diagnosis might make a low-deductible plan a much smarter choice.

The Importance of Reviewing Coverage Every Year

Even if your life hasn't changed, insurance plans do. Every year during Open Enrollment, insurers can change their premiums, deductibles, provider networks, and drug formularies. The plan that had your doctor in-network last year might not this year. A better, more affordable plan may have entered the market. An annual review is your opportunity to make sure your plan is still the best option for you.

When and How to Make Changes During Open Enrollment

Open Enrollment is the period each fall when you can freely enroll in a new health plan or change your existing one. In California, this is the primary window to make adjustments for the upcoming year. This is your chance to act on your annual review. You can switch from an HMO to a PPO, choose a plan with a lower deductible, or move to a different carrier altogether. Missing this window means you are generally locked into your plan for another year.

Bonus Mistake – Forgetting About Dental, Vision, and Life Coverage

When focused on the complexities of medical insurance, it's easy to forget about other critical forms of protection. A standard health insurance plan does not cover routine dental care or vision exams for adults. Forgetting these supplemental plans can leave a significant gap in your family's overall health and financial security.

Why Basic Medical Coverage Isn’t Always Enough

Good health goes beyond doctor visits. Oral health is closely linked to overall health, and regular dental cleanings can prevent more serious and costly problems. Likewise, routine eye exams can detect not only vision issues but also early signs of other diseases like diabetes. Life insurance provides a vital financial safety net to ensure your family is protected if the unexpected happens.

How Add-On Plans Protect Your Whole Family

Purchasing separate dental and vision plans is an affordable way to ensure everyone in the family gets the routine care they need, from cleanings and fillings to new glasses and contacts. Life insurance provides peace of mind, knowing that your loved ones won't face a financial crisis on top of an emotional one. These plans work together to create a comprehensive shield for your family's well-being.

The Benefits of Bundling Coverage for Savings

Many people don't realize that they can often save money by bundling their insurance plans. Some carriers offer discounts when you purchase health, dental, and vision insurance together. Working with an advisor can help you find these bundled deals, simplifying your bills and lowering your overall costs while ensuring your family is fully protected.

How to Avoid These Mistakes When Buying Health Insurance

Now that you know what to watch out for, here are a few simple, actionable buying insurance tips to help you make a confident choice.

Compare Costs and Coverage — Not Just Prices

Look at the whole picture. Create a simple spreadsheet to compare the annual premium, deductible, out-of-pocket maximum, and copays for your top 2-3 plan choices. This will give you a much clearer sense of the true cost and value of each option.

Verify Network Access and Preventive Benefits

Before you make a final decision, double-check that your must-have doctors, specialists, and hospitals are in the plan's network. Also, confirm that the plan covers key preventive care benefits at no cost, as this is a valuable feature that helps you stay healthy.

Get Personalized Advice From a Licensed Advisor

You don't have to do this alone. A licensed, independent insurance advisor can be your greatest asset. They can answer your questions, run comparisons for you, and offer personalized recommendations based on your unique needs. Their services are typically free to you, as they are compensated by the insurance carriers.

Frequently Asked Questions About Buying Health Insurance

Here are answers to a few common questions that come up during the insurance shopping process.

When is the best time to buy health insurance?

The main time to buy or change your health insurance is during the annual Open Enrollment period in the fall. This is when anyone can sign up for coverage for the following year.

How do I know if my plan covers my medications?

The best way is to look up your specific medications on the plan's formulary, which is usually available on the insurance company's website. You can see if the drug is covered and what your cost will be.

Can I switch plans midyear if my situation changes?

Yes, if you have a Qualifying Life Event (QLE). These include events like getting married, having a baby, losing other health coverage, or moving to a new zip code. A QLE opens a Special Enrollment Period, allowing you to change your plan outside of Open Enrollment.

What documents do I need to apply for coverage?

You will typically need Social Security numbers, birth dates, and income information (like pay stubs or W-2s) for everyone in your household who needs coverage. If applying for subsidies, you may need more detailed income documentation.

Avoid These Mistakes by Letting TSM Compare Plans for You

Choosing a health plan is a major decision, but it doesn’t have to be a stressful one. You can avoid these common mistakes by working with a local expert who knows the California insurance market inside and out. The advisors at TSM Insurance are here to help you compare plans from top carriers, explain your options in plain English, and find the right coverage for your family’s needs and budget—at no extra cost to you.

Let us handle the hard work so you can make a confident choice.