Health Insurance

Health insurance is a pit that makes money disappear.  I have seen that proven over and over.

However, I have seen that the LACK of health insurance is an even larger pit that not only makes money disappear, but many times it leads to bankruptcy or worse – a failure to diagnose a major health issue.

Health insurance is costly, but I wanted to share some tips that might help you save money as you acquire insurance or evaluate your current coverage.

  • Consider a High Deductible Health Plan.  An HDHP usually has a deductible of $2,500 or greater.  The insurance will not pay a dime for most items until the policy holder has paid an amount equal to the deductible.  After the deductible is reached, some plans pay 100% of the rest, other plans might require the policy holder to continue to pay a certain percentage.  Why is a HDHP good?  Because it is much cheaper because the policy holder has assumed more risk.  If you have a healthy family, a higher deductible can be a good risk to take because the deductible is not guaranteed to happen.  The premium is guaranteed to happen!
  • Purchase insurance with a Health Savings Account.  Health savings accounts allow one to save money on their health care expenses because the money can be used tax-free for healthcare-related expenses.  Think about it for a minute.  If a doctors appointment costs you $70 and you have to pay for it, it actually costs MORE than $70.  Why?  Because the $70 is AFTER you have paid payroll and income taxes.  You had to earn about $100 to net home $70.  If you have a HSA, you are able to use BEFORE TAX money which stretches your money about 30%!
  • Shop around.  There are a myriad of insurance plans available.  I personally shopped mine around on eHealthInsurance and with a local independent insurance agent.  I got a pretty good deal on a $5,000 Deductible Major Medical plan with a HSA.  After I spend $5,000 in the year, my insurance plan will pay 100% of the rest.
  • Compare GUARANTEED costs and MAXIMUM costs.  The premiums are guaranteed to happen.  Take the monthly cost and multiply it by 12 to obtain an annual cost.  Let's say a plan has a monthly cost of $250 and a deductible of $5,000 and the insurance will pay 100% after the deductible is met.  The guaranteed cost is $3,000 ($250 x 12 months).  The maximum cost would be $8,000 ($3,000 premiums PLUS $5,000 deductible).  I personally make it an objective to fund my HSA with an amount equal to the maximum cost so that when a major medical event occurs (baby!), I will have the funds ready to roll.

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4 Responses to “Health Insurance”

  1. Sandy June 23, 2009 at 6:54 am #

    Can you pay your premium with an HSA? I know that premiums are deducted from payroll pretax, but didn’t know if there was an alternate way to pay for it. Hmm…

  2. Dan June 23, 2009 at 8:00 am #

    How would you fund maternity if you are self insured with a HDHP HSA? Prepayment at hospital? The monthly premium?

    Thoughts if mom has complications and baby has complications?

  3. Lori Capace June 23, 2009 at 4:40 pm #

    Heath Ins. has always been a nagging need. That is one thing I desire not to have to worry about. We reached the point a couple of months ago to at least purchase health ins. for one of us. Then we received our new premiums for wind and hail (we live within 12 miles of the coast) an over 40% increase and auto ins. (we now have a teenage driver unable until recently to get a job) add about $2000 annually. Ouch! Not giving up though! Thanks so much for your encouragement, tools and tips!

  4. Michael B August 13, 2010 at 10:59 am #

    @Sandy There are 3 circumstances that I know of where you can use funds in an HSA account to pay premiums:

    1) if the HDHP premium is part of a COBRA continuation coverage,

    2) if you (the HSA owner) are currently receiving unemployment under a state or federal program, and

    3)if the HSA owner is over age 65 and using the HSA to pay for medicare or an employer sponsored health plan.

    You can also use your HSA to pay long term care premiums as well.

    @Dan Prenatal and Postnatal care are qualified expenses from HSA accounts. I personally haven’t seen an individual HDHP plan has maternity…it’s usually a benefit reserved for Group coverage. I would imagine that Joe would recommend you saving and using your emergency fund to pay for the pregnancy. Complications with pregnancy should be applicable to your deductible and thus, be qualified expenses as well.

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