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.