10 Ways to Slash Your Health Plan Costs
Buying affordable, low-cost health insurance requires knowledge of all possible cost-cutting strategies. Discover the best strategies to health plan affordability.
By reviewing the following information you will:
- Know how to use deductible and maximum out-of-pocket choices to significantly reduce your health plan costs.
- Evaluate your prescription drug choices to reduce costs.
- Use multiple plans to your cost advantage.
- Pay for your deductible with pre-tax income (it's like and IRA for health insurance).
- Get tips for completing your health insurance application that can reduce your costs.
- Learn how personal health choices lead to low-cost health insurance.
- Get low-cost health insurance quotes.
Managing your health insurance plan for low cost
1. Slash your health plan expenses by choosing a low-cost health insurance plan.
The type of health insurance plan you choose has the initial impact on cost. Generally, fee-for-service plans tend to be the most expensive because of the free choice of doctors. HMO plans are beginning to incorporate more elements which allow you to control costs. But PPO plans offer the most options for cost control. You will find the greatest number of low-cost health insurance plans in the PPO category.
Managing key parts of your health plan is the most direct way to low-cost health insurance. Unfortunately, the tradeoff is that you must bear more of the cost of your everyday medical care. Does this make sense financially?
If your budget requires that you keep your health plan costs low, the first concern is the big, unexpected medical problem that will wipe you out financially if you are not protected. Trade off the everyday expenses for protection against the big expense. That makes sense!
The parts of a health insurance plan where you can make choices that result in cost savings are:
- The amount of the deductible per year.
- The amount of the maximum out-of-pocket cost per year.
- The percentage of co-insurance.
- Whether there are co-pays for doctor office visits and other services such as x-rays or emergency room visits.
- Whether there is a prescription drug benefit, and if so, whether it is for brand name, generic, or specific plan-accepted (formulary) drugs.
- Whether there is coverage for maternity, dental or vision care.
2. Slash your health plan expenses by increasing your deductible and maximum out-of pocket amounts.
The two factors that have the greatest impact on your health plan costs are the amount of your deductible and the amount of your maximum out-of pocket costs per year. The simple formula for cutting costs is this: the higher your deductible and maximum out-of-pocket, the lower your costs. Deductibles can range from about $250 to $10,000 or more per member and maximum out-of-pocket costs from about $2,500 to $7,500 per member.
The least expensive PPO plans will generally have deductibles of $2,500 to $5,000 per member and maximum out-of-pocket costs ranging between $5,000 and $7,500 per member (often with a limit of two members) per year.
By choosing as high a deductible as you can reasonably afford, your plan costs will drop significantly. Of course, you will pay for all of your medical expenses, up to the amount of the deductible, before your plan kicks in. But if you don't spend very much in medical costs during the year, it may make sense to consider a high deductible for your plan. If you total up your medical costs for the past year, the results will come in handy as we look at an example.
The following example is based on a 40 year old male non-smoker with quotes from one company to compare apples to apples:
Note: These plans all have prescription drug and maternity benefits.
As you can see, Plan C would cost $2,580 more per year than Plan A with the higher deductible. The difference in deductibles in $4,500. That means in Plan C you are paying $2,580 more in premium to protect $4,500 in out-of-pocket expenses. You need quite a few everyday expenses for that to make sense. If you check your usage of medical services over the past two years, it will give you a good idea of whether it makes sense to increase your deductibles and maximum out-of-pocket limits.
Again, when comparing plans from different companies, be sure to check whether the deductible is included in your maximum out-of-pocket rather than added to it.
One additional thing to keep in mind is that when insurance companies raise rates as they most regularly do, plans with the lowest deductibles usually get a greater percentage rate increase.
3. Slash your health plan expenses - increase co-insurance and pay for doctor office visits.
There are other low-cost health insurance plans with further reductions when they don't pay for doctor office visits until you meet your deductible. You can also find plans with higher co-insurance, say 60/40 instead of 80/20 or 70/30, at further reduced costs. Again this is a matter of shouldering more of your everyday medical expenses yourself until you reach the maximum-out-of-pocket limit. At that point your costs are 100% covered.
If you require frequent visits to your doctor or have a young family with planned additions, it may not make financial sense to use this method.
4. Slash your health plan expenses - remove coverage that you don't need.
If you are healthy and taking no prescription drugs, you can further reduce your costs by selecting a plan without a prescription drug benefit. If you do take prescription drugs, to keep costs down consider a drug benefit that only uses generic rather than brand name drugs.
If you are not expecting to have additional children, eliminating a maternity benefit can significantly reduce your costs. If you are still able to bear children, be careful with this one! Surprises do happen!
5. Slash your health plan expenses - buy group health insurance.
In most cases, the cheapest way to buy health insurance is through a group plan. Many people get their health insurance through employer-sponsored group health plans. If you are self-employed with one person working for you (even if it's a spouse) you can purchase a small group health plan and not be denied because of your health.
If you can't get group health insurance through an employer, there are opportunities for group health through professional associations. For instance, if you are in the fields of engineering, computer science and information technology, physical sciences, biological and medical sciences, mathematics, technical communications, education, management, law and policy, you can join the IEEE, Institute of Electrical and Electronics Engineers, and once a member for two years, be eligible to apply for their group health plan.
Many other opportunities for group health through associations are available, so research any special groups that you could be connected with to see what the possibilities are. One word of caution! Associations are easier prey for fly-by-night insurance companies. Be sure and check out the company behind any association plan, especially if there have been changes in providers. Really do your homework here.
6. Slash your health plan expenses through tax savings by using a Health Savings Account (HSA).
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 added new IRS Code section 223, Health Savings Accounts (HSAs), that permits eligible individuals (almost anyone) to establish HSAs after December 31, 2003. HSAs, used in combination with a high deductible health plan, receive tax-favored contributions from or for an eligible individual, that are distributed tax free when used to pay qualified medical expenses
An HSA has two components: a high-deductible "qualified" health insurance plan, and a "qualified" health savings account at a bank or other financial company. If you are considering a high deductible health insurance plan, it makes sense to use a plan designed to qualify for an HSA. You can then pay for medical expenses with funds that give you a tax deduction. With the appropriate HSA insurance plan, you can open an HSA savings account with a bank or credit union and make deposits on a tax deductible basis just like a regular IRA.
How much can you deposit in an HSA? Depending on the deductible amount you choose, in 2005 as much as $2,650 for a single and $5,250 for a couple. For those individuals 55 years old or older, the law allows an additional "catch up" deposit. Catch up deposits started at $500 in 2004 and go up by $100 each year, until the maximum catch up amount is reached, which is $1,000. If both the husband and wife are 55 or older, they could both use the catch up provision.
You can access this account by check or debit card to pay medical bills with tax-free money. And wait until you see what expenses your HSA can pay for. If you don't use the funds, they remain in your account and continue to grow without taxation. You can save these funds for future medical bills or retirement income. When we look at quotes, you will see plans designated as HSA plans.
How to save money when completing your health insurance application
When you prepare to fill out and health insurance application, the real work of cost-savings begins. There is nothing that affects your health insurance costs more than your health history. It is not unusual for a insurance company to want ten years of your health history. Be prepared! When you provide your health information, try and look at it from the standpoint of the insurance company. If you give them good and complete information, it reduces their uncertainty and will improve your chances of getting a good "rating" and thus a better price.
7. Slash you health plan costs by telling the complete truth.
Any medical treatment for which your costs have been covered by insurance or that are in your medical records is accessible to an insurance company when you submit an application. If you are thinking about leaving something out, don't. More than likely, the information will be discovered and the worst will be assumed. Even if it slips by and you get treatment later for the same issue after a policy is issued, the company could discover that you have withheld material information and can cancel your policy within the first two years.
Take a more proactive approach by giving the full story. If you have high cholesterol, tell them about it, when it was diagnosed, and that it is being successfully controlled with medication. When you get to the checklist of "things you have been treated for", with those items that you check "yes", include information about the results of treatment and follow up. The more information that you can supply to reduce uncertainty, the better.
Other proactive tips for the application process:
- Let your doctor know that you have applied. If the company is requesting medical records, follow up with your doctor's staff to be sure the information goes out on a timely basis. If you have had a change in doctors, make sure all your records are sent.
- If any kind of physical exam is required, try to schedule it early in the morning on an empty stomach for better vital sign and blood test readings.
Personal health choices that slash your costs
It should come as no surprise that you can save a great deal on your health insurance by doing things to improve your health! A no-brainer, huh? Forgive me for stating the obvious, but we will try to put it in dollar terms.
8. Slash your health insurance costs - quit smoking!
Smoking adds up to 30% more to the cost of your health insurance. In our example above for plan C, that's an extra $1,200 a year. Add that to the cost of cigarettes, a pack-a-day habit runs about $200 a month........ If you want low-cost health insurance, do everything possible to kick the smoking habit.
9. Slash your health plan costs - lose weight!
While there has been considerable progress in reducing smoking rates in the U.S., problems with excessive weight and obesity have increased dramatically. Recent studies indicate that 1 in 3 Americans is overweight and 1 in 5 are obese. Obesity can add significant cost to health insurance coverage or quite possibly result in denied coverage. Considering the increased risks for diabetes, heart problems, etc. it is important to deal with this problem.
10. Slash your health plan costs - control use of alcohol!
Abuse of alcoholic drinks causes as much death and disability as tobacco and high blood pressure. Alcohol is linked to many medical problems, including oral, liver and breast cancers, heart disease, stroke and cirrhosis. In addition, it plays a significant role in many car accidents, drowning, falls, spousal and child abuse and homicides.
Although one might find companies willing to issue individual health insurance in a situation where alcoholism has been successfully treated, a high risk of relapse is assumed. This will probably result in an issued policy being "rated up" at considerably higher cost.
Affordable, low-cost health insurance is possible by employing these cost-cutting strategies. We can now move toward researching the specifics of the health plans which may be most suitable for you on our health quotes page.