How to Lower Monthly Cost With a High-Deductible Health Plan
At some point, whether you’re buying health insurance independently or signing up for a plan through your employer, you’re probably going to have choices to make. Even when your employer has already worked out some sort of deal with this or that provider, there are still so many types of health insurance to choose from!
Do you want the HMO, the POS, the PPO, or the E-I-E-I-O? Should you and your spouse each have an individual plan from your respective workplaces, or sign up for a family plan at one or the other? And this dental add-on, what’s up with that? And vision? What does vision insurance even cover, anyway?
In the mix of all that is one of the most important decisions you can make. Do you want the high-deductible health plan with the lower monthly premiums? Or do you want the low-deductible plan that cost more each month?
I know what you’re thinking. Why can’t I have the low deductible plan that still costs less each month? I hear you, but that’s not how it currently works, I’m afraid. So, let’s look at the pros and cons of our actual options, shall we?
Let’s Talk Terms
Deductible
This is the amount you pay for health services, even the stuff covered by your plan, before your coverage kicks in. If you have a $1,000 deductible, for example, and have a doctor’s visit early in the year that costs $340 dollars, that’s your responsibility. Until you’ve paid $1,000, you’re essentially paying 100% of your health care expenses.
Even after you’ve hit your deductible, you may be expected to pay a co-pay each time you visit a physician. Your plan may not cover 100% of expenses even after you’ve paid your deductible. Some plans kick in and pay, say, 80% of covered expenses. As always, the details are everything.
Premiums
This the amount you pay each month for your coverage. If your health insurance is through your employer, this may come directly out of your paycheck before you even see it, which is nice. If you get behind on your premiums, however, you can lose your coverage. If you seek treatment during that window, you may have to pay everything yourself. It’s essential to budget appropriate for your health insurance monthly cost.
Whatever your politics, whatever your financial goals, the fact is that high and often unpredictable health care expenses are a fact of life in 21st century America at the moment. Keeping up with your premiums won’t guarantee that you’ll never face difficult medical costs, but it will help – and it’s one part of your health coverage that’s more or less predictable.
I’m still going to talk about higher deductibles in relative terms. There’s a big difference for most of us between a $1,400 deductible and a $5,000 deductible.
Obviously, there are many types of health insurance within this category. (Maybe I should have gone with “high-deductible health plans” – but you get the idea, right?) Generally speaking, however, there are several things to consider before deciding on a high-deductible health plan.
Lower Premiums
First and foremost, of course, is that just like most types of insurance, a higher deductible means you pay lower monthly premiums. The reason for this is straightforward enough – your insurer is less likely to pay as much for your care each year. This is usually an advantage if you’re relatively young and healthy and don’t anticipate needing extensive medical care during the year. Like so many things, this is about making informed guesses about your needs each year, but don’t let that dissuade you. If you have kids or a pre-existing condition, or you just seem to be accident-prone or get sick easily, a high-deductible health plan may not be ideal.
Higher Out-of-Pocket Expenses
If you are in an accident or become seriously ill, you’ll be responsible for more of your medical expenses upfront. Whatever your deductible is, ask yourself if you could come up with that amount in a pinch – preferably without turning to credit cards or other types of high-interest loans. If you have a decent emergency savings of three or four times your deductible, this might still be a pretty good way to go. Of course, none of us want to get sick or injured, let alone pay a lot as a result, but most years (hopefully) that won’t happen. You’ll pay less for your insurance coverage and keep your savings – MOST of the time.
If you’re working your way out of serious debt, or living paycheck to paycheck, don’t choose a high-deductible health plan out of desperation and then simply pray no one gets sick or injured ever again. If even average medical expenses would put you in dire straits financially, better to go with a lower deductible that covers more. It will cost you more, but you can factor it into your monthly budget more predictably.
Health Savings Accounts (HSA)
A health savings account (HSA) is a type of flex-spending account (FSA) dedicated to medical expenses. They typically allow anything you don’t spend during the one year to roll over to the next, which most FSAs do not. These are not to be confused with any Health Reimbursement Arrangements your employer may have set up. You own your HAS, even if your employer organized it to begin with. The money that goes into your Health Savings Account is pre-tax, meaning you’re reducing your taxable income by the amount you commit to your HSA each pay period. When used for qualifying health care expenses, the funds remain tax-free.
An HSA pairs up nicely with a high-deductible health plan. Instead of paying a higher monthly premium, you secure a lower premium with a higher deductible, then invest the difference in your HSA. When you use the funds for qualifying expenses, you’re not using your insurance coverage – you’re effectively using your own savings to pay as you go, and gaining some tax advantages along the way. You still have insurance, however, so if something serious occurs, you have traditional coverage.
Low-Deductible vs. High-Deductible Health Plan
You’d think this would be a relative term; what’s “high” for one person may not seem so “high” for another. Nope. Thanks to Uncle Sam, there’s a specific dollar amount attached to the terms “high-deductible” and “low-deductible.” If you’re on an individual plan with an annual deductible of $1,400 or more, you have a “high-deductible health plan.” If you’re on a couple’s or family plan, a deductible of $2,800 or more makes it a “high-deductible health plan.” Anything below those limits, and congratulations – you have a low-deductible health plan!
Preventative Care Coverage
It’s worth keeping in mind that as long as the Affordable Care Act remains in effect (which it still is, as of this writing), many preventative tests and procedures are 100% covered no matter what your deductible is. In most circumstances, your insurance provider may not even charge you a co-pay for things like…
HIV (AIDS) screening
Immunizations (over a dozen different types)
Lung cancer screening (adults 55 and over)
STD prevention
Help to stop smoking or using tobacco
Services for pregnant or potentially pregnant women, including breastfeeding support, nutritional services, and other specialized care
Services for children, including autism screening, behavioral assessments, hearing checks, etc.
Blood pressure screening
Breast cancer screening and prevention
Cervical cancer screening
Cholesterol screening (after a certain age)
Colorectal cancer screening (ages 50 to 75)
Contraception (within certain limits)
Diabetes (Type 2) screening (qualifying adults ages 40 to 70)
Domestic violence intervention
Falls prevention (adults 65 and over)
Hepatitis B & C screening
You can get more details on these and a list of other covered forms of preventative care at HealthCare.gov.
Are You Less Likely To Seek Medical Care?
Some doctors are reporting an overall reduction in preventative care visits or typical doctor’s visits over the past few years. Their concern is that the growing popularity of high-deductible health plans has patients avoiding medical care because of the expense. This is a tricky balance. It’s not usually necessary to run to your doctor for every sniffle or pain, but when we have low-deductibles and good coverage, it’s more of a temptation to get checked out “just in case.” Running unnecessary tests and all that extra time seeing patients who don’t really need it runs up the cost of health care for everyone.
That said, there’s a reason we have doctors. For all the systemic problems you hear discussed in the news, the U.S. has some of the finest medical care in the world. Plus, as with so many things, the earlier something can be detected and treated, the less severe it usually ends up being over the long-term. I throw my opinion around here quite regularly, but I very rarely try to tell you what to do with your life or your money. I offer things to think about and ideas to consider – that’s my job here. I’m not your mom.
But please hear me on this part: if you need medical care, go get medical care. The longer you put it off, the worse it will usually be. If money is a concern, talk to your doctor’s office about that upfront. They’re not delusional – they know how things are going right now. Chances are, you can work something out.
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Personal Loans for Medical Expenses
Ideally, you won’t ever face medical expenses so steep that you can’t cover them through some combination of your insurance and whatever payment arrangements you can work out with your medical providers. We realize, however, that sometimes things don’t go the way we’d like and that health care expenses can get out of control quickly in some situations.
If you do discover you’re having difficulty with medical bills from multiple sources all coming in at once, it might be worth considering a consolidation loan of sorts specifically aimed at helping you gain some control of those expenses. By totaling up your total medical debt and paying it off with a personal loan, you may be able to get your monthly obligation to something manageable and predictable while protecting your credit. It might even lower your stress levels a bit, which is also good for your health.
We don’t loan out money, but we do maintain a curated database of a wide variety of reputable online lenders. By gathering just a little information on yourself and your needs, we can connect you with someone eager to earn your business and help solve your problem. You can then listen to what they’re offering and decide for yourself whether that’s the right path for you at the moment.
Let’s Sum up about a health care
I’m going to break with proper form and veer off-topic a bit by way of conclusion. I’ll tie it all together at the end, but only as a formality. This is, in effect, a side note. Take it for what it’s worth.
It’s impossible to think about anything health care related without thinking about the pandemic and the impact it’s had on almost every facet of American life. If you or someone close to you works in pretty much any branch of health care in any capacity, you already know how especially draining these events have been for them. I’m not saying things haven’t been weird all over, but working in health care is a special kind of weird in the best of times – and these are not the best of times.
I’m not trying to step on anyone’s political or personal beliefs (maybe next time), but I suspect we can at least agree that your average hospital nurse or family doctor has been slammed this year. Yes, they get paid and they chose this field, but like teachers, firefighters, or financial bloggers, most got into the profession because they genuinely want to help people. That hasn’t been easy this past year, for those on the front lines or those in the upstairs offices trying to keep it all running:
Large medical systems are shifting personnel between states to hard-hit facilities. Hospitals are outbidding one another for temporary health care workers. Retired nurses and doctors are bravely re-assuming duties. And, as last resort, regional medical leaders are appealing to federal emergency and health officials for embeds from the U.S. Public Health Service, Department of Veterans Affairs, and U.S. military.
What’s my point? As we push our way through this year, to some extent we have to take a “life goes on” approach. Hopefully, we have jobs to get to (in person or virtually). Our kids have school (again, in person or virtually). We shop, we eat, we laugh, we argue – even in tough times, we make the best of it because what else are you going to do?
Closing Thoughts
Whether you choose a high-deductible health plan or something with a lower deductible, whether you set up a Health Savings Account or choose to pay out-of-pocket as you go, remember two things about the people you deal with at almost any level of health care – from your local family physician to the nurses in the ER to the specialist whose title you can never remember or pronounce correctly.
First, you can be honest about just about anything with them, and probably should be. Financial arrangements? You might be surprised what you can work out. Weird medical questions? That’s what they’re there for. Be honest and unashamed – it’s OK, they’re all “your doctor” to some extent.
Second, it wouldn’t hurt to be a tiny bit extra kind and patient when you call, when you arrive, when you’re doing paperwork, or when you’re sitting there wondering if they’ve forgotten you and you should get comfortable because you’re spending the night. Even in specialties or positions, you wouldn’t think to have much direct interaction with the Covid-19 madness or the mask arguments or the vaccination kerfuffle have probably been impacted by it more than you realize. I’m not saying you have to bring everyone stickers and cake and put those “HEROES” signs up everywhere – just, you know… take a breath and smile if you can.
If you have questions about insurance options or want to learn more about medical loans, let us know. We’re always here to help.