How To Lower Your Health Insurance Costs

Everyone wants to save money, so if you can find a way to lower your health insurance costs then that certainly is a bonus considering the expense involved.

If you have other insurance policies, such as those for your home or car, even just being able to reduce the cost that you pay for one of your policies can still make a significant difference to your financial situation. Of course, the best strategy would be to try and reduce how much money you spend on all your insurance policies, as doing so will save you the most amount of money.

In addition, when you try and save money on insurance, this will very often involve taking a look at your existing policy and reviewing the type of coverage that you have.

This can then lead to the discovery of “coverage gaps” where you find out that you are underinsured, or in some cases, you may discover that you are insured for things you no longer need, in which case, you can get rid of that coverage and save yourself even more cash.

Remember, your health comes first.

In this article, we will be looking at some of the things that you can do to reduce how much you are paying for your health care or medical coverage.

Whilst this is certainly a worthwhile exercise to do from a financial perspective, it is important to bear in mind that you should never leave yourself underinsured just for the sake of saving some money.

Although being underinsured can save you a lot of money in the short term, if you ever need to make a claim on your health insurance, it could end up costing you far more than you initially saved should you be forced to cover large uninsured costs by yourself.

So the basic point to remember is that when trying to save money on your medical insurance, save money by getting rid of things which you do not need. But for risks which you are exposed to, make sure that you still have a significant level of coverage to protect you against potential uninsured losses in the future.

Strategies For Reducing Health Care Premiums

Generally, there are three strategies that you can use to lower health insurance costs.

The first involves reducing the amount of coverage that your insurer’s policy provides you with. Although this will ultimately leave you more exposed to uninsured risks, you will benefit from a direct premium credit which will make your policy more affordable.

Another option is to put your money into a health savings account with a high deductible health plan.

Finally, you could opt for a higher health insurance deductible limit, providing you are in reasonably good health and know how to look after yourself.

All of these options will help you to lower your health insurance costs, although there are pros and cons associated with each option. In the rest of this article, we will look at each of these options in more detail, and hopefully, you will then be able to take steps to lower your health insurance costs.

1) How Insured Do You Need To Be?

One of the simplest ways to save money on your medical insurance costs is to only take out the coverage that you need, or if you already have health insurance, remove the coverage that you don’t need. For example, if your health insurance policy provides coverage for maternity, but you know that you are not going to need it, then you can remove it from your policy as doing so will lower your premium costs.

It is recommended that you look carefully over your health insurance policy to see exactly what sort of coverage it is giving you. Take the cover that you need and get rid of the rest. Be careful however not to leave yourself exposed to unnecessary risk just to save money, as it could end up costing you more later on.

Getting advice

If you are not sure about what type of coverage you need, or what is safe to remove from your policy, it is generally a good idea to speak with an insurance adviser or agent and ask them to review your policy with you.

When you meet with your adviser, explain your current living situation to them and any concerns that you may have about your health. They will then tell you what you would benefit from keeping in your policy, and what you could do without.

However, be careful that your adviser really wants to help you and is not just trying to sell you more insurance. If you are in doubt, speak with two or three agents just so that you can get a variety of opinions on your policy and the types of coverages that you would benefit from.

You may in fact find that some agents will recommend that you take on more coverage, but this won’t necessarily mean that they are just trying to make money out of you.

Taking on more coverage options

As was mentioned previously, if you are underinsured then you expose yourself to a greater amount of uninsured financial risk. So by spending more money now to increase your coverage, you could potentially save yourself a lot of money if you ever needed to make a claim to your insurer.

You should only do this however, if two or more insurance advisers recommend that you increase your level of coverage, or if you have used your adviser before and fully trust them.

Making the right choice

The take away message from this is that whilst you can save money on your health care costs by reducing your level of medical coverage, it is also possible to save money by spending more money to get a policy that provides you with greater protection against risk.

So don’t rule out the later option, unless you are in a situation where you currently can’t afford to pay any more than you are currently doing. As the savings which you do ultimately make, should be viewed from both a short and long term time perspective.

2) Save Money By Saving Money!

A health savings account, also called a HSA, is very much like a retirement account except that it is combined with a high deductible health plan, or HDHP.

One of the main advantages of having a health savings plan is that with such a plan, you can pay for your major medical deductible, in addition to certain medical and dental expenses, with pre-tax dollars.

As a result, you effectively end up saving somewhere in the region of 25-30% on your medical and dental bills.

How Does A Health Savings Account (HSA) Work?

Just like your retirement account, any contributions made into a health savings account are tax deductible. In addition to this, any interest earnings are sheltered from tax. This allows you to put money into your health savings account knowing that it is going to grow and that you will receive the maximum benefit from your investments over time.

There is however, a limit on the amount of contributions that you can make towards your health savings account each year. This limit is set by the government and may change each year, although usually, it will increase in line with inflation.

To get the tax benefits associated with a health savings account, you must also have a high deductible health plan that has been approved by the Internal Revenue Service (IRS). This plan must include minimum and maximum deductible options which are also set by the government each year.

As mentioned previously, with your health savings account you can pay various medical expenses, including your deductibles, with money that has not been taxed. This is perhaps the main reason why people take out such a savings plan, as it really does help to save you a lot of money in the long run.

Money that has not yet been used in your health savings account can be left in the account and used later. There is no use it or lose it policy.

Alternatively, you could continue to save money in that account and use it for your retirement alongside your Individual Retirement Account (IRA). But just like with an IRA, when you do withdraw money at retirement time, that money will be subject to tax.

To find out how much money you could potentially save with a HSA plan, you may want to visit this site for more information.

Where Can You Set Up A HSA Plan?

A health savings account can be set up pretty much anywhere you can set up an IRA. For example, you can set up a HSA plan at banks, savings and loans firms, investment houses and insurance companies.

Be sure to shop around though to get the best deal, as you are likely to find many different types of offers.

3) Take Out Higher Deductibles

Another common way to save money on health insurance costs is to have higher deductibles. For example, by increasing your deductible from $300 to $1000, you could save up to 45% on your health insurance costs. A truly massive saving.

This is certainly something worth thinking about, especially if you have a family, because for taking on an extra $700 worth of extra risk you could be saving a lot of money which could then be invested elsewhere.

Do not however, just go for the largest deductible immediately, as it is a lot harder to lower your deductible once it has been set, but it is much easier to raise it later on. Not everyone can afford to carry the extra risk that a higher deductible brings, and so this is something that you must be absolutely certain of before making a firm commitment to.

Also, it is worth bearing in mind that the deductible you pay can be affected by your current state of health and the health of your family. Individuals who are deemed to be high risk medically, such as smokers or people who are obese, are likely to find that their health insurance costs are higher than average.

Unfortunately, this then limits what steps you can take to lower your health insurance costs, unless of course, you are willing to change the type of lifestyle that you live if doing so will bring clear benefits to your health and your finances.

Is a higher deductible a good idea?

Overall, taking out a higher deductible is generally a good option for most people. Although be warned that doing so will mean taking on more risk, because you will have to pay your deductible limit first before your insurer steps in to cover any remaining fees or charges.

As a result, if you are frequently making claims on your health care plan, then you could end up paying out more money than you are saving due to your higher deductible limit.

Where higher health care deductibles really make sense, is if you are in reasonably good health and do not visit your doctor or hospital very often. When you do require medical attention, it will therefore usually be for something major like an illness or accident, and so any claims made to your insurer will be for large medical expenses rather than for minor medical expenses.

Other Ways To Lower Health Insurance Costs

The three strategies previously listed, accessing your coverage level, taking out a HSA plan and increasing your deductible limit, are all proven ways to reduce the amount of money that you spend on health insurance.

However, there are some other strategies, as listed below, that you might also want to try out as they too can sometimes prove useful in helping you to reduce your expenses even further.

Lets now have a look at some of these other strategies that you can use.

1) Be A Smart Shopper!

One thing that is definitely worth knowing about any type of insurance coverage is that there are lots and lots of companies trying to sell it to you!

This is good news for you as a consumer, because it means that you have many options to choose from and you will benefit from different insurance companies competing with each other to offer you the best deal.

You can look for good offers in your local high street store, although the best way to find a good deal on health insurance is to search online as you can quickly compare many different policies that are on offer.

2) How Risky Is Your Lifestyle?

Because insurance is all about protecting yourself against risk, it stands to reason that the more risk a person is exposed to the higher their insurance costs are likely to be. This is because from an insurance company’s perspective, that higher risk translates to a higher probability of you needing to make a claim.

In terms of health insurance, you may find that your costs will go up if you participate in any activities which are considered to be risky or dangerous in terms of you suffering bodily damage and requiring medical attention. Contact sports, motorbike or car racing, mountain climbing, skateboarding and working with infectious diseases could all put you in a high risk category and therefore raise your insurance costs.

What you may naturally think of doing if you do participate in risky activities, is simply not to mention them when you apply for your health insurance plan.

This can save you money, but if you end up suffering an injury as a result of one of those activities which you chose not to mention, your insurer may refuse to provide you with any compensation. So be very careful about what you do or do not choose to disclose about your lifestyle.

3) How Healthy Are You?

How healthy you are, and your overall level of fitness, is another signal of risk that insurance companies take into consideration when calculating the cost of your health care plan.

Generally, you will find that the better your level of health is and the younger you are, the lower your costs will be. Of course, the reverse of this is usually also true. So the older you are and the worse your health is, the higher you can expect your health care costs to be.

If you want to reduce health care expenses, it is therefore in your best interest to get as healthy as you can. This will usually involve not smoking, not drinking excessive amounts of alcohol and not being obese. All of these things can be viewed as significant risk factors to your health by insurance companies, and therefore, can also be used as a justification for charging you more.

Reverse risk factors are things you do which are associated with promoting longer life. You may therefore want to exercise more and eat a healthy diet.

However, just thinking that you are healthy may not be enough to lower your costs, as most insurance companies will require that you prove your current state of health if you are claiming that it is better than it used to be.

This will usually involve getting a medical exam or health risk appraisal to check for things such as heart rate, blood pressure and respiratory function. So in most cases, you won’t just be able to say that you are healthier without proving it.

4) Your Driving Record

People who have been involved in a car accident or who have a poor driving record, are usually seen as higher risk individuals and so can be charged more for their health insurance.

If you currently have a clean record, then make sure you keep it that way. If you do not have a clean driving record, just be aware that you could end up paying more for health care as a result.

5) Take Out Private Health Insurance

Private health insurance is usually something that most people who are trying to save money stay away from, as it is usually associated with higher costs and receiving fewer benefits than you would normally get from your employers health plan.

However, this isn’t always the case, as it is possible to get a good deal on private health insurance providing you are willing to put in a lot of time and effort to find yourself the right policy for your needs.

If you are, then you are likely to save yourself money with lower premiums, save money by only paying for the level of coverage that you need and also benefit from the peace of mind that you will still be covered even if you become unemployed.

There are some significant downsides to having private health insurance however, such as less comprehensive coverage and steep rate increases. So having such a policy may not be the best option for everyone.

You can find out more about private health insurance at this website.

6) Change Your Co-Payment Ratio

A co-payment ratio is the proportion of expenses, past your deductible, that you agree to pay. In most cases, this will involve you paying 20% of the post deductible expenses and your insurance company paying 80% of the post deductible expenses.

One way to save money on your health insurance is by changing this ratio so that you agree to pay more, for example, 30/70 or 40/60. You will benefit from having lower health care premiums, but it does mean that when you make a claim that you will end up paying more and your insurer paying less.

Providing you never make a claim on your health insurance, or very rarely make a claim, this could potentially save you a lot of money. But if you make many claims, it could also cost you a lot of money. So use this strategy with caution as it does involve you taking on a significant amount of added risk which some people may not be able to afford.

7) Get Insured With Group Plan Coverage

Most employees tend to assume that the health coverage offered to them by their employer is fixed and can’t be changed.

However, the reality is that if enough employees decide that they do not want certain types of coverage, you can in fact ask your employer to change your policy to get rid of unnecessary coverages to save you money.

Not all employers will be willing to do this, but your chance of successfully lobbying your employer to change your health plan coverage will significantly increase the more of you that there which want the change.

8 ) Have A Mini-Medical Plan

Instead of taking out a full blown health insurance policy, you may in fact just want to insure yourself for minor medical expenses such as doctor visits, prescription drugs, lab work, diagnostic tests and some types of surgery.

Having a mini-medical plan can help to save you a significant amount of money, but be aware that it also exposes you to a large amount of uninsured risk as you will not be insured against major medical expenses. As a result, a mini-medical plan is usually best suited to younger people or those who are in good health and rarely get sick.

An alternative to a mini-medical plan is a major-medical plan. This won’t cover you against small medical costs, but it will do for major medical expenses such as those relating to diseases like cancer and heart disease.