Navigating the world of health insurance is certainly a headache. No one wants to face the astronomical prices of some health insurance coverage. But, at the same time, no one wants to get stuck in a medical emergency where they’ll be left with medical debts they just can’t pay. When it comes to health insurance, there are several options individuals have when they decide what coverage they want to take.
While some employers have fixed coverage, others allow you to choose an option when it comes to your health plan. It might be a frustrating task to undertake, but the good news is that having a choice can be helpful to your overall financial status. And, the right choice might not be the one you think it is. Let’s take a closer look at an option you might not think is a good financial choice and explore the reason you may be wrong!
What Is a High-Deductible Health Plan?
No one likes to consider the thought of paying high premiums for their family health insurance coverage. With the cost of living so high, it might give you an instant headache to think about the monthly bill that will be coming in for your health insurance. The cost of premiums for families rises every year. In fact, over the last 10 years, health insurance premiums for families have increased by 55%. What used to be an easy payroll deduction has turned into a major monthly expense families face every month. Healthcare premiums are now in line with real estate taxes, car payments, and even mortgage interest.
So, why continue to pay high premiums if you don’t require ongoing health services? More and more individuals wonder why they pay $10,000 or more a year for their medical coverage when they only spend a couple thousand in actual cost of care. For most patients, paying high premiums is like an insurance that covers the possibility of major medical crisis. But, other patients are turning away from high premiums for a more affordable option.
If you have low-risk for significant health issues, and don’t have any ongoing medical care needed, you may want to consider another option. High-deductible health plans, also known as HDHP, are the alternative. Under these plans, premiums are as low as $4,500 a year. The catch is that patients are responsible for medical expenses up to a $6,000 deductible. So, in the long-term, you might save a great deal of money if significant medical expenses don’t arise.
How Can I Weight Premium Savings vs. Medical Expense Costs?
Before you make the decision to choose a high-deductible health plan, you should sit down with someone who knows how to weigh the costs vs. savings between your options. If your premium savings can be expected to exceed the projects cost of medical care in a normal year, HDHPs make total sense.
Keep in mind that HDHPs are not suitable for people who require ongoing medical services with costs greater than their premium savings. But, this is a great option for those who only undergo a normal check up every year, and maybe a few specialist visits or ER trips. If you and your financial consultant determine that you might benefit from an HDHP, there are other things to consider.
- Can you treat your healthcare services like an economic decision? Find providers who offer the best value without sacrificing your standard of service. The cost of healthcare should always be considered when you choose an HDHP.
- Find ways to keep yourself healthy. If you’re healthy, you’ll save money! Exercise, eat right, take precautions to remain safe. Keep in the back of your mind that if you don’t, it’ll cost you your money, not just your physical health.
Tax Benefits of HDHPs
Annual savings aren’t the only financial benefits of the HDHP strategy. The savings move beyond medical outflows such as premiums, co-pays, deductibles, and co-insurances. You can establish a health savings account, also called an HSA. This gives you the ability to accumulate the money you need to pay for any qualified medical expenses, while benefitting from the fact that that money is triple tax free.
The government actually offers tax incentives to those who meet some deemed-worthy goal. For example, education spending, retirement, and healthcare spending. With an HAS< you are granted the optimal tax treatment to fund your account, invest your funds, or distribute your funds to qualified medical expenses. Your financial advisor can help you plan ways to make the most of your HSA, navigate the taxation of these funds, and choose the best contribution strategy to meet your needs.
Unfortunately, we live in a time where we not only have to shop around for health insurance, we need to shop around for medical treatment and providers. While it might be stressful to think about navigating this other stressor in your life, we’re all in the same boat. Consider your options and get great financial advice and you’ll be on the road to making the best choice for you and your family.