How to Lower Your Health Insurance Costs
October 8, 2008
Vol. 4, Issue 9
Most people reading this newsletter already know that an HSA is the way to go if you want to lower your overall healthcare expenses. The premiums are lower and the tax benefits make them an even better value. But in financial times like this, it makes sense to explore even more ways that you can save money and lower your premiums.
How Not to Waste Money
I first moved to
In my attempt to save money, I was actually wasting it. Are you doing the same, buying health insurance coverage that you don't really need?
Higher Deductibles = Lower Premiums
One of the first ways you should look at to lower your premium is to take a look at your deductible. The higher your deductible, the lower your premium will be. In my opinion, the deductible should be high enough to give you a low premium, but low enough to pay for from your HSA, or with a credit card if need be. If you have been funding your HSA for a couple years or so, you may have $10,000 or more in your account. If so, it may be time to raise that $2500 deductible to something much higher. Don't be surprised to see your premium cut in half.
The important thing is to maximize your HSA contribution every year. In 2008 you can contribute up to $2900 as an individual, or $5800 as a family, into your health savings account. Not only will this contribution allow you to more comfortably move to a higher deductible, but it will give you a nice tax break, to boot! The maximum deductible available in 2008 is $11,200, and next year that limit goes even higher.
Lower Your Exposure with an Accident Plan
Many people are nervous about choosing a plan with a higher deductible because of the risk of accidents. If you have a child who skateboards, climbs trees, or does strange experiments with his chemistry set, you very well may end up in the emergency room one day, and costs there can add up quickly! That's why most of our clients also include an accident plan with their coverage.
Wiley, increasing his risk of an accident
These plans have a $100 deductible, then cover 100% for medical expenses incurred as a result of an accident (but not a sickness). The plans will cover up to $5000 or $10,000 per accident, enough to cover your deductible so that you have very little exposure. Since you may be more likely to need your coverage for an accident than sickness, this can be a great way to comfortably move to a higher deductible health insurance plan.
Review Your Options Every Year
health insurance marketplace is very competitive. There are dozens of
companies competing for your business, and the advent of instant quote engines
(as found on the HSA
Some people make the mistake of signing up for a plan, and then going several years without looking at it again. Not only do their premiums increase during that period, but often-times a competing company will introduce a plan with much lower rates than were available when you first signed up for your plan. Just this year one of the major providers of HSA-qualified health insurance plans readjusted their rates in many areas, dropping premiums by as much as 40% in some areas.
HSA clients receive a free Annual Comprehensive Policy Review each year, in which we review the competing plans and see if it might make sense for our customers to switch to a different plan. If your broker does not offer this service, you should take it upon yourself to do a quick rate check once per year.
It All Adds Up!
Almost everyone would like to have more money. There are two ways to make this happen - earn more, or spend less. The best way to spend less is to quit wasting money on stuff you don't need. If you have a relatively low deductible on your HSA plan (or even worse, are spending a lot of money on a copay plan), you may want to take a look at your options.
If you can save $80 a month, that's another $1000 a year you can do something with. If you deposit that money in your HSA, it may save you another $200 - $300 off your tax bill. And if you let that $1200 grow tax-deferred in your HSA for the next 20 years, it could be worth $10,000 or more!
P.S. - Next month we'll look at the new world of genetic testing, and how you can use money from your HSA to determine your genetic risks of various diseases.