Wherever one stands on the health care debate, there is no denying that the costs of health care are huge and rising. Being such a major expense, it is critical to understand all the costs involved. By doing so, one can better set to find ways to reduce the burden of the cost of health insurance.
In 2009, the average cost for health insurance for a family of four was $13,375. Even though much of this is paid by employers in large and midsized companies as a benefit to employees, it adds to the cost of hiring workers and is an expense everyone must pay in the end regardless.
Premiums
Premiums are the beast everyone with any kind of insurance must face. It is the money paid to the insurance company in exchange for health and other types of coverage. Those paying these directly rather than having them paid by their employers are particularly aware of the painfully high costs, but the money for expensive medical care has to come from somewhere!
Other health insurance costs
As high as premiums are, they are not the end of the cost of health coverage. With costs rising, almost everyone now must also pay a deductable. This is the portion that those facing medical expenses must pay out-of-pocket (at their own expense) before the insurance company will start to pay. While insurance companies are obviously trying to reduce their payments, another principle behind deductibles is to encourage people to avoid unneeded trips to the doctor and reduce the amount of paperwork required to process smaller claims.
Coinsurance and copayment
There are still more costs though. Depending on the plan, it may be necessary to pay a percentage of any expenses, or coinsurance, even after the full amount of the deductible has been paid for the year. Also, many plans, particularly HMOs, charge a set free for certain types of medical expenses: copayments.
Ways to reduce the average cost of health insurance
Fortunately, there are ways to at least lessen the burden of health insurance. Consider the following:
Stay healthy
Staying healthy can reduce the cost of health care in some plans. Also, with fewer sick days and trips to the hospital, a healthy lifestyle will reduce average out-of-pocket expenses while also lowering the number of paydays lost to being sick. From quitting smoking, exercising and eating healthier, there are a lot of things the average person can do to improve their health. If not for one’s family, consider taking steps to live healthier for the pocketbook!
Increase deductibles
For many, especially those who live healthier lifestyles, it may make sense to increase their deductibles and other out-of-pocket limits. While one should do the math beforehand and estimate their likely costs, most can save more in reduced premiums than will be lost to increased deductibles.
Use managed plans
Some people have negative impressions of HMOs and other managed plans, but they often offer quality health care and lower cost. At least give them serious consideration.
Shop around
Those who have other options such as a spouse’s medical plan can often save by shopping around. Be certain to check out all available options for the best possible price.
Health Savings Accounts
Health savings accounts allow the employed to save part of their income pretax to use for medical expenses. While their rules can be confusing and there are penalties for withdrawing the money for other purposes, they offer great tax savings. They certainly should be used by anyone who is going to have out-of-pocket medical expenses.
Whatever becomes of healthcare in the US, the average cost of health insurance is likely to remain high. Therefore, it will always be important to understand the system as much as possible and look for ways to reduce costs.
