insurance

How to Save Money on Health Insurance

14 Minute Read

Do you want to save money on health insurance? You’re not alone.

For most of us, health care costs seem to increase every year, and saving money on health insurance feels more and more out of reach. The typical American family of four paid more than $7,100 in health insurance premiums in 2017.(1) That doesn’t include out-of-pocket costs.

Total medical costs—including premiums paid by employer, employee, and out-of-pocket costs—come to a grand total of nearly $27,000 for the typical American family of four on an average employer-sponsored plan.(2)

But if you think the high cost of health insurance gives you an excuse not to have it, think again! According to the Kaiser Family Foundation, medical debt contributes to nearly half of all bankruptcies in America.(3) Not having the right health insurance in place for you and your family sets you up for a financial disaster. And when you’re faced with a medical crisis, the last thing you need to worry about is how you’re going to pay for it.

Having health insurance may be a non-negotiable, but there are proactive steps you can take to save money on health care. Let’s start by looking at the ways your health insurance costs can add up before we show you how to save money on health insurance!

Related: Wondering what insurance you need to have in place to safeguard your family and assets? Here are the types of insurance you can’t afford to go without.

What Are Health Insurance Costs?

First of all, let’s talk about the different ways you might encounter health care costs. Sure, you pay your health insurance premium every month, but there’s more to it than that. You also owe money out-of-pocket for specific types of care.

Understanding how your health insurance works can be confusing, so let’s dig in.

What is a health insurance premium?

A health insurance premium is the amount that you pay every month for your health insurance coverage.(4) This may be the health care cost you’re most familiar with because you pay it every month, whether or not you had health-related services during that time period.

How much is the average health insurance premium? The average family of four pays nearly $600 per month in premium costs, but that amount varies depending on your specific health care plan.(5)

What’s a co-pay?

A co-pay is flat rate you pay for specific health care services.(6) If you go to your primary care physician and have a $45 co-pay, you will owe $45 at the time of your visit. It’s best to do your research beforehand so you know exactly what to expect.

Each health insurance plan can be different when it comes co-pays. Depending on the particulars of your plan, your co-pay could apply to doctor visits, walk-in clinics, emergency rooms, or prescriptions.

What is a deductible?

A deductible is the amount you are expected to pay per year for health services before your insurance plan starts to cover a large portion of your expenses.(7) As an example: If your deductible is $1,500, you are responsible for paying for the first $1,500 of the total costs.

Keep in mind that there are some health care services that will be covered by your insurance, even if you haven’t hit your deductible. And in most plans, a co-pay doesn’t count toward your deductible. The specifics can vary depending on your health insurance plan, so that’s why it’s important to understand exactly what it offers.

What is coinsurance?

Once you hit your deductible, your health insurance plan may not pick up 100% of the remaining cost. Instead, you may be responsible for a percentage of the costs until your insurance does pick up 100%. The percentage of health care services you are responsible for paying is called coinsurance.(8)

Imagine that your coinsurance is 15%. That means you are responsible for 15% of the cost after your deductible. Your insurance company covers the remaining 85%. For example: If you’ve hit your deductible and you have a $200 health care charge, you owe $30.

What is an out-of-pocket maximum?

An out-of-pocket maximum is the most you have to spend on health care services in a year before your insurance plan picks up 100% of the remaining costs. As an example, the 2017 out-of-pocket limit for a Health Insurance Marketplace individual plan is $7,150 and $14,300 for a family plan.(9)

How does all of that break down? Let’s take a look. Amy, a 28-year-old single professional, loves playing tennis when she’s not working. It’s all fun and games until she injures her knee, sending her to the emergency room. She has a $2,000 deductible with 30% coinsurance and an out-of-pocket maximum of $7,150. Since she needed surgery, her medical costs total to $30,000.

What should Amy expect to pay? Let’s take a closer look.

  1. First, she’ll pay the $2,000 it takes to meet her deductible.

  2. Her 30% coinsurance means, for the remainder of the costs ($28,000), she’ll owe $8,400. That brings her total costs up to $10,400.

  3. But because Amy’s out-of-pocket maximum is $7,150, she’ll only be responsible for that amount. Her insurance company covers 100% of the rest.

Even with her health insurance, that trip to the emergency room still costs Amy a pretty penny. That’s why she’s glad she had cash on hand to cover the cost without going into debt. A couple months and several physical therapy sessions later, she’s back on the tennis court with a completely replenished emergency fund!

Tips for How to Save Money on Health Insurance

At this point, you may be thinking, That sounds like a lot of ways to spend money on health insurance! How can I be saving money? Great question. Lucky for you, we’ve got some answers. These five simple tips can help you keep your health care costs down.

#1: Check Out Your Options at Work

Your first tip for saving money on insurance is to actually know your options, and those will vary depending on whether your workplace offers health insurance benefits or if you’re exploring individual plans. Let’s start there.

If your workplace offers health insurance benefits, that’s the first place to look. In 2016, employer-based insurance covered 55.7% of the population in the United States, so by far, it’s the most common scenario.(10) Your employer-paid group plan may have more limited options—usually a few different plan options within the same health care company. But your employer also shares the cost of premiums with you, which helps you save money.

Advantages of employer-paid group plans:

  • Your employer shares in the cost of premiums with you.

  • Your premium contributions can be made pretax (as well as contributions from your employer). That translates to tax savings for you come April.

  • Your employer chooses the health insurance company and plan options.

If your workplace does not offer health insurance benefits or if you’re self-employed, partnering with a health insurance pro makes it easier to know your options. And just because you don’t have health insurance through an employer doesn’t mean you have a spend an arm and a leg on insurance costs. A pro can help you pick the right plan that works for your needs and your budget.

Advantages of individual plans:

  • You get to choose the insurance company and plan that works best for you.
  • You can change jobs without losing your insurance coverage.
  • You can choose a plan that allows you to see the doctors you want.

Related: Expecting a baby? Here’s what you need to know about your health insurance during pregnancy.

#2: Know How Different Plans Work

There are three different ways to categorize health insurance plan options. You may have heard of them before, but knowing how the difference affects your health insurance cost can be complex.

Health Insurance Network Types

There are four different network types, also known as managed care plans. What does that mean? Simply put, it means that each of these types uses a specific network of providers. These providers agree to a lower cost of service in exchange for having access to the network plan members.

What are the four network types?

  • Health maintenance organizations (HMOs) – An HMO provides access to certain physicians, clinics, and hospitals in its network. To be eligible for an HMO plan, you may have to live or work in in a particular service area. Your health care is only covered by insurance if you stay within your network of providers.

  • Preferred provider organizations (PPOs) – If you use a PPO insurance plan, you pay less when you choose from a network of providers. You can get out-of-network care without a referral from your primary care physician, but it will be at a higher cost..

  • Point-of-service (POS) – With a POS plan, you may be required to choose a specific primary care physician, who will have to refer you to specialists for care, if needed. You can receive care from physicians out of your network, but with increased out-of-pocket costs.

  • Exclusive provider organizations (EPOs) – If you have an EPO plan, services are covered only when you use providers in your plan’s network, unless it’s an emergency..

Health Insurance Tiered Plans

Some plans are classified by tiers, which estimate the costs you pay out-of-pocket compared to what your insurance covers. Plans with lower out-of-pocket costs will generally have high monthly premiums. Plans with higher out-of-pocket costs usually have much lower monthly premiums.(11)

How do you know which tier is best for you? There are a lot of factors involved, which is why it’s always a great idea to work with a health insurance pro who can help you choose the right option for your particular situation.

High Deductible Health Plan (HDHP)

The third classification for health care plans is the high deductible health plan (HDHP). A HDHP is simply a plan with a higher deductible, compared to traditional health insurance plans. According to the IRS, a health insurance plan with a deductible of at least $1,300 for an individual or $2,600 for a family qualifies as a HDHP.(12)

High deductible plans offer lower monthly premiums, helping you save money over the long-haul. What’s the downside? With a HDHP, you will have a higher deductible and things like dental, vision, and prescription drugs may not be fully covered. The good news is there are still lots of ways to save money with a HDHP, including the option to take advantage of tax-free savings for health care expenses by utilizing a Health Savings Account (HSA).

#3: Take Advantage of a Health Savings Account (HSA)

An HSA allows you to contribute money to a savings account dedicated to health care costs tax-free.(13) Using an HSA can be a great way to save money on health insurance costs, if it’s available to you.

Here are four reasons to consider an HSA:

  1. You can take advantage of tax-free contributions.
  2. Lower monthly premiums help you save money.
  3. Your contributions roll over year-to-year.
  4. You can invest your HSA funds so they grow over the long-term.

When you use pretax money to pay for co-pays and health care costs before you hit your deductible, you can reduce your overall health care costs. Even Dave takes advantage of the tax savings by using an HSA! Here’s why Dave recommends using an HSA for your health care costs:

When you use an HSA, not only do you get the benefit of tax-free contributions and withdrawals for health care costs, you are also eligible for a tax deduction. In 2017, you can deduct your HSA contributions up to $3,400 for singles and $6,750 for married couples.(14)

Having a higher deductible may seem scary, but when you already have the money on hand in your HSA to cover an emergency, it’s no problem. An HSA is an especially great plan if you are generally healthy. You’ll also be taking advantage of lower monthly premiums, and you’ll be able to use tax-free savings to cover any out-of-pocket health care costs.

#4: Stay In-Network When You Can

In nearly all circumstances, you’ll save money by using physicians, clinics, and hospitals that are in your health care plan’s network. When you use in-network care, you can take advantage of the relationship that your plan has with certain care providers. These providers agree to lower fees on services in exchange for having access to the plan’s network members.

Depending on which health care plan you have, your costs for out-of-network care could vary.

  • If you have a HMO or EPO plan, it’s likely you will be responsible for the entire cost of care from an out-of-network provider.

  • Do you have a PPO or POS plan? Your insurance may still cover part of your care. But since your overall costs weren’t discounted, the amount you owe will be higher—even after your insurance chips in.

Let’s take a look at an example:

Stephen visited an in-network physician when he started experiencing flu-like symptoms. The charge was $200. Because his plan has a discounted rate with that doctor, he got a $50 discount on the service. His insurance covered $130, leaving him with a $20 bill to pay.

If Stephen had chosen an out-of-network provider for the same service, he wouldn’t have received a discount on the overall costs. Even if his insurance covered the same $130, he would be responsible for paying the remainder, which in this example would be $70. Stephen can visit an out-of-network provider if that’s his preference, but he should be prepared to pay extra.

If you can stay in-network for your health care, do it. It’s an easy way to save on your overall health care costs.

The responsibility of making sure your provider is in-network falls on you, so it’s important to ask the right questions on the front end. Just because a clinic accepts your insurance doesn’t mean that they are in-network. If you want to verify that a provider is in-network, call the customer service number for your insurance company.

What is “balance billing”?

When you work with an in-network provider, they have agreed to certain discounted rates on services. However, when you see an out-of-network provider, they can charge full price and bill you for anything that your insurance company doesn’t cover. The term balance billing refers to your provider’s ability to bill you for that remaining balance.(15)

What should you do if you get billed for more than you think you owe?

Your first step is to double-check the math. Sometimes errors are made, either on your end or in your provider’s billing department. If you think there may have been an error, simply call your provider and explain that you think you may have been incorrectly billed.

It’s also a great idea to talk to an insurance pro, who can help you make sure that you understand your insurance bills correctly. Your insurance pro is your best advocate when it comes to navigating complex health care costs.

#5: Work With a Health Insurance Pro

A health insurance broker can help you find the best plan for your budget and your family’s needs. Understanding your health insurance is complicated, so why not partner with an expert?

An insurance pro can:

  • Help you review and compare your health care plan options
  • Show you how co-pays and deductibles affect your overall health care costs
  • Help you know if a tax-favored option like an HSA is right for you
  • Navigate complex situations if you encounter unforeseen costs like balance billing
  • Advocate for your best interests

Our Endorsed Local Provider program makes it simple and easy to find quality professionals in your local area. We want you to be confident about your health insurance, and our ELPs can guide you through the process of choosing the right coverage and save money on health insurance costs.

Find a health insurance pro today!

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