This is Part IV in a series called Health Insurance for the Self-Employed: When doing what you love doesn’t come with health insurance. The posts in this series focus on the importance of health insurance and finding, evaluating, and enrolling in individual health insurance.
In this last post of the series, I discuss strategies to save money and different ways to access health insurance or find health care. I’ll list a few strategies that I have used in the past. And one that is now possible thanks to a new healthcare law in the U.S.
1) How much of a deductible can you afford? A deductible could be low or high, depending on your needs and how much you are willing or able to pay. One way to save money on your monthly premium is to look for the highest deductible you are comfortable with and enroll in a high-deductible plan. Currently, the minimum annual deductible to be considered “high” is $1500 for individuals and $2500 for families.
You could save the money you would have spent on a higher premium in a savings account. Then you could use that emergency savings to help meet your deductible should you ever need lots of health services one year and reach the maximum.
So generally, the higher the deductible and out-of-pocket maximum, the lower the monthly premium. Be careful. In Part II of this series, I shared a study that found that having health insurance in the U.S. does not protect one from bankruptcy from high medical bills. Having adequate health insurance, with a deductible you could afford, will make it less likely for you to become financially devastated from a major health crisis.
In summary: Know your policy’s deductible, coinsurance maximum, and out-of-pocket maximum. If these are more than you are able to afford, consider paying a higher monthly premium for plans with lower deductibles and maximums.
2) Have you considered a Health Savings Account (HSA)? An HSA is a savings account that allows you to save money for qualified medical expenses to help you cover the cost of services up to your deductible. In addition, income taxes are not taken out of the money you earn and you save in an HSA. If you have a high-deductible plan, you may be able to open an HSA on your own or through an employer.
An HSA and a flexible spending account (FSA) are different. If you do not use all of the money you saved in an FSA that year, then it goes away and you never see it again. Money in an HSA stays there for you until you need it as long as your account is open. This makes the HSA an excellent place to save your emergency health savings to help you meet your deductible obligations should you ever reach the maximum. Here’s a guide on HSAs if you want to learn more, including how and where you can open an HSA.
3) Would you qualify for lower-cost subsidized plans? The U.S. Affordable Care Act will provide health insurance subsidies for people within certain income limits. To see if you would qualify and the amount, the Kaiser Family Foundation developed this subsidy calculator.
Only those making between 1 to 4 times the national poverty level and do not have employer-sponsored health insurance are eligible for subsidized healthcare. For example, my annual income would need to be under $45,960 to be eligible. I got this by multiplying the number of people in my household (one) with the 2013 poverty guideline for a single person ($11,490). Poverty guidelines are changed by the federal government every year.
If you are ready to check out your health insurance options, check out the Health Insurance Marketplace. Don’t worry about doing the calculation like I did above. The Marketplace website will calculate your income limit for you.
4) If you’re thinking of joining your partner or spouse’s policy, consider your options first. Example: My partner’s premium is about $100/month. If I were to go on his policy as a spouse or domestic partner, the premium would increase by $162. However, using ehealthinsurance, I found that health insurance in his state would cost me as little as $58/month as an individual. To decide whether or not I would want to join his policy, I would compare each plan’s benefits. I would look at which services are covered and compare the co-pays, deductibles, and out-of-pocket maximums of his plan and other plans I’m considering.
5) Have you shopped around at different health care providers? Costs for health services may vary dramatically depending on the hospital, even within the same community. Call and shop around for services. A hospital’s billing department should be able to tell you the price of procedures that you are considering.
Knowing the different prices of health services in your area will put you in a better position to negotiate hospital bills. If a hospital near you costs more than one farther away, consider using that fact as a bargaining tool. Also remember other fair pricing resources such as the Fair Health Consumer and the Healthcare Blue Book.
Community centers in your area may offer low-cost or free health services. The U.S. Department of Health and Human Services maintains this database of health centers.
6) Have you considered moving your primary residence to a different state? In Part III of this series, I compared how much health insurance had cost me six years ago with how much an individual policy would cost now. Why was there a $200 price difference between my post-college self and my late-twenties self? Typically, insurance is more expensive for older compared to younger individuals. Also, I was living in the state of New Hampshire when I was quoted the much lower premium. I currently live in Massachusetts, which seems to have costlier plans.
As an experiment, I went back to ehealthinsurance and entered my current age but used my old New Hampshire zip code. My premiums would be between $150 to $290/month if I stilled lived in NH. It varies even more for other states. If I lived in Nevada, my price range of premiums would be $60 to $530/month. I know now that where you live makes a big difference.
8) How about finding student health insurance? Jacob Lund Fisk at Extreme Early Retirement, wrote a post about finding low-cost individual health insurance. A commenter named Dave found another way to save that worked for him. He signed up for a one credit course through his local university. His tuition and student health insurance costs for the year ended up being less than what he would have paid for individual insurance. Being a “student” also gave him access to campus facilities such as the gym and libraries. Whether or not this will work for you will depend a lot on your state and local options.
Bonus) Have you thought of moving to a country with universal health care? This is not something I am considering. But writing this series has made me wonder: What is it like for our fellow bloggers and readers who live in a country where they do not having to worry about individual health insurance options — but do have to pay hefty taxes to receive such a benefit? Below is an email from my friend Steve at The SIlver Maple Leaf about the taxes he pays as a Canadian:
He also sent me a detailed explanation of the monthly medical premium, which is sometimes paid by employers. Many thanks to Steve at The SIlver Maple Leaf for the excellent overview of taxes in Canada. Check out his personal finance blog if you haven’t already!
Some final thoughts and reflections on writing this health insurance series: I have learned more about health insurance than I thought I ever could by writing these four posts. First of all, health insurance is confusing. Some things that I learned were disheartening (Part II). But some things gave me hope (Part IV). And remember: Always balance saving money on health insurance with the level of risk you can afford. I avoided going into a debate about the politics of The Affordable Care Act. From what I can tell, it will help those without affordable health insurance get the care and peace of mind they deserve. Please let me know if there is anything I missed or got wrong. I’m sure there will always be more about health insurance I can learn.
Other posts in this health insurance series:
Part IV: Ways to save on health insurance or health care (current post)