No matter which side of the fence you’re on, I think we can all agree… Our medical system is in dire need of some changes; especially those pertaining to insurance. Do you know the average person pays $450/month for medical insurance? Of course, if you end up having a child or suffering a severe injury, this investment quickly pays for itself, but the majority of healthy millennials aren’t using more than their annual preventative care benefit, and maybe an extra office visit & prescription here or there.
There are different types of health insurance, with the most common ones being Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO), and High Deductible Health Plans (HDHP). This video does a nice job describing the main differences, and helping you determine what suits your financial situation the best.
Many healthy young adults find that HDHPs are a nice balance of cost vs benefit. They’re a good way to gain access to a Health Savings Account (HSA) and stash away extra money tax-free. However, if you don’t have the money to cover the deductible in the event of an emergency, these plans might not be the right fit for you.
(Not So) Fun Fact:
If you do have a HDHP, did you know that doing “self-pay” can be less expensive than using your insurance? Meaning, if your deductible is a few thousand dollars (or more in some cases), you’re paying the prices they’d otherwise be charging your insurance company (since you cover everything until you meet your deductible). Granted, you are taking a bit of a risk if you end up having an emergency later that causes you to meet your deductible, but it might be a risk you’re willing to take. One thing to note though is that the “self-pay” amount cannot be applied towards your deductible.
Personal example: a recent quote for a medical service I received was $850 self-pay, or $3,350 using insurance. With a $5900 deductible, and being 3 months until renewal, I decided to take on the risk and opt to “self pay” and not have it go towards my deductible. Assuming I had nothing else go wrong for the next 3 months, I would save myself $2500 by doing this.
Here’s how you find out which will be less money:
- Call your Doctor’s office and ask them directly what a service would cost if you did not use insurance at all (self-pay).
- Ask that same doctor’s office for the billing code(s) they would use for insurance if you did submit a claim.
- Once you have that billing code, call your insurance company directly and ask for a quote for that billing code & provide the name of the doctor/office.
- Compare the 2 and weigh your options.
Healthcare & insurance costs disproportionately more than it did 40 years ago. What can we really do about it though? Aside from voting for what we believe in, honestly, not a lot – except for being diligent with asking questions, making informed decisions, and having money set aside so that a health emergency doesn’t put us into debt.
We hope this helps you turn lemons into slightly less sour lemons.