Whether you have employer-sponsored healthcare or you’re looking to buy healthcare on the individual market, there’s a strategy to getting the biggest bang for your buck. Sometimes that’s going with the cheapest available plan, and sometimes it’s going with the plan that covers all of your needs.
Step 1: Figure out What You Need
Think back over the last two years. What have your medical needs been? What’s changed since then? If nothing has changed and you don’t expect anything to change, then you can use your medical needs for the last two years as a guide to the type of coverage you’ll need this year.
But if you’ve taken up a moderately risky new hobby like mountain biking, or are planning to get pregnant, you’ll need to take that into account when considering cost-effective coverage. According to the CDC, the average emergency room visit costs $2,168 and the average childbirth costs $8,800 including pre and postnatal care. Paying a little higher premium per month might be worth it if it’s going to help with a medical bill that could mount to thousands of dollars.
Step 2: Consider Your Options
Since most employers subsidize employee premiums for their sponsored healthcare plans, an employer-sponsored plan will most likely be your cheapest option if you have that available to you. If you don’t, then head to Healthcare.gov and eHealthInsurance.com to start comparing plans.
Do you qualify for Medicare?
The first step in comparing individual health plans will be to determine whether or not you qualify for Medicare. The Affordable Care Act (ACA) expanded the pool of people who qualify for this government-subsidized healthcare plan, so even if you haven’t qualified for it in the past, it’s worth applying for it now. Both Healthcare.gov and eHealthInsurance.com have areas of their website dedicated to applying for Medicare.
What are your Individual Healthcare Options?
Both Healthcare.gov and eHealthInsurance.com give you comprehensive plan comparisons, showing the medical services each plan covers and to what extent, in addition to the monthly premiums, annual deductibles and maximum out-of-pocket costs.
Consider the HDHP + an HSA
The individual market and most employers will offer at least one High Deductible Healthcare Plan (HDHP). These plans typically have the lowest monthly premiums but the annual deductible (i.e. the dollar amount in services you must pay before your insurer pays) is typically much higher than it is for other plans. The benefit is that with an HDHP, you can also open up a Health Savings Account (HSA).
An HSA is a savings account for healthcare expenses. The money you contribute is pre-tax and you can use it at any time on any eligible healthcare expense. Another great feature of the HSA is that your money rolls over year to year, so the longer you have it and the more money you contribute, the better position you’ll be in should you have an emergency. And you can change your contribution amount at any time, depending on your cash flow needs.
If you’re a relatively young and healthy person with few medical needs, an HDHP and HSA might be the cheapest option for you.
Step 3: Make Your Decision
In order to find the cheapest plan, you’ll need to find one that covers your needs for the cheapest total cost. That means the sum of your monthly premiums and your anticipated out-of-pocket costs. If you get bare-bones insurance but have a chronic issue or break your arm, you might end up paying more for your healthcare than you would have if you’d paid a little more per month in premiums.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.