It’s a sign of the times that health insurance has become one of the primary expenses in many households, often coming in a close second behind the house payment.
There are many reasons for this: healthcare has become more expensive across the board, employers are reducing their contributions to our premiums and, let’s admit it, we want more coverage than ever.
Having the best health insurance available is understandable, but since few of us have unlimited financial resources, we have to make compromises and cut corners where we can.
The idea is to cut the cost while preserving the most basic coverage. This is not always an easy path to take but there are ways to achieve savings without sacrificing too much coverage.
Raise your deductibles and co-payments
As much as we’re disturbed at the idea of having to pay a doctor or clinic directly even though we have health insurance, we have to understand that this has a major impact on our monthly insurance premiums.
The lower your co-pays and deductibles, the higher your insurance premiums will be. This is because co-pays and deductibles are part of first dollar coverageâ”which is where the most frequent charges come about.
By raising your co-payments and deductibles you can cut your health insurance premium by up to several hundred dollars a month. Raising deductibles will generally have the greatest impact. If you raise the deductible from $1,000 to $2,000 there will be a significant drop in your premium.
As an extreme measure, you can opt for very high deductibles, such as $5,000, $8,000, $10,000 or even higher. This is what is often referred to as catastrophic coverageââ”coverage that only takes affect during a major medical event, or catastrophe.
Catastrophic coverage can seriously lower your insurance premiums, and is worth looking into if you’re premiums have gotten beyond the realm of affordability.
If you do raise your deductible, understand that you will be responsible for more of your direct medical expenses so you’ll need to prepare. Combining catastrophic coverage with an employer sponsored Health Savings Account (HSA) is one way to do this. It enables you to contribute money to the account similar to the way you would an IRA, complete with similar tax benefits. The money in the account is then available to cover expenses your insurance won’t.
If you don’t have an HSA plan available, the next best step is to increase your emergency fund enough to cover the amount of the higher deductible.
Drop unnecessary coverage riders
Most health insurance plans have riders attached that add certain forms of coverage. These are good options to have, but they aren’t worth having if you seldom or never use them.
Prescription drug coverage is one. We all know that the cost of prescriptions has gone into orbit, but that doesn’t mean you absolutely need the coverage. If you aren’t on any recurring drug therapies, and only go to the pharmacy for the occasional anti-biotic, you’re probably wasting money having prescription drug coverage.
Two others are dental and vision coverage. The problem with dental insurance is that the cost of the coverage is very close to the amount of the benefit. It’s more of a benefit coverage than insurance, especially since it doesn’t usually cover dental catastrophes like braces (and you don’t need that coverage anyway if you don’t have children).
Vision coverage can be even worse since you probably don’t use it every year, even though you pay for it. Many of the chain vision centers have extremely generous coupon offers on their examinations, glasses and contact lenses, and these can be far more cost effective than having vision coverage. Just check out the websites before you go to have your eyes examined or need corrective eyewear. Oh, and many of them will not allow you to use their advertised specials if you have insurance coverage.
Take better care of yourself
There are a couple of factors worth discussing in this regard. The first is that the less you need medical care, the less you need to rely on insurance. Take better care of yourself and you’ll be in a better position to take higher co-payments and deductibles, and to drop certain coverage’s.
The second is that if you have private health insurance you can lower your premiums by losing weight, lowering your blood pressure or quitting smoking. The premium increase for certain physical conditions or health habits are significant, and by taking better care of yourself you can remove the higher costs.
You generally will have to improve the health condition over a period of time before the insurer will recognize the change in your health status. Smokers, for example, often need to show that they’ve been off of cigarettes for a certain period of time, like two years. That makes it important to start taking better care of yourself now.
Contact your insurance company to see how much affect any health conditions are having on the cost of your coverage, and what you’ll need to do to demonstrate that you’ve corrected the situation.
Health insurance premiums will only get higher in the future, so it’s important that we do what we can now to minimize the impact on our finances.
Do you have any suggestions for how to lower health insurance premiums?
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Written by Kevin
With backgrounds in both accounting and the mortgage industry, Kevin Mercadante is professional personal finance blogger, and the owner of OutOfYourRut.com, a website about careers, business ideas, money and more. A committed Christian, he lives in Atlanta with his wife and two teenage kids.
