NEW YORK (MainStreet) – With Americans focusing on the debt side of their financial ledger, and with health care reform ready to roll out, making the switch to a high-deductible health plan increasingly makes sense for consumers: you may have to pay more of the up-front costs of care, but your monthly payments will be significantly lower.
You’ll be able to pay rent, but you’ll have to pay more when you get sick.
For example, if you have a health care plan with a $1,500 deductible, you’ll have to pay the first $1,500 of (annual) medical expenses, though some plans may exclude checkups and general office visits, for example. Your insurance company should then cover the rest of your medical expenses for the year. That includes critical expenses such as hospital visits, emergency room services, prescription drugs and blood work.
Recession has pushed more and more people toward these plans, as the Los Angeles Times reports that the number of Americans who have chosen health plans with deductibles of at least $1,000 has tripled since 2006, reaching 20 million.
Regardless of your financial situation, the healthier you are in general, the less you’ll pay both in monthly premiums and in out-of-pocket expenses. But other than eating your vegetables and exercising, what can you do to keep your costs low and make sure health care costs don’t bust your budget?
- Ask yourself if you really need high-deductible health insurance. If you’re healthy and have access to cash to cover expenses up to your deductible, then a high-deductible policy will probably save you money on monthly premiums. But if you have a chronic medical condition that requires regular care, especially on a year-to-year basis, those out-of-pocket medical costs can certainly add up and push you into debt.
- Link your plan to a health savings account (HSA). Many high-deductible health plans offer access to health savings accounts. By law, you can contribute up to $3,050 a year to an (untaxed) individual health care savings plan. You can use that cash for medical costs, but if it turns out you don’t need the money, you can roll it over (also tax-free) into an individual retirement account. And even if you use the money to pay for medical costs, it’s still tax-free. Sweet deal, but watch out next year: Under the new health care reform rules, you won’t be able to use HSA funds to pay for prescription drugs.
- Check with your employer for a deal. Many companies offer price breaks to employees who buy high-deductible health plans but have demonstrated healthy habits. You may have to undergo a health assessment (much like you would with a life insurance company before it issues a policy), but it can be a way to lower your costs.
Health insurance doesn’t have to be expensive. With high-deductible health care plans, you can take more control over your own health care costs, and save money – tax-free in many cases – over the long haul.