How much is health insurance?
How much is health insurance?
It is a question for which the answer changes every year. According to a recent national human resources survey, insurance premiums increased again this year, and deductibles increased substantially. That means that people who are trying to determine the cost of health insurance, and how much will need to come out of their pocket in terms of premiums and deductibles, have a new answer every year. Here, we will deconstruct the components of health insurance costs and provide some tips for how you can keep them in check.
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Components of Health Insurance Costs
For most individuals, there are two things that make up the direct personal health insurance costs. The first is premiums, and the second is the out-of-pocket – deductible, copays, and coinsurance.
Premiums – Premiums are the amount that you pay each month for insurance coverage, much like you would for automobile or homeowner’s insurance. If you are employed, much of the premium amount is paid by your employer (on average about 2/3), but if you are unemployed or self-employed, you are responsible for the entire amount. Premiums can range greatly, and can be influenced by your deductible level, your health history, and where you live. Use our Insurance Search tool to find premiums in your area.
Out of Pocket – Out-of-pocket cost is the amount that you pay in conjunction with medical service. The three most common elements are a copayment, or copay, deductible, and coinsurance. The copay is usually a flat cost per service for a visit to a provider. $20 is a very common copayment amount, but they sometimes vary based on the type of service or drug. The deductible behaves much like auto insurance, and resets every year on a per-individual and per-family basis. Deductibles vary greatly, from $200 on the low end to $2,500 or more on the high end. Finally, coinsurance is the portion of the health costs that are borne by the covered person based on the specific benefit plan and contract with the provider. A common coinsurance amount is 20% of the total bill (while the insurance pays 80%). Some plans have no coinsurance element, with the provider agreeing to eat the difference in return for a large volume of patients.
Example: A procedure by your doctor has an allowed price of $850. You have a $200 deductible, a $20 copay, and a 20% coinsurance. You would pay $346 ($200 + $20 + 10% of $630, or $126).
Managing How Much Your Health Insurance Costs
Managing how much your health insurance costs can take a variety of approaches and some digging. There is no "one best" price for health insurance – rather, there is a best fit for every particular situation. Here are a few ideas to consider:
Adjust Your Deductible – Adjusting a deductible upward in return for a lower monthly premium can be a winning technique, especially if you are healthy and don’t expect major medical procedures in the coming year. You may want to stay away from this technique if you have a chronic medical condition or expect a major medical event (e.g. pregnancy and delivery) in the coming year.
Shop Around – By shopping around for health insurance rates, you can be sure you not only get a low price but the best-fitting policy type for your needs. Don’t always assume that your employer offers the best rate, especially if you work for a very small company. Smaller companies are sometimes limited in their pricing power and in the options they can provide their employees.
Run All Health Insurance Expenses Through Flexible Spending Accounts – Most large employers do this automatically, but if you have an individual policy or work for a firm with a limited HR operation, be sure that your health insurance premiums are being covered by your FSA. Doing so can essentially discount your premiums by 30% or more, and covering your deductible and copay amounts by your FSA can save the same amount.
Consider Discount Drugs and Lower Cost Medical Services – If you’ve done all you can to affect how much health insurance costs, be sure to make smart consumer choices to save even more dollars. Finding discount generic drugs can be a start, and using walk-in medical services instead of the ER can be another major cost-saver.
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