You don't have to be a financial genius to lower your health insurance premiums -- or even in immaculate health. You just have to grasp a few simple truths about health insurance and use them to your advantage. Namely, the more you tailor your insurance to fit your own needs and the more you pay out of pocket, the lower your insurance costs will be.
Here are three simple steps you can take to start saving money on your health insurance immediately...
Step #1 - Eliminate Unnecessary Health Insurance Coverage
The first thing you'll need to do is dust off the information that came when you started your insurance policy, or call your provider to request the details of your plan. From these details you can then see where you have coverage that may be costing you more, but is unlikely to be used.
For example, if you don't have a chance of having a child, you won't want to pay extra for maternity coverage. If you are young and have 20/20 vision, vision care might simply be a waste of money. And if you're already reasonably healthy, experts suggest you may not want to buy coverage for annual physical exams. A recent government study showed that healthy people gain little to no benefit from such exams, and they sometimes lead cautious doctors to order costly and unnecessary follow-up tests.
Tailoring your coverage to meet your actual needs is easy if you buy individual health insurance, since the marketplace for such coverage offers many choices, assuming good health. It takes more work if you get your coverage at your place of employment, because many small and mid-sized companies offer only one-size-fits-all health insurance. But check into your group coverage anyway; it may offer more options than you think.
Step #2 - Increase Your Co-Pay and Your Deductible
No matter where you get your coverage, another powerful option for lowering health insurance premiums is to increase your co-pay -- the amount you must pay out of pocket for doctor visits, prescriptions, and the like. Co-pays of $20 are common, but a $50 or $75 co-pay could help lower your premiums substantially.
You'll also be able to lower your health insurance premiums if you increase your deductible -- the total amount you pay out of pocket before your insurance kicks in. If you buy individual coverage, you can choose plans with four-figure deductibles in exchange for big cuts in your health insurance premiums. Step carefully in choosing a high deductible, of course; if a $5,000 deductible would put your finances in dire straits, then set your sights a little lower.
If you have an employer-sponsored health plan, under legislation enacted in 2003, small businesses can offer their employees high-deductible health plans in tandem with tax-favored health savings accounts -- a powerful way to cut healthcare premiums. Many such plans come with four-figure deductibles and reductions in premiums of 50%, sometimes more, compared with premiums for preferred provider or health maintenance plans.
Step #3 - Establish a Health Savings Account
Want to save even more? Consider establishing a health savings account. Many employers add money to the health savings account with each paycheck as a benefit, meaning you may have to pay nothing out of pocket to even cover the deductible.
The advantage here is that money that goes into health savings accounts isn't taxable, and it escapes taxation again when it comes out, as long as you use it for legitimate medical expenses. Given high income tax rates, this can translate into a significant savings on your health insurance costs.