Since the onset of the global pandemic, healthcare has never been more critical. However, the cost involved also continues to rise. In 2020, health spending reached $4.1 trillion — a 4.3% increase from 2019. Over half (53.6%) were on hospital care, doctors’ services and prescription drug purchases.
These figures highlight the value of health insurance. However, another challenge surfaces — health plan premiums have also increased. 9.6% of Americans were uninsured as of mid-2021, and the primary cause is cost.
While health coverage isn’t cheap, its benefits outweigh the drawbacks. You can apply strategies to make the most out of it, like staying within your plan’s network and taking advantage of screenings and assessments.
MoneyGeek’s guide explores this in more detail and provides tips to help you choose the right plan and maximize its benefits.
U.S. Rising Healthcare Costs
Consumers shouldn’t take health coverage lightly. With the continuous increase in healthcare costs, having a health plan is an excellent way to protect you and your finances.
- The average American spends $12,500 on healthcare annually.
- The yearly cost for single coverage increased from $7,470 in 2020 to $7,739 in 2021. Those for family coverage rose from $21,342 per year to $22,221.
- A policyholder with individual coverage has an average deductible of $1,945 in 2020. The average cost for family coverage is $3,722.
Decide on the Right Health Plan
It’s best to explore your options before enrolling in a health insurance plan — even if you like your current one. Remember, several types are available, so it’s crucial to find one that fits your needs. Each plan may have varying benefits and costs.
Understanding the different elements of an insurance plan and seeing how it aligns with your healthcare needs can lead you to your best option.
Elements of an Insurance Policy
Reviewing your health insurance policy is wise — even if you’re only renewing it. You never know whether rates or benefits have changed, so don’t assume it’s identical to your previous one.
Cost, although an essential factor, shouldn’t be your only one. Others to consider are a provider’s reputation or a plan’s network. Our table below provides a comprehensive list that you can use to evaluate your options.
Comparing Health Insurance Plans
Besides the various elements of a health insurance plan, you must also consider its type. Your choice often impacts factors like your premium and network. Knowing the differences between them can come in handy when comparing options.
Choosing the right health plan for you is essential. The table details the pros and cons of each allowing you to make the best possible decision.
Smart Tips: Choosing the Best Plan For Your Needs
Choosing the right health plan can be stressful. It’s not a matter of selecting the most affordable one but something that can give you appropriate coverage.
You won’t be able to maximize your plan’s benefits if it doesn’t fit your needs. Or, you may be paying for coverage you won’t use. Either way, it will make it seem like your health coverage isn’t worthwhile.
Here are some tips to help you choose the best health insurance plan.
Make a thorough assessment of your medical needs
A clear understanding of how much medical care you need is a good place to start. Those who have extensive healthcare needs may be better off with plans with a low deductible. However, a high deductible health plan with a low premium may be more cost-effective for members in good health.
Be realistic about your budget
Although cost isn’t the only factor to consider, it plays a significant role in your decision. Remember, the premium isn’t the sole expense connected to health insurance. You also need to factor in deductibles, out-of-pocket maxes, copays and coinsurance. However, you’ll lose coverage if you can’t cover your monthly due.
Know what health plans are available to you (and where to get them)
It’s best to know what type of plans are available to you. For example, depending on your age or income, you may qualify for Medicare or Medicaid. You can also get healthcare coverage through your employer or the Marketplace.
Brush up on health insurance terms
What makes health insurance complex is that many terms may be unfamiliar. Understanding what a deductible is and how it’s different from copay and coinsurance can be a great help when you start comparing plans.
Consider your preferences
Be clear about your preferences regarding doctors, hospitals, labs or clinics. Don’t assume that your physician is part of your plan’s network — ask your doctor if you have to, but it’s better to know before you enroll. If you’re not particular, it may make HMO plans more attractive.
Compare health plans across providers
Exhaust all your options before deciding. Health insurance companies may price plans differently, even if they have the same coverage. Comparing them helps you find the best possible deal.
Determining the Right Amount to Spend on Health Insurance
Health coverage is expensive. MoneyGeek’s analysis found that the average cost of health insurance for a 40-year-old is $477 per month. That comes up to almost $7,000 a year.
However, how much you spend varies based on your unique profile, so what’s appropriate differs for each person. Our guide provides some tips to help you determine if you’re paying too much for health coverage.
Follow the 10% rule
How much you earn in a year can be a sound basis for how much you should spend on coverage. Typically, it should be 10% of your income. For example, if you earn $67,521 per year, the median household income for 2020, then $6,752.10 should go to health insurance.
Determine what you used and what you didn’t
At the end of a coverage period, review the summary of benefits and coverage, whether or not you intend to renew your plan. See if there are additional benefits you aren’t using. Taking them off can help you save on premiums and ensure you aren’t overpaying for coverage.
Don’t decide based on technical terms
Don’t get swayed by terms like “Catastrophic” or “Platinum” health plans. You may not like the sound of the former, but if you qualify, it might be your most cost-effective option. Don’t go with the latter just because it sounds better.
Consider where you live
The average cost of health insurance varies between states. For example, policyholders in Colorado spend an average of $4,052, while those in West Virginia pay around $8,546 a year. However, other factors like age or metal tier may affect your premium.
Are you a smoker?
Another factor that affects your health insurance costs is whether or not you smoke. Tobacco use can increase your premium by 50% because of its effects on your overall health. Smoking affects your finances in several ways, and more expensive health coverage is one of them.
Expert Tips on Maximizing Health Insurance Benefits for Healthcare Costs
Health insurance can be pricey even if you’re taking steps to not overspend on coverage. Remember, your health plan can impact your finances significantly, so it’s crucial to maximize it. Besides helping pay for medical expenses, you can take advantage of lesser-known benefits. Our guide explores these further, along with some mistakes to avoid. These can help you make the most of your health plan.
Don’t automatically accept a denied claim
Sometimes, your health insurance provider denies a claim you file. When this happens, don’t give up immediately. You can appeal this through its internal process or an external review. Either way, it’s best to exhaust all means — it could result in an overturned decision and the processing of your claim.
Keeping within your network
A common mistake policyholders make is using services outside their plan’s network. You’ll have to pay for these services if you have an HMO or an EPO plan. It won’t count towards your deductible, so you’re no closer to getting our provider to share your medical costs.
Don’t forget about benefits and discounts
Some health insurance plans include wellness programs. These benefits focus on stress management, nicotine cessation or weight management. You may find that you have discounts on gym memberships — these can go as much as 50%. Others allow you to get LASIK surgery at a lower rate.
Determine the right deductible
A high deductible isn’t necessarily bad; a low one isn’t always good. Remember, the best limit depends on your medical needs. Members who require a lot of medical attention can benefit from a low deductible — since they’ll reach it sooner, their provider begins sharing costs earlier. A low deductible plan is best for someone who doesn’t frequent the doctor and can take advantage of the low premium.
Take advantage of tax benefits
You can apply your health insurance premiums as tax deductibles. However, it only applies if you enrolled through the Marketplace and are paying it through your pocket (as opposed to an employer-sponsored health plan).
Navigating Health Insurance on Case-By-Case Scenarios
People tend to associate health insurance benefits with unexpected medical expenses. However, it can provide financial support in non-emergent cases.
Your health plan can come in handy in different scenarios, allowing you to manage your finances better. There are several potentially expensive situations where knowing how to maximize your health insurance can make them more manageable.
Having a New Child
A child is a blessing, but you can’t deny that soon-to-be parents must consider the expenses. The International Forum for Wellbeing in Pregnancy found that most women get stressed during pregnancy because of financial challenges. Although health insurance isn’t the answer to all these costs, it can alleviate money worries and keep expectant mothers healthy.
USING HEALTH BENEFITS TO KEEP NEW MOTHERS AND NEWBORNS SAFE
Preparing for and having a newborn involves a lot of medical attention for the mother and child. Here’s how you can maximize your health coverage.
- Use it for prenatal visits: Prenatal visits are essential because it’s best to catch and manage any condition before it puts your pregnancy at risk. Your plan can cover the costs of these visits without a copay. You also don’t need to go through your PCP for a referral to see an OB/GYN, nurse practitioner or midwife.
- See if you’re eligible for Medicaid or CHIP: If you don’t have health coverage when you find out you are pregnant, see if you qualify for Medicaid or CHIP. Unlike Marketplace plans, you don’t have to wait for the Open Enrollment period to get health insurance. These can give you access to free or low-cost coverage.
- Determine if you qualify for special enrollment: If you don’t qualify for Medicaid or CHIP, see if you do for a Special Enrollment Period. These require you to be undergoing a significant life event. Being pregnant will not qualify you, but giving birth does.
- Report your child’s birth to the Marketplace: After giving birth, update your application as soon as possible. It may change your coverage options, resulting in lower monthly premiums. You can either add your baby to your current plan or enroll in a separate one for the remainder of the year. Remember, your baby’s first year includes a lot of visits to a pediatrician.
- Get breastfeeding help: A Marketplace health plan can also cover consultations with a lactation consultant. It also includes equipment, such as breastfeeding pumps. The best part of this is you don’t have to spend on copay.
Not all surgeries happen during emergencies or after accidents. Some procedures are non-emergent, giving you more freedom to decide when you want to undergo them.
However, remember that surgeries can be expensive regardless of when you decide to go under the knife. Although costs vary depending on the complexity of your procedure, it can still consume a chunk of your savings.
HOW TO MAKE COSTS FROM PLANNED PROCEDURES MORE MANAGEABLE
A surgery always entails expenses but having health insurance can help minimize costs. Here are some practical ways to maximize your health plan benefits for planned procedures.
- Ensure your coverage: See if your health plan covers the procedure you want. Health insurance typically shoulders part of your surgery (or sometimes, the entire thing) as long as it’s medically necessary. For example, your provider may cover elective cosmetic surgery like breast reduction if it helps alleviate back pain.
- Use pre-authorization: If your plan doesn’t cover the procedure you want, check if it requires pre-authorization. If yes, your doctor must inform your health insurance company that the surgery is medically required before you have it. If your healthcare provider doesn’t do it, prepare to foot the entire bill.
- Ask about discounts: More complicated procedures will typically cost more than simple ones. However, the costs can quickly increase because these involve surgical teams. Ensure that most, if not all, of your medical service providers are in-network. Even if your health plan covers the procedure, you’ll still pay for out-of-network services.
- Time your procedure properly: Check your deductible to determine where you’re at in reaching it. Timing can considerably impact your expenses. See if you can schedule it when you hit your deductible (or are just about to). Once you’ve paid up to your deductible, your health insurance provider will share the remaining costs.
Surgeries, injuries or accidents can have long-lasting effects, and some people lose mobility. A physical therapist can help you get you back in shape, but their services don’t come cheap.
OrthoBethesda puts a single session to cost anywhere between $75 to $350. Imagine if you’re on the higher end of that spectrum and need ten sessions. Health insurance can considerably reduce costs, but you still need to consider some things.
POINTS TO PONDER IF YOU’RE ABOUT TO START PHYSICAL THERAPY
Health insurance is an excellent way of reducing possible physical therapy costs. However, before pushing through with your treatment, ask the following questions to ensure you’ve covered all your bases.
- What limits are in place? There are several limits to check with your health plan. Some only cover PT within the first three months. Others only pay for the service for a specific number of sessions. If the recommended duration of physical therapy exceeds your plan’s limit, you know you’ll need to pay at some point. Discuss your options with your physical therapist if you know that’ll be challenging.
- Can you use out-of-network therapists? Your health plan type determines your flexibility regarding medical service providers. If you have an HMO or a PPO, you can only stay in-network if you want therapy covered. Plans that allow you to go with out-of-network therapists may have higher copays or coinsurance, so if your preferred therapist isn’t within your network, you might want to calculate the difference in cost.
- Do you need a referral? Some health insurance plans require your primary care provider to issue a referral before covering a service. If you’re unsure whether you need one, check with your provider. Getting a referral isn’t complicated — simply tell your PCP you need one — but it’s still an extra step. However, skipping it may cost you more money than it’s worth.
- Is equipment covered? With physical therapy, your therapist may ask you to do some exercises while you’re at home. Some of these are simple and are a matter of completing specific movements. However, others require equipment — these may range from resistance bands to Total Resistance Exercise (TRX) systems. Sometimes, even if your health insurance plan covers the actual session, it may draw the line at equipment. It’s best to confirm it before purchasing home equipment.
When you’ve been diagnosed with heart disease, cancer or diabetes, you’ll always have it. In the U.S., six out of every ten adults suffer from a chronic illness.
Chronic diseases cause physical, mental and financial stress. A person suffering from a chronic illness spends an average of $6,032 in direct health care. That’s around five times higher than someone without it. Fortunately, knowing how to maximize your health insurance plan can help you manage costs.
MANAGING EXPENSES FROM CHRONIC ILLNESS THROUGH HEALTH INSURANCE
Frequent doctor visits and regular medication can quickly dent your savings. Having health coverage doesn’t mean you won’t have to spend anything anymore, but it can help you reduce some costs. Here are some strategies you can apply.
- Take advantage of preventive care services: Check out your health plan’s wellness benefits. You can get discounts on gym memberships, have access to a weight loss counselor or join a cooking class. These may not reduce your direct costs, but you can use them to improve your overall health. That may eventually lead to a change in your medication or lessen the frequency of your doctors’ visits.
- Choose a low deductible plan: You typically need more medical attention when dealing with a chronic illness. It translates to numerous doctor appointments, regular tests and medication — all of which cost money. A low-deductible health plan is a better option. Staying in-network (if required) ensures you’ll reach your limit early. After that, your coverage kicks in, and your provider begins sharing in costs. It can reduce your medical expenses considerably.
- Maximize self-management programs: Living with a chronic disease can elicit feelings of hopelessness. Some programs focus on letting you build confidence in managing your condition. Believing that you can lead an active lifestyle helps patients’ mental, emotional and physical well-being. You can also pick up techniques to nurture relationships with family and friends despite your condition.
- Consider maintenance medication: Most people with chronic illnesses also have prescribed maintenance medication as part of their healthcare regimen. Most health plans provide prescription drug coverage but don’t cover all medicines. Consider it when you’re choosing a health insurance plan. Pick a plan that covers your medication because it can help reduce expenses.
Mental Health Treatment
Present healthcare needs aren’t limited to physical injury. Now mental well-being is as important, especially in the wake of the COVID-19 pandemic. The U.S. spent $225 billion on mental health treatment and services in 2019 alone.
But, like all treatments, these aren’t free. The need for counseling or group therapy may impact your finances. Having health insurance is one way to cushion the blow.
MAKING THE MOST OF YOUR COVERAGE FOR MENTAL HEALTH TREATMENTS
Although mental healthcare services are included in the 10 essential benefits of all plans in the Marketplace, keep the following things in mind to ensure you maximize your coverage.
- Confirm that the service is covered: Mental health treatment isn’t limited to one-on-one therapy sessions with a psychologist or psychiatrist. It includes group therapy, addiction treatment, telemedicine and online therapy and psychiatric emergency services. Knowing these allows you to understand better what your plan can cover.
- Ensure you have a diagnosis: You may want to schedule sessions with a therapist for many reasons. You could have had a death in the family and are experiencing difficulty coping. Or you might be looking for ways to get out of a toxic relationship. Although all these are valid reasons, most health plan providers require services to be medically necessary before covering them. So it’s best to have a formal diagnosis.
- Clarify the limits of your coverage: Determine what limits your plan set for mental health treatments. These could include having to stay in-network, requiring a referral or only covering a specific number of visits to your therapist. This way, you’ll know what your plan covers and get an idea of how much you’ll need to prepare for costs that you’ll shoulder.
- Consider an HSA plan: Younger generations (especially Millennials) are more receptive to going to therapy than older generations. If you’re one of them and your preferred therapist isn’t in your plan’s network, consider getting an HSA plan. You may have a high deductible, but you’ll benefit from the low premium. You can also use your savings to pay for out-of-network service providers.
How to Take Advantage of Hidden Benefits
Having a health insurance plan is an excellent way to reduce medical costs. When your expenses become more manageable, you feel you’re maximizing your coverage.
That’s true, but lower healthcare costs are only part of maximizing your health insurance. Ensuring your take advantage of available benefits is another — and it applies to those that policyholders may frequently overlook.
MoneyGeek highlights four that you can explore further.
Having a case manager
Having one central person handle your healthcare matters can make life much easier. It’s especially true if you have a chronic illness. They can answer all your questions and align with your healthcare providers so everyone’s on the same page.
Rushing to the hospital isn’t always the answer for unknown aches, pains and sickness. You can use the nurse line, which is 24/7, to get more information. They may save you from a trip to the doctor by providing the help you need.
Getting the medical care you need without setting foot in the hospital is a source of relief. It saves you time, effort and money. Telehealth has gained traction and has become a popular healthcare channel. Best of all, you can get it at a discounted rate — sometimes, it’s free!
Health plans that have wellness programs offer discounted membership rates for fitness clubs. Being physical and working out can save you money in the long term because it improves your health. You may need less medical attention in the future.
Health Insurance Benefits FAQs
Although consumers are encouraged to enroll in health insurance plans, several aspects may remain unclear. MoneyGeek included questions policyholders typically ask to provide additional information.
What type of health insurance is best?
The best health insurance is different for everyone. Your healthcare needs and preferences are the best basis for what kind of health plan you should get. A low deductible health plan might be cost-effective despite more expensive premiums if you need a lot of medical attention. However, younger, healthier policyholders may benefit most from one with a high deductible and lower rates.
What if I haven’t reached my deductible or out-of-pocket max, and it’s nearly the end of the year?
Although health insurance is helpful when you have emergency medical expenses, often, it’s most valuable for preventive care. You can use your benefits for annual check-ups, lab work and vaccines. These keep you healthy (or at least detect any condition early) and help you work towards your deductible and out-of-max limit.
What if I still have funds in my HSA?
Although you can’t spend your HSA funds on your plan’s premium, you can use them for your copay, coinsurance and deductible.
If, towards the end of the year, you still have funds in your HSA, don’t worry about it. The remaining amount rolls over to the following year. That gives you a larger balance, allowing you to earn more interest.
What if I still have funds in my FSA?
FSAs apply a “use it or lose it” policy, so it’s best to consume as much of your money within your plan year. You can use it to cover planned procedures or alternative treatments. Most FSA plans also include dental and vision services, so schedule dentist or ophthalmologist visits.
If you need extra time, ask your employer for a two-and-a-half-month grace period. It’ll give you more opportunities to use your funds.
How can I prepare as I choose next year’s plan?
Before deciding whether you’ll re-enroll in the same plan or try to find a new one, it’s best to take a look at how well the last one worked for you. If not, maybe it’s time to rethink the different elements — your premium, deductibles, copays and coinsurance. If you went to several out-of-network providers, you might find a plan with another network.
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Featured Image Credit: Steve Debenport.