Throw away your traditional notion of health insurance and start thinking like a savvy health care consumer. With the passage of the Affordable Care Act, Americans received consumer protections most know very little about. With limited exceptions, all preventative care is covered 100% before deductibles and with no co-pays. Emergency room visits outside of your home state may no longer be out-of-network expenses. Doctors who choose to treat you when you have no say (ie., if you are unconscious after an accident) are not allowed to demand excessive payments because they decided to care for you, knowing you might not be in a network they work with. Therefore, if you are an otherwise healthy 26 year old (or just new to the health insurance market) going out to buy health insurance for the first time, you may benefit from these tips before you shop.
You’re right, the likelihood you will need medical care from an illness at the stage of your life is much lower than it will be 30 years from now. However, if you play sports, work out, ride bikes, ski, or participate in other healthy, vigorous exercise, this is the greatest risk you have for seeking medical attention. Broken bones, twisted ankles, falls, and unexpected bumps in the road will surely lead to an emergency room visit, and may result in restorative surgery. In addition, if you have a car accident, the bills can be enormous. So, while buying insurance is not much fun, it is something you will need to do.
Do you take a prescription each month? If so, ask the pharmacist how much it would cost a cash payer for the same prescription. Is it available as a generic? What’s the cost of the generic? Do you see a specific doctor or specialist? Ask how much a cash paying patient pays for a typical visit. This will help manage your price and cost sensitivity if you are not blinded to the routine costs of your healthcare.
Ask your healthcare providers if there are any plans they don’t accept. There is no sense choosing a plan that the only 1 or 2 doctors you currently like will not accept. Also, you want to be sure your local hospitals are in their coverage networks. The office manager at the doctor’s office can answer these questions. Specifically ask if there are any high deductible plans the provider does not work with.
Consider a high deductible plan with a maximum out-of-pocket expense of $5,000 or less. With health care reform, all of your preventative care, routine check-ups, and any stray inoculations you may have missed growing up are covered 100% before deductible and with no co-pay. So, if you are an otherwise healthy 26 year old, you could easily go to the doctor only for check-ups, and never pay a cent. With this in mind, low co-pays are not of value to you as you will pay a higher premium for something you do not need.
If you buy a high deductible plan, make sure it is “Qualified” to make use of tax loopholes. At this age, saving your money is always a good idea. If you look at the savings between the premium with a high deductible, and a premium with no deductible, why not keep that money tax free in a bank account you can access? Why send it to an insurance company? You can use those tax free dollars for prescriptions, to pay COBRA, dental work, eye care - any qualified medical expense. Or you can save it for a medical rainy day. Either way, its better than sending it to an insurance company.
I know this is not fun. Buying insurance is not fun. Paying taxes is also not fun. As a member of the over 26 year old population, these are very real responsibilities. All it takes is one terrible accident and instead of looking for insurance you could be looking at bankruptcy.
Right now, your risk of using insurance is relatively low. Medical insurance is all most young people need to protect them against financial disaster. In order of priority, if you feel you really want to buy other types of voluntary insurance, the priority I recommend is disability, life, and then go out to dinner and stop buying insurance.
There is an anthropological theory that we have 2 systems. System 1 is our caveman or gut intuition, and it is driven to avoid pain. System 2 is our more modern logical brain which can make analytical decisions. Insurance purchases are often made to avoid a fear of a large expense--a very System 1 behavior. When you look at premiums and deductibles, you need to engage your more logical System 2 analytical brain. People who try to avoid a deductible usually end up paying an amount that is actually greater than the deductible in 12 monthly installments, called a high premium. So make sure you are not spending $3,000 extra in premium to avoid the risk that you might incur $2,500 in actual expenses.
In many states, it is illegal to discuss specific terms of health insurance unless you are a licensed producer (broker or agent). So if you call a health insurance company to ask questions about a specific policy, you are likely talking to an agent who will make a commission if you buy from them. Ask them if they are an agent and if they make a commission if you buy. Take your time, call several companies, compare premiums and coverage and then, after you make a choice, call back and buy your plan.
Insurance varies state by state, plan by plan, and provider by provider. Your uncle in Arizona may have great advice but it may not apply to you in Wisconsin. Individual plans are governed by very different rules than group plans and insurance for very large companies complies with a totally different set of rules. So even though your brother in California has really good intentions, only an advisor in your home state can give you useful information. One person’s claim problem or bad experience is not your bad experience and should not be the basis for your cool, well thought out choice. Allow System 2 to override System 1, and don’t be afraid the same thing will happen to you.
Since the late 1970’s, we have been conditioned that health care should be free or almost free. Consumer’s wanted low-co-pays and low premiums. With the advent of an amazing amount of medical advances, improved patient care and quality controls, medical care has improved, but the price has also gone up. Health insurance is, at its core, insurance. Insurance is something you buy to protect you against financial disaster. A $65 doctor visit is not a financial disaster. A $10 prescription does not require insurance. When you shop for health insurance, choose a plan that will protect you from financial disaster, not cause a financial disaster. Just like you pay for oil changes on your car, be prepared to pay a few bills for maintenance and save that insurance for the big things. If you shop with these tips in mind, you will be well protected and have some money left over to go out to dinner.
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