Medical expenses can be a big drain on your bank account and may even lead to bankruptcy. Interestingly enough, this can be the outcome even when people are covered by health insurance. Sky-high health insurance premiums and out-of-pocket costs–in combination with the lost wages that often come with a serious illness or injury–can create tens of thousands of dollars in personal expenses.
For that reason, it’s imperative that you know how to save money on health insurance. That includes, as much as anything else, knowing how to properly manage the plan you have and take advantage of every cost-saving technique that may be available.
To help you in that effort, we’ve compiled this list of 10 ways to save money on health insurance. Overall, the two biggest money-savers are finding the best policy for the lowest premium and properly managing the costs within your plan. The 10 tips below will cover both of those strategies.
Table of Contents:
Find the Cheapest Insurance Quotes in Your Area
1. Know Your Health Insurance Plan
It’s unfortunate but very few people know what’s in their health insurance plan. Partly, this is because health insurance plans are incredibly complicated. But there’s often also an assumption that the plan you have covers more than it actually does.
Many medical treatments and procedures may be excluded from health insurance plans include the following:
- Long-term care
- Cosmetic surgery
- Adult dental services
- Weight loss programs
- Routine foot care
- Infertility treatments
- Private nursing
- Adult eye exams
- Weight loss surgery
Two other categories that are frequently excluded include treatment by chiropractors and healthcare services provided outside the United States.
But in addition to specific coverage exclusions, you also need to know the procedures to get the proper consideration.
For example, most health insurance plans require that you get pre-certification prior to any significant medical procedures. That can include everything from physical therapy, consulting a specialist, or undergoing surgery.
Many assume required pre-certifications are automatically obtained by the healthcare provider. But as I learned in my own experience, it’s worth taking an extra step to check with either the provider or your health insurance company to make sure the necessary referral or pre-certification has been obtained.
In some cases, the absence of a referral or pre-certification can mean the denial of a claim. That’s why it’s critical to know your policy and to be proactive in managing your care. Many people get socked with uncovered medical expenses simply because the right form wasn’t approved or even applied for.
2. Out-of-Pocket Maximums DO Matter
As the cost of healthcare skyrockets, insurance companies have made policies “more affordable” by passing more of the first dollar medical expenses onto the consumer. First dollar medical expenses are those that you pay before your insurance applies.
Collectively, these expenses are referred to as out-of-pocket costs, and are comprised of three different charges:
Copayments – These are the payments you must make upfront directly to your healthcare provider. It may take the form of $30 for your primary care physician, $60 for a specialist, or $25 for a prescription.
Deductibles – These are flat dollar amounts you must pay before insurance kicks in. For example, if your policy has a $2,000 deductible, you’ll pay that much out-of-pocket for most medical expenses before your insurance coverage will begin.
Coinsurance – Few consumers know exactly what it means or how it works. Simply put, coinsurance is a form of cost-sharing. The health insurance company will apply a percentage–usually 20% or 30%–which you must pay over and above the deductible.
For example, let’s say your policy has a $2,000 deductible, a $6,000 out-of-pocket maximum, and a 20% coinsurance provision.
If you need a surgical procedure that will cost $50,000, under the terms above, you’ll pay the first $2,000 as your deductible. But you’ll then pay 20% of the amount above the deductible until your out-of-pocket maximum is reached.
Since your out-of-pocket maximum is $6,000 and your deductible is $2,000, the dollar amount of your coinsurance provision is $4,000. That means you’ll pay 20% of the first $20,000–or $4,000–of your surgery after you make your deductible. Your insurance will pay 80% of $20,000, plus 100% of the cost from that point forward, for a total of $44,000.
Dealing with Out-of-Pocket Costs
As you can see, out-of-pocket costs have gotten much more complicated in recent years. But the important takeaway is to carefully consider these costs when choosing a health insurance policy. You may not have that option if you’re covered by an employer-sponsored group plan. But if you’re shopping for an individual policy, you’ll need to figure this into the mix.
Consumers often go with high deductible plans as a way to reduce the premium costs. That strategy can make sense if you’re young and healthy and unlikely to need to file a claim. But if you’re older, or have any significant medical conditions that may require treatment or hospitalization, choosing a plan with the lowest premium can be a serious mistake.
If you believe you are likely to need costly medical treatment, you may be better served by a policy with a $500 per month premium and $2,000 out-of-pocket, than one that has $350 per month premium and a $6,000 out-of-pocket limit. Though you’ll save $1,800 per year on the lower premium policy, you’ll pay more than that with the additional $4,000 in out-of-pocket costs if you need a major medical procedure.
In many cases, the better choice is to choose a higher premium with a lower amount of out-of-pocket costs. Not only will that reduce your financial responsibility in the event of a medical procedure, but it will also reduce the shock of being hit with a very large medical bill at a very inconvenient time.
If you obtain coverage through the Affordable Care Act, you can get estimates on different policies, premiums and out-of-pocket limits when you preview plans and prices at healthcare.gov. There you can get an idea of what plans cost without having to go through the application process.
3. Avoid Treatments That Aren’t Necessary
This is a big part of managing your out-of-pocket costs. Some consumers, unaware of the full implications of out-of-pocket costs–particularly the coinsurance provision–may undergo medical treatments not entirely necessary under the assumption that they’re paid for by the insurance company. It’s only after the procedure is performed and the bill arrives that you become aware of your financial responsibility. But by then, it’s too late.
Out-of-pocket costs impose a requirement on us all to be more responsible with our medical care. This can be more difficult than it sounds. In an effort to get the best medical care and to have the highest level of assurance on a health condition, consumers often agree to tests and procedures that aren’t entirely necessary.
Part of this is the result of what’s known as defensive medicine. A healthcare provider may order certain tests or procedures as a potential defense against a future lawsuit. Because of the prevalence of malpractice suits, this strategy is understandable–and unfortunately, not at all uncommon.
However, because of out-of-pocket provisions, you’ll pay at least part of the cost of any test, procedure or treatment whether it’s necessary or not.
It’s hard to know where to draw the line here because we’re consumers, not medical doctors. But getting a second opinion on a major procedure is usually an option and may reveal if a recommended treatment is not necessary.
4. Stay “In-Network”
Most health insurance plans include a network of approved participating providers. Costs for using in-network providers fall within the out-of-pocket expense provisions for the policy.
But if you need to go outside the company’s network, the out-of-pocket costs increase, usually doubling. For example, while you might pay $50 to see a doctor in-network, the cost will be $100 for an out-of-network doctor. Your deductible may double from $2,000 to $4,000 and the coinsurance provision may require you to pay 40% after the deductible is met rather than the usual 20%. The out-of-pocket may also double.
Before visiting any healthcare provider, whether that’s a doctor, a clinic, a lab, or hospital, first make sure that it’s an in-network provider. If it isn’t, it can cost you thousands of dollars more.
If you need to go out-of-network because there are no suitable providers in your geographic location that are in-network, some health insurance policies will allow you to request a provision for an out-of-network provider to be treated the same as an in-network provider for insurance purposes.
If that’s the case, be certain to get that confirmed in writing. In the insurance universe, a verbal assurance is not legally binding. But if you have written confirmation, you’ll have evidence your insurance company agreed to cover an out-of-network provider as though it’s in-network.
5. Look for Cheaper Alternatives for Prescriptions
One of the fastest growing expense components of healthcare is prescriptions. A single prescription can cost hundreds or even thousands of dollars per month.
Use the following strategies to control those costs:
Use only prescriptions that are part of your health insurance company’s formulary. A formulary is simply a list of prescription drugs approved for use by your health insurance company. If a prescription drug is excluded, you may pay 100% of the cost yourself and it won’t count toward your out-of-pocket cost limits. If your doctor recommends a drug that’s not included in the formulary, request a substitution by one that is.
Use generic prescriptions whenever possible. Generics are the equivalent of buying store brands instead of name brands. Typically, when a medication has been available for several years, identical substitutions become available. Most health insurance companies have tiered pricing on prescriptions. That might include a $50 copayment for a name brand drug compared to $10 for a generic substitute. If your doctor doesn’t prescribe a generic medication, request a change if a generic is available.
Buy in bulk. Many pharmacies offer significant discounts if you purchase larger quantities of maintenance medications (those that you’re on for an extended period of time or even for life). For example, a 30-day supply of a prescription may require a $30 copayment. But if you get a 90-day supply, the copayment may be $50. You’ll save $40 on the prescription over the course of three months.
Buy through mail order providers. These are centralized prescription providers offering medications at significant discounts. They’re not as convenient as going to a pharmacy and getting your prescription filled immediately. But in exchange for ordering your meds a few days in advance, you can save serious money on copayments.
6. Participate in Health Insurance Wellness Programs to Reduce Your Premium
Many insurance companies offer wellness programs that will give you an opportunity to lower your premium costs. By participating in certain healthy activities or reaching specific health improvement goals, you’ll be eligible for premium discounts.
For example, CIGNA offers their Wellness Programs and Incentives. As is typical of such programs, discounts may apply if you participate in either activity-only or outcome-based behavior modifications. Activity-only requires only that you participate in the prescribed behavioral modification, such as engaging in a walking program or a coaching program.
The outcome-based program requires reaching certain health goals, such as lowering your body mass index below 30% or completing a smoking cessation program. Success in meeting the outcome-based goals can be rewarded with a reduction in the total cost of medical coverage of as much as 30% or 50% of the cost of coverage for tobacco-related programs.
The CIGNA program is just one example. Many health insurance companies offer wellness programs, and you should investigate the options offered by your carrier.
Wellness programs are not to be confused with discount plans. Discount plans are often marketed to those without health insurance as a low-cost alternative. They are not health insurance in any sense of the term and the discounts they promote are often exaggerated or nonexistent.
You’ll usually pay a flat fee for membership in a discount program then be issued a card that mimics a health insurance ID card. The promoters make claims of $10 doctor visits and up to 70% discounts on prescriptions.
But these plans are often bogus. You may pay a fee to join and not get the promised discounts. What’s more, they may promote discounted services from healthcare providers who either don’t exist or don’t actually participate in the plan.
7. Carefully Scrutinize Any Medical Bill You Receive
Never simply assume you owe all that’s included in a medical bill. As many as 80% of hospital bills contain errors that can cause you to pay more for your services than you should.
Analyzing medical bills is not easy for the average person. The one thing you can easily do is look for duplicate charges or charges for services you don’t remember receiving. A healthcare provider may also fail to credit a previous payment and charge you a second time.
If you spot such errors, you should contact the health provider immediately and dispute the charge. Many will cooperate, especially if you provide evidence of previous payments or highlight duplication. Charges for services you didn’t receive is a more difficult process.
Hospital bills tend to be the most complicated and fraught with errors. However, many hospitals have patient advocates who can help you to both analyze and dispute your bill. But there may also be a dispute resolution department through your employer or your health insurance company and you should absolutely take advantage of it if that service is available.
As a precautionary method, it’s usually possible to get a statement of benefits in advance of a scheduled medical procedure. The insurance company will provide you with a statement that will show the charges by the healthcare provider, any plan discounts the provider is required to accept, the amount paid by the insurance company, and the patient’s responsibility.
If the invoice you receive from the medical provider significantly exceeds the patient’s responsibility indicated on the insurance company’s statement of benefits, you should institute a dispute immediately. Letting the dispute go for even two or three months runs the risk of the invoice being turned over to a collection agency, which will make your job that much harder.
8. Open a Health Savings Account (HSA)
A health savings account will help you better manage the out-of-pocket-costs portion of your health insurance plan. It will do that in two ways:
- It will enable you to accumulate funds specifically for health care costs on a regular basis, and
- The contributions you make to the plan will be tax-deductible–even if you don’t itemize.
HSA’s are often offered by employers, but you can also set one up individually.
To be eligible to open an HSA account, your health insurance plan must meet the following qualifications:
- Your health insurance plan qualifies as a high deductible health plan (HDHP), defined as a plan with a minimum individual deductible of $1,400, or $2,800 for a family.
- The plan must provide for maximum out-of-pocket costs of $6,900 for an individual, or $13,800 for a family.
If your health insurance plan qualifies you can contribute up to $3,550 to an individual HSA, and up to $7,100 for a family. Both contribution limits allow for an additional $1,000 if you are 55 or older.
An HSA will usually give you a debit card and/or checks that can be used to pay your out-of-pocket costs. Those costs must be qualified medical expenses as determined by the IRS. Generally, these are expenses that are covered but not paid under your health insurance plan. For example, prescription medication payments are eligible expenses, while over-the-counter medications are not.
You can open an HSA account at various financial institutions, including banks, credit unions, and even some investment brokerages.
So far, we’ve been discussing how to save money on your health insurance. But what if you don’t have an employer-sponsored plan or can’t afford coverage under the Affordable Care Act plans?
The options are limited, but there are a couple worth trying.
Lively HSA is a great place to begin looking into an HSA. Lively allows you to save or invest with your HSA and there’s no cost to open an account or any monthly fees.
Open a Lively HSA or read our full Lively HSA review
9. Health Sharing Ministries
Some consumers are reporting good results with these health insurance alternatives. They’re not true insurance in the strict sense, but you can often get comparable benefits at about half the monthly cost.
Health sharing ministries are typically available to those of the Christian faith. You’ll usually need to sign a statement of faith confirming your beliefs and agreeing to refrain from certain practices deemed to be non-biblical. The plans are recognized by the U.S. government as ACA-compliant.
Health sharing ministries work as something like informal insurance groups. Members pool their funds through monthly contributions that are then made available when group members have medical expenses. They usually have out-of-pocket cost equivalents though they’re at much lower levels than is the case for traditional insurance.
Though there are some healthcare providers who accept health sharing ministry plans, most don’t. In that case, you’ll need to pay the provider out-of-pocket, then be reimbursed by the ministry.
Examples of health sharing ministries include:
- Samaritan Ministries
- Christian Healthcare Ministries
Before plunging into health sharing ministries, you should be aware of certain limitations:
- As noted earlier, health sharing ministries are not true insurance. There are absolute limits on how much benefit they can and will provide.
- If you don’t meet the faith requirements of the ministry, you won’t qualify.
- Health sharing ministries are based on the pre-Obamacare qualification model where you must be medically qualified. If you have certain chronic health conditions, you won’t be eligible.
- Some members have reported difficulty getting the ministries to pay their medical costs, particularly on large bills.
10. Work With a Health Insurance Broker to Find the Best Plan
Health insurance brokers can provide valuable services. Since they work in the industry, they’re aware of the plans available in your state and can help guide you through selecting the right plan for your needs and budget, and even provide advice in navigating the admittedly complicated ACA application process.
You won’t pay extra for a health insurance broker’s services since they are paid by the insurance companies. But given how complicated both health insurance plans and the health insurance application process have become, a health insurance broker can be a valuable resource to help you to locate the best plan for your money.
Just don’t expect a health insurance broker to work miracles. They’re largely working within the same limits the rest of us are, but they’re doing it with superior knowledge. That’s the basic service they provide, and it can be extremely valuable if you’re shopping for a suitable health insurance plan.
Final Thoughts on How to Save Money on Health Insurance
As you can see, saving money on health insurance is a two-part process, combining finding the plan with the lowest premium and minimizing your out-of-pocket costs within that plan. It’s a real balancing act, especially as health care and health insurance become progressively more complicated.
It’s for that very reason that we all need to do whatever we can to minimize the costs of health insurance while preserving the benefits it provides.