Finding the right health insurance plan — either through your employer or the Health Insurance Marketplace — is confusing. There are many factors to consider based on your and your family’s unique health care needs. Because of the lack of understanding, many people are overpaying for health insurance or paying for more coverage than they really need. Follow these tips when selecting a new health insurance plan to save money in the long run.
Choose the Right Deductible Amount
The cost of insurance comes in two forms: premiums and deductibles. If you opt for a higher premium, you often have a lower deductible. You pay more for care up front this way. If you opt for a lower premium, it often comes with a higher deductible. While you pay less each month, you’ll have more out-of-pocket expenses throughout the year until you reach the deductible amount.
Before automatically choosing the lower premium, consider your healthcare needs. If you’re in overall good health and typically visit the doctor for check-ups and the occasional illness, then a lower deductible could save you money. However, if you have ongoing medical needs, such as treatment for a chronic condition, you’ll save more in the long run with the higher monthly premiums and lower deductible. Low-deductible plans also provide you with some assurance that you’ll not be hit with a high bill for an unexpected medical expense.
Opt for PPO Over HMO
Preferred provider organizations (PPO) give you greater flexibility over health maintenance organizations (HMO). HMO plans tend to be cheaper than PPO plans, but you often get less coverage and more restrictions. In recent years, the gap in price between the two types of plans has narrowed. With a PPO, you can visit any doctor in the network and even out of the network. This gives you the power to choose the doctor that provides your care. However, if you want to save money on healthcare costs, stick to in-network doctors. Chances are good that you’ll have a large pool to choose from.
Take Advantage of Flexible Spending Accounts
If you’re trying to free up funds, then it might be tempting to skip setting aside money in a flexible spending account (FSA). However, this is tax-free money that you can use to pay for medical expenses that aren’t covered by insurance. That includes co-pays, co-insurance, prescriptions and more. In addition to having this money there when you need it, it also lowers your taxes by putting you in a lower tax bracket.
Open a Health Savings Account
One of the biggest drawbacks of a high-deductible health insurance plan is that you could be hit with an unexpected medical bill with no money to pay for it. With some high-deductible plans, you’re eligible for a health savings account (HSA). This also lets you set aside tax-free money to use toward medical expenses. In addition to the tax benefits, these accounts are also investment opportunities and another way to set aside money for retirement.
Sign Up for Medicare at the Right Time
If you’re 65 or about to turn 65, then it’s time to sign up for Medicare. You should sign up for Medicare during the month you turn 65 or within three months before or after. If you have not yet retired and have health insurance coverage through your employer, then you don’t need to sign up right away. You’ll need to sign up within eight months of retiring from your job though. If you fail to sign up in time, you could be hit with a surcharge that ranges from 1 percent to 10 percent depending on the type of plan you have. Additionally, you could be left without coverage until the next enrollment period, leaving you to cover all health care expenses out of pocket until then.