Until recently the extent of my knowledge of my healthcare benefits was that I was insured. After all, we place such a high emphasis on simply being insured that we don’t know what’s covered until the worst happens. Some of us are lucky enough to be covered by company plans, and others have to seek out their own private insurance. Regardless, you typically have more than one choice available to you. There are many different aspects of health insurance to consider when choosing: Monthly premiums, co-pays, annual deductibles, out-of-pocket maximums, etc. Not only do we want to be safely covered in the event of an emergency, but we also do not want to pay more than we have to.
When I was 25 I had a good job, free health insurance (meaning no premiums), and an unexpected hernia surgery. I was a healthy young guy who had never had an issue previously. When my company gave me a choice between paying $40 a month for insurance that pretty much covered everything, and the free option that covered 80% of everything…well, I chose the free option. The hernia surgery was billed out at $10,000 and I had to pay for $2,000 o fit. Had I chosen the insurance with the $40 premium it would have cost me $480 for the year, and I wouldn’t have paid a dime for that surgery, or anything else for that matter.
Well welcome to unexpected health issues part two. I work for a different company than previously mentioned, no more free health options, but I only pay about $40 a month in premiums right now so I can’t complain. We actually have 7 different options to choose from, so a little more flexibility than I ‘m used to. Surprise, surprise, I learned little to nothing from my first forray into the unexpected costs of healthcare. I chose the cheapest option yet again, after all, what are the odds that I’m going to have many issues at 30. Well I would estimate my current expenditures on medical bills to be around $2,500 for the year. Had I chosen the most expensive healthcare option available to me I would’ve spent $720 this year, as opposed to the $2,500 I’m currently at.
Monthly premiums are important because despite your healthcare usage this is the amount of money you will pay in a year. It’s tempting to go with the cheapest cost option. Though sometimes it’s best to budget for the more expensive option instead of gambling with the outcome of your health.
Co-payments are an important aspect of your healthcare as well. Even if you are fortunate enough to not have a medical emergency, regular doctor visits are part of your preventative care. I know at the very least I will have four or five visits with a doctor throughout the year. It behooves me to pay attention to my portion of the payment for the the appointment. Also, payments for specialists can garner a higher co-payment, so watchout for that as well.
Your annual deductible is an easy to understand concept that I’ve found many people overlook when considering which type of insurance to choose. This is the amount of medical expenses you are personally responsible for prior to your insurance company picking up the tab. For instance, if your annual deductible is $500, you will have to pay this amount for office visits, surgeries, and even medical emergencies prior to your insurance kicking in.
I’ve come to realize that this may be THE most important dynamic of your health coverage. My annual out-of-pocket maximum is $2,000 currently. This means that once I have paid out $2,000 for medical expenses this year, and trust me I have, then the remaning expenses I incur this year will be 100% covered. This only serves to remind me that I should have gone with the slightly higher monthly premiums and I wouldn’t be paying out anything for the year. What you need to focus on is what is covered and considered as an out-of-pocket expense. I thought when I looked on the insurance companies website that would be research enough, I was wrong, I should have called the company directly. All of my co-pays for office visits and prescriptions aren’t covered as the website stated they would be. You might not think this would add up, but I pay $35 for each specialist appointment I have. If you aren’t seeing your family physician I’ve found that pretty much every other doctor is considered a specialist…so that’s probably going to be an extra $500 I will spend this year as well.
You can delve even further into other aspects of health insurance like FSA’s and HSA’s, but make sure you research the topics above thoroughly. These will be the base indicators of the amount of money you will be paying out each year. You can learn the hard way, as I have each and every year, or you can play it safe and not gamble with your health and the expenses that come with maintaining it.