In 2010, the Affordable Care Act (ACA) became law. In 2012, the Supreme Court upheld its constitutionality. The ACA doesn’t take full effect until 2014, so for now, follow these reliable strategies. In 2014, new alternatives will emerge, including health insurance exchanges. Check for updates at FrugalFringe.com.
32.1 Get Coverage Through Employers or Parents
If you receive health insurance through your job, congratulations. You belong to a dwindling group. In January 2008, 50 percent of Americans received coverage from their employer, but by January 2011, the figure had slumped to 44.6 percent. Part of this downturn stemmed from greater unemployment, but much of it occurred because premiums rose so high that many employers decided they could no longer afford the expense. If your workplace provides health insurance, think hard before leaving. If you’re job hunting, favor positions with benefits.
Under the ACA, insurers that cover dependents must offer such coverage until dependents reach the age of 26. If you’re young enough to qualify, ask your parents to include you on their policy. This will increase their premiums substantially, so offer to pay your fair share.
32.2 Research Policies
When you shop for health insurance, you swim in deep waters, so educate yourself. Download the ebook “3 Steps to Understanding Obamacare” at eHealthInsurance.com.
The biggest point to keep in mind as you research policies is the difference between Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). In both arrangements, insurers contract with medical providers for lower prices and require that you obtain care from those sources. In HMOs, the restrictions on where you get your medical services are more severe. Typically, if you use providers outside the approved network, you have to pay for everything yourself. In PPOs, fewer restrictions are imposed. Typically, if you use providers outside the approved network, you pay some of it yourself, but the insurer still pays a large percentage.
To assist your search for insurance, here’s a list of major provisions to consider.
- Eligibility for Tax Savings. Find out whether your policy qualifies you to open a Health Savings Account (HSA), which generates welcome tax advantages (see 32.3.3).
- Premium. The monthly amount you pay the insurer for coverage.
- Annual Deductible. The yearly threshold in out-of-pocket medical expenses at which the insurer begins to pay its share.
- Coinsurance. Under this provision, the insurance company pays a percentage of the expense and you—the coinsurer—take care of the rest. An example: if the policy covers maternity services for “20 percent coinsurance after deductible,” this means that once total medical expenses exceed the annual deductible, the insurer pays 80 percent and you pay 20 percent.
- Annual Out-Of-Pocket Limits. Once your yearly costs for deductibles and coinsurance reach a stated threshold, the insurer pays any other covered expenses for the rest of the year.
- Lifetime Limits. The ACA bars insurers from imposing lifetime caps on paid benefits.
- Office Visits. Many insurers cover general exams that spot problems early and reduce medical claims.
- Preventive Care. Look at how the policy covers diagnostics such as colonoscopies and mammograms.
- Dentists and Optometrists. Find out whether these are covered.
- Special Needs Medicine. If anyone in your family needs care for maternity, mental health, or substance abuse, ask about this coverage when you shop.
- Alternative Medicine. If you visit chiropractors, acupuncturists, or homeopaths, figure out in advance whether you’re covered.
- Drugs. Some policies cover prescriptions, while others ignore them completely or give you drug discount cards.
- Pre-Existing Conditions. Under the ACA, insurers can’t deny coverage simply because you suffer from conditions that predate your insurance application.
- Exclusions. Some policies specifically exempt certain types of care from coverage, which means that the insurer pays nothing and you pay 100 percent out of your own pocket.
32.3 Shop Around
□ 32.3.2 Look at Policies From Associations
For any organizations to which you belong, check whether they offer insurance to members.
□ 32.3.3 Look for HSA Compatible Health Insurance Plans
HSAs offer three levels of tax savings: (1) deposits are deductible; (2) earnings grow tax-free; and (3) withdrawals avoid taxation when spent on qualified medical expenses (other spending triggers taxes and sometimes penalties).
□ 32.3.4 Pick the Highest Deductible You Can Afford
As always, the higher your deductible, the lower your premiums.
32.4 Pick a Low-Priced Insurer
After you create a list of the lowest offers, it’s time to investigate the insurers that made them.
□ 32.4.1 Ask Friends
Ask if they have experience with any of your prospective insurers.
□ 32.4.2 Research Customer Satisfaction
Some insurance companies pay off claims faster than others. Review ratings in Consumer Reports and at JDPower.com. To view customer complaint records where you live, click on the map of your home state at NAIC.org/state_web_map.htm.
□ 32.4.4 Use the Comparison Shopping Checklist
Keep track of insurance offers with the Comparison Shopping Checklist located at the end of this chapter.
32.5 Follow Up
□ 32.5.1 Keep a File
Maintain copies of your policy, endorsements, declarations page, price comparisons, and buying guides.
□ 32.5.2 Tap Your Health Savings or Flexible Spending Accounts
Use these accounts to pay for deductibles or exclusions. This saves money because you pay with pre-tax dollars. The precise savings depend upon your top marginal rate.
□ 32.5.3 Seek a Deduction
Medical expenses, including health insurance premiums, generally are tax deductible in any year where your out-of-pocket medical costs exceed 10 percent of your adjusted gross income (AGI). Save your receipts and consult a tax advisor. Note: payments from HSAs and FSAs don’t qualify for deductions, because you already received a tax benefit when you first funded those accounts.
□ 32.5.4 Pay With Credit Cards
Pay with plastic and pocket the rewards, but only if you pay off your cards every month (see Chapter 49).
□ 32.5.5 Make Sure Providers Report Spending to Insurers
The care provider usually reports this information on your behalf, but you need to double-check because giant bureaucracies sometimes make mistakes.
□ 32.5.6 Pursue a Healthy Lifestyle
Don’t smoke, drink moderately, eat a balanced diet, exercise regularly, and keep stress levels low. Track the metrics: body mass index (18.5-24.9), blood sugar (80-120), blood pressure (≤120 systolic and 80 diastolic), and total cholesterol (≤ 200).
COMPARISON SHOPPING CHECKLIST FOR HEALTH INSURANCE
Policy 1 Policy 2 Policy 3
Annual Out of Pocket Limits
Special Needs Medicine