I have been an insurance broker since 2003 and have specialized in Medicare and individual coverage. Today, most Americans are forced into situations that require them to buy health insurance for themselves and/or their families. Wanted to discuss how individual insurance has changed since I became a broker and what to expect in the future.
The cost of coverage has increased significantly over the years especially since ObamaCare started in 2008. The monthly premiums have increased and the deductibles and maximum out-of-pocket have also increased. It appears to be no end in sight, meaning the premiums, deductibles, and maximum out-of-pocket will continue to increase annually.
So how does the average American afford quality healthcare and not have the monthly premiums become a 2nd mortgage?
The answer may not be what most would expect but it’s time we all discussed what or how to purchase coverage for you and your family.
The individual insurance I am referring to is called an HSA type plan. The components
Only 22 million Americans have something called a Health Savings Account yet 55% of them have not contributed to those accounts. Not a pretty picture but worth discussing so everyone understands how these special insurance plans work and can save you premium dollars while still having protection from a catastrophic health event. These insurance plans were designed to allow the policyholder to have coverage to protect them from a catastrophic health event while trying to keep the monthly premiums affordable.
To begin with, an insurance policy that qualifies to use an HSA must have no fixed copays. In other words, these plans are high deductible plans that do not offer any fixed copays for services rendered. Then you can have a Heath Savings Account known as an HSA to put money aside pre-tax to pay out-of-pocket medical expenses. You put money into these accounts to be used for out-of-pocket medical expenses
These plans allow the participating physicians and hospitals to charge their contracted rates that have been negotiated with the insurance carriers and the person with that type of coverage pays those rates until they meet their annual deductible and then the remainder of the year is covered by the plan at no cost to that individual. The idea behind those HSA accounts is you use pre-tax dollars that you put into these HSA accounts to pay for health coverage and deduct the amount you put aside from your income tax.
When you turn 65, you can no longer put money aside into these accounts, but you can use your money to pay out-of-pocket medical expenses until the account has a zero balance.
It is a great concept for those that cannot afford a rich benefit insurance plan with a low deductible and maximum out-of-pocket. These plans are typically priced below the richer plans and allow the individual or family to pay all their out-of-pocket medical expenses using pre-tax dollars. The issue is that in today’s dollars these HSA plans have become expensive with high deductibles and high maximums out of pocket so affording one of these plans’ is difficult for most Americans. Typically, these plans have a deductible and maximum out-of-pocket anywhere from $6500 to $7000. The deductible and maximum out-of-pocket are usually the same so you must spend that money on services until you reach the maximum and the plan pays all other charges for the remainder of the calendar year. Unless you have a catastrophic medical event, you will never reach the maximum out-of-pocket.
These plans were designed to protect you from any catastrophic medical event but not pay for routine doctor visits or prescription drugs until the maximum out-of-pocket is reached.
The new HSA limits for 2022 have changed to:
HSA insurance $1400 deductible or higher, $2800 for the family
HSA maximum out-of-pocket $7050, $14100 for the family
HSA annual contribution $3650, $7300 for the family
For those over 55, there is a catch-up contribution allowed of an additional $1000 per year.
Most people who opt for this type of account do not put money into the HSA thus defeating the purpose of this type of insurance. They do not consider that these plans have much lower premiums and that savings can be put into the HSA thus reducing the cost of insurance. Let’s face it, if you go to the doctor once or twice a year paying the contracted rate instead of a lower copay isn’t going to change your lifestyle at all. It will, however, give you back premium dollars to place in an HSA to use when something serious happens medically. The government did a good thing by designing these HSA accounts and allow us to put pre-tax dollars into it to use when we get sick or need medical services.
Before I conclude this blog article it is worth mentioning that since there are no fixed copays in these insurance plans, you must think outside the box regarding prescription medications. Would like to mention that you can buy prescription medication at reduced rates by doing some research and investigate goodrx.com, singlecare.com or Nevadadrugcard.com. These sites offer prescription mediations at reduced rates. I am not endorsing any site but suggest you look at all three when shopping for prescription medications.
This is a different way to view insurance but since premiums, deductibles, and maximums out of pocket have increased it is a smart way to protect your family from the financial effects of a catastrophic illness.
Talk to your insurance broker and ask them about these HSA health insurance policies and how it will reduce your cost of insurance and keep more money in your pocket. This is a smart way to buy health insurance for you and your family.
The Barend Agency Inc.
Len Barend, broker