“When I give someone my insurance card, I want benefits!”
I get it. If I had a nickel for every time I heard someone say, “Why should I pay monthly for a premium and still have to pay full price for my doctors visit or medications?” The answer to that question is a sharp pencil and a calculator.
Remember the purpose of insurance—to manage risk—and unless we’re talking about certain life insurance products, health insurance is almost never considered an investment. It’s a sunk cost that we hope we’ll never have to use much less get a return on, because that means we’ve been really sick or injured! The goal then becomes to get the best value at the best price and to do that we have to look at more than monthly premiums. While cash flow is important to most people, it’s not the only way to judge which policy to pick. Often the most important way to judge is by looking at yearly costs, which include variables such as deductibles, coinsurance rates and maximums, and copays. Here are some common mistakes people make when approaching health insurance:
- Paying more for a lower deductible they will never meet.
If you’re young and have no history of illness it rarely makes sense to pay more for a policy that has a lower deductible. If you aren’t likely to meet a $2,500 deductible, why pay more in premiums to have it that low? It’s often better to take a plan with a higher deductible, and add a supplemental policy that will pay your deductible for you. You will almost always save money and get better coverage that way.
- Paying too much to get a plan with a copay.
How often do you go to the doctor in a year? If it’s less than two or three times then it’s generally cheaper to take a plan without copays. Remember copays only pay for the visit—the part where the doctor takes your temperature, hammers your kneecap and asks you what’s wrong. The negotiated rate for that part of the visit can range anywhere from $150 to $250 depending on the doctor and the carrier. If you need blood work or x-rays, your copay isn’t going to cover that. This is where your calculator comes in handy. Often copay plans can cost $100/month or more than plans without copays. Lets say you go to the doctor three times a year. That means you have spent an extra $400, plus whatever your copay is for each visit. Let’s say your copay is $25. So the visit that would have only cost you $150-$250 has now cost you $425 in this scenario, and you STILL have to pay for any testing you have done. You get the idea.
- Buying the wrong dental insurance, or buying it at all.
I imagine most agents would rarely tell you not to buy something, but in the case with dental insurance, there are not many good choices out there these days unless they are bundled with your employer’s group policy. If your teeth are healthy, have no family history of problems, and all you do is get them cleaned twice a year you’re often better off negotiating directly with your dentists for your cleanings. Most individual dental plans have waiting periods and offer very little coverage. That said there are plans available that can benefit you greatly if you know you are going to need work done.
- Thinking that a major medical policy alone can meet all your needs.
Supplemental policies are a great way to customize your coverage and if packaged right, can save you in monthly premiums and get you better coverage! Add an accident policy or a critical illness policy to a higher deductible plan and you will likely pay less per month. Consider a discount drug program instead of paying more for a drug copay if you don’t take tier 3 or 4 medications.
A good agent can help you navigate your options and save you money. The best agents get paid from the insurance carriers and their services don’t cost you anything, and generally not using an agent won’t save you any money. Major carriers don’t have one price for using an agent and another for going directly to their website or through healthcare.gov. Find someone you trust and it could make all the difference next year!