Health InsurancePersonal Finance
Health insurance is essential. Health insurance is basically emergency insurance. You will rarely need it until an event which threatens your quality of life or life itself. You will need health insurance to pay your way. If you don’t have insurance, you will pay for the emergency’s costs out of pocket. If you have insurance, you pay an amount known as the deductible, and then your expenses will be paid by the insurance company. Since medical costs can run from tens of thousands to millions of dollars, a health insurance policy is absolutely essential.
The cost of your health insurance is subject to change based your options. Options differ dramatically for those willing to pay higher monthly payments for their health insurance. This monthly payment is referred to as a premium. Those who pay lower premiums will pay more when dealing directly with medical care. Those who pay higher premiums will pay less comparatively when seeking medical care. The amount you pay for medical care is referred to as your deductible.
Health Care Sources
Your personal health insurance can come from three sources. You can pay for it yourself, you can have it provided as a financial benefit by your company, or you can have it provided by an organization. These organizations include trade groups, churches, ministries, and unions. If you pay for insurance, you usually will pay the full price rates. Group insurers, such as corporations, religious groups, trade groups, and unions all receive cheaper bulk rates for insurance. Companies will pay most of the charged premiums and might have you contribute a reduced amount.
People under the age of 26 have two more potential sources. They can remain on their parent’s insurance coverage or they can acquire health and dental insurance from their university. Often they must be enrolled above half-full enrollment to be eligible for university insurance.
Insurance does not absolve you of paying any amount of money at all due to medical expenses. You will still have to pay a deductible. A deductible is an amount you pay before insurance takes over medical costs. You still could pay some costs for certain medical services, such as cancer screenings, CAT scans, x-rays, or MRIs. Your deductible will range from a couple hundred to a couple thousand dollars. It’s wise to have enough money in your emergency fund to cover both 6 months of expenses and your deductible. This way a medical emergency will not wipe out your emergency fund. Any loss of work afterward will not drive you into homelessness or other potential problems.
Lower premiums have higher deductible costs. Alternatively, a higher premium has a lower deductible cost. The higher the deductible is, the harder it is to come up with as a fee when the emergency hits. After your deductible, you will be mostly covered by insurance.
A Health Savings account also called an HSA account, is set up to assist with high deductibles. Instead of saving for a deductible with after-tax savings, you contribute to the HSA account with pretax dollars. Contributions reduce your taxable income. HSA account accessibility is dependent on your minimum deductible and maximum out of pocket cost. Note that the costs listed are of 2013.
The requirements are different if you are single or a “family”. If you are single the minimum deductible is $1,250 and your Maximum out of Pocket expense is $6,250. Your contribution limit is $3,250. If you are over 55, you can contribute an additional $1,000.
If you are a family, the minimum deductible is $2,500 and your Maximum out of Pocket expense is $12,500. Your contribution limit is $6,450. If you are over 55, you can contribute an additional $1,000. Your employer can contribute to this amount. The money will stay there, growing interest, until it is used. If you transfer jobs or work locations, your HSA plan follows you.
Copayment is an expense incurred each time you visit a doctor’s office or hospital for basic medical care. This usually means checkups, physicals, and other small visits. This number is typically a double-digit, occasionally low triple digit, dollar number. The more often you visit the doctor’s office, the lower your needed copayment fee. You’ll pay it every time you visit. If you’re the type of person who likes to constantly visit the doctor, it is essential to keep your copay low.
Your coverage limits are the selection of services your insurance plan covers. Prescriptions, medicines, and services outside of this limit will either have a low amount or no insurance coverage. Review what is covered under these limits. If there’s a prescription, service, or medication you need, you will pay far more if it’s outside of coverage limit. You can also review if a substitute or imported drugs are covered within the limits. If not, look at other health insurance plans.
Most health insurance policies will limit you to a network. This network is the policy’s compatible group of medical providers. If you are straying outside of this network, you will receive greatly reduced insurance coverage compared to in network service providers. This restricts your choices and discourages visiting them. You will incur additional costs per visit if your preferential doctor, hospital, medical laboratory, or service provider is not found within the network.
There are two solutions. The first is to select an insurance policy which has your preferred medical providers in their network. The second is selecting plans with low compatibility restrictions. This will have a wider selection of network options, or give you total freedom. They may alternatively have a lower penalty for service providers outside the network.
Out of Pocket Maximum
Insurance will also have an Out of Pocket maximum which functions similar to deductibles. There is a substantial difference. The deductible is the amount you pay before insurance pays the rest on a single event. Out of Pocket maximum is the maximum amount you pay during a policy period (typically annual) before insurance pays the rest of expenses, with some exceptions. It often doesn’t include premiums, non-coverage expenses, or copayments. It probably won’t include expenses outside of the networks.
The primary care category is who principally provides you service. Your primary care selection will be your main medical service provider. The primary care physician usually must be a provider within your network. Your interaction with certain service providers will work one of two ways. You may be referred to them from your policy provider, which is fairly limiting. Alternatively, you can schedule your appointments with this person on your own, which gives you increased flexibility and freedom.
Flexible Spending Account
Flexible Spending Accounts are slightly similar to Health Savings Accounts. They are funded with pretax money, but their actual operations are different. Each year, you decide what your contribution to the account will be in the next year. The money you place in the account will be usable for the next year on medical expenses. After that year the money expires. You must use the money before then. Your account may have a grace period before expiration. Since you can lose the money, unused contributing to the account is a waste. It is better to underspend than overspend. Add your average annual medical costs together. This should be your contribution to your FSA account. As the expiration date draws closer, zero out the remaining funds on any potential medical expense.
Your strategy for finding actual healthcare is identifying a balance between needs and finances. Determine your medical priorities in order of importance, and then compare varying plans to see what fits your range. You may find you need to eliminate less essential services in order to afford your healthcare. The trick is determining which part of your medical plan is most important: Low Deductibles, Low Copayments, or Low Premiums. Compare the plans which align financially with the benefits you receive versus other plans which have the benefits you desire. Which benefits are the most essential and align the closest financially with your pay schedule and affordability? Pick the plan which fits.
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