In the United States, health insurance is seen as this life-sucking black hole of an expense.
It's often something that keeps people working at jobs they can't stand years longer than they want.
I can safely say that since I've left my job one of the questions I've been asked most is, "What are you going to do about health insurance?"
Well, I took on this beast of an expense a few months back. And you know what? I found out it's pretty easy, and can even be cheap. Let me show you how.
Free Health Insurance
My first line of health care is completely free. Actually my first line of health care is available to and completely free for every member of the United States.
It's called healthy living.
By eating well, exercising regularly, engaging in fun social activities, etc. I become less likely to need the help of a doctor or specialist.
Last year I went to the doctor just three times. Each time was for an ear ache I got from not wearing my ear plugs while surfing. Solution? Wear my ear plugs.
In theory, if I could keep myself 100% healthy than I'd never even need to use my health insurance.
But as you and I both know, life is a hell of a lot different than "in theory."
Sometimes, even when I hedge my bets by living healthy, things can go South. For those times, I should need the best of all health insurance plans right? Well, not really.
Learn the Lingo
The first thing I need to figure out in this black hole of a world was the language. Here are the key terms and their meanings.
A Premium is the amount you pay each month.
A Deductible is the amount you have to pay till your insurance kicks in.
Coinsurance happens after you pass your deductible—you and the insurance company start to share the bill. The coinsurance percentage you see is the percent of the bill you have to pay.
Max Out Of Pocket is the total money you pay for both your deductible and coinsurance.
When you hit your max out of pocket, your insurance kicks in 100%.
Max Coverage is the maximum amount of money your policy will cover in a given year.
Deductible = $2,000
Coinsurance = 20%.
Max Out of Pocket = $3,000
Total insurance bill = $8,000
In this case, you pay $2,000 to your deductible up front. You then pay 20% of the remaining $6,000. But you only pay until that your portion hits $1,000, which is where your out of pocket maximum reaches $3,000. So you actually only pay 20% of the remaining $5,000, or $1,000. Then insurance kicks at 100% to cover the remaining $1,000 of the bill.
Vet Your Needs
After I learned the health insurance lingo, I needed to understand what I needed out of an insurance plan.
As Todd Tressider says on Financial Mentor, "Insure the risk you're not willing to take." What is the risk I'm willing to take?
I thought back to my last 3 or so years.
- How often did I visit a doctor?
- Can I remember what the costs may be?
- How likely are these events to occur again?
In summary I don't head to the doctor much. Probably once a year. Those cost end up being around $300 for the visit.
I am active though, so there is a chance I'll get hurt. I need to have a plan that covers a massive injury or catastrophic event. This hasn't happened in years, but better safe than sorry.
I also have a fair 7+ years of spending saved up on the off chance I need to use them for a deductible payment.
In summary, because I don't often go to the doctor I want something with a low premium. And because there's still a chance I get massively hurt, I want my plan to be able to cover me in case of a catastrophic event. Something with a 100% coverage after the deductible.
What I want is called a high deductible health plan (HDHP), which comes with a lower premium.