One of the biggest financial news stories right now is the approaching deadline to sign up for health insurance under Obamacare. If you aren’t covered by a health plan right now, you have until March 31, 2014 to sign up — or face the possibility of a penalty next year when you file your tax return.
Before you decide that paying the penalty is cheaper than buying health insurance coverage, however, it’s a good idea to consider the possible costs associated with not having insurance.
The High Cost of Medical Care
Health care in the United States is quite expensive. If you have a catastrophic accident or illness, your pocketbook could be affected — even if you have insurance. Without coverage, the effect can be devastating. According to a recent study from NerdWallet Health, one of the biggest factors in bankruptcy filings is medical bills.
Can you imagine the cost of a hospital stay out-of-pocket?
Health insurance can help you cover those costs. Even seemingly healthy people get sick, and you never know when an accident will strike. So, while you might think it’s cheaper to pay the penalty and avoid the coverage, the truth is that you’re taking a risk with your finances.
How to Reduce Health Insurance Costs
One of the hardest things for some consumers to do is buy health insurance when they have relatively few health needs. This is a bit of a challenge for me, since we mainly just go in for preventative care, along with a couple of regular prescriptions. We really don’t spend much on health care.
However, I do like to have insurance, just in case. What happens if my son falls on the playground and breaks his arm? Or my husband ends up with a major illness and has to stay in the hospital for a week? I feel better knowing these situations won’t bankrupt me, because the health insurance is there to help.
In order to make it a little more palatable, I make an effort to reduce my health insurance costs. One of the ways you can reduce your premiums (if you have few health care needs) is to get a high deductible plan. You pay more out of pocket, but your monthly premiums are much lower. You can combine this plan with a Health Savings Account to get a tax deduction and save up for the out-of-pocket costs. I’ve found that the HSA is a great way to help me reduce my overall health insurance bills.
If you don’t have coverage right now, and you qualify to buy on the exchanges, you might be eligible for a subsidy. Some consumers can buy a “Bronze” level health plan on the exchange for a very small amount, once the subsidy is considered.
Before you make any decisions, run the numbers. It might make sense for you to get health coverage after all.
Do you have health insurance? If not, have you signed up for coverage under Obamacare yet?
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My choice is either to put away money for retirement or get health insurance, I can’t do both. I figure if I die from lack of health care then I die because nothing is worse than being old, running out of money and being kicked out into the street homeless. Thoughts?
Great post but what would you suggest to students living independently and not having a health insurance plan? Can they afford to live without it?
Great web site. I have two points. The first is, even if you have a high deductible plan that doesn’t pay a cent, it really does because of negotiated rates for in- network providers. If I went to a doctor with no insurance, I’d get a bill for $300. If I had insurance, with a high deductible, I might be charged a negotiated rate of say $65. This is a big difference. Don’t forget that difference if you think you will go without insurance.
Second, I have seen too many people believe they are healthy and are going to take their chances. I can tell you, everyone is healthy until the day they find out they have cancer or they are in a car accident that happened out-of-the-blue. It’s surprisingly easy to get a $150,000 hospital bill. It may not happen, but then again it may. At least get the bronze or silver plan, then if something does occur that will require years of treatment, move to a higher plan the following year.
I agree 100% with Allen. My husband and I have always been healthy and take preventive measures with our health, going to the gym regularly, eating right, no smoking, getting wellness exams every year, etc. In fact, in an effort to save a little on the insurance when it came due in August, we increased the deductible. A month after renewing, he had a freak accident and broke his jaw. $80,000 later…. (after the deductible was paid!) well, you get the picture. People, do not tempt fate. I thank God we had that insurance.
There is a great book out called “The Self-Pay Patient” by Sean Parnell. His website, http://selfpaypatient.com/, has a lot of helpful and useful information, along with more info about his book. Both focus on how to find alternative types of healthcare, how to self-pay, to how save a lot of money while getting the healthcare you need, how to find affordable healthcare if you’re uninsured, and a lot more. It targets a wide demographic including people with high-deductible health insurance. My sister and I actually gave the book to our cousin who is struggling with her own healthcare questions and we’d recommend it to anyone, insured or not.
Wow awesome website! I read a couple articles and already got some actionable advice (to try out a retail clinic next time).
Thank you very much for leading me there.
One of the biggest challenges for self-employed like myself is the high cost of health insurance. Although I’m pretty healthy, I absolutely needs to have health insurance just in case for hospital stays. So I applied for the silver package with high deductibles from the Obamacare. It’s not the greatest health insurance, but it gives me the peace of mind if something catastrophic happens to me or my wife. It’s more like a protection from being bankrupted by expensive medical bills, and that’s worth paying for.
The silver plan is actually pretty sweet already compared to what the self employed market is used to. The premiums are really high though but it all depends on the subsidies that you are getting.
Anyone find it strange to call something “insurance” when we all will use it, or most of us will use it? In my mind, I am just paying someone else to pay for me. Or in the case of Obamacare, I am paying for me and someone else too.
Why can’t I just pay for my health care out of my own pocket? I once went into a dental office and said I would like to have my teeth cleaned and have a regular check up. She asked what insurance I had. I told her I only had catastrophic and would be paying out of pocket. She was stunned and didn’t know what to do. She didn’t even know how to look up the price.
I say catastrophic for everyone, and pay for things that you know you are going to use (dental, eye glasses, etc.)
I’m not sure what the right answer is. On one hand, I know that making everybody weigh their options whenever care is needed (something people will have to do when there’s no coverage) will dramatically decrease health care costs. After all, no one will be saying yes to every suggested medical procedure/medicine/treatment since the money is now coming out of their own pockets, I think it’s the right thing for a rich country like ours to help citizens with health care in some way, especially those who are struggling.
Maybe the voucher approach would work, or maybe we all get a flat subsidy and then we get half of whatever we don’t end up spending (or some other percentage). At least this approach will encourage us to use less coverage, and free up doctors for people that actually need care.
We have a family member that’s choosing to pay the penalty as they refuse to sign up – which always leads to interesting discussions. We have a HDHP that we bought about two years ago since we run our own business. Having the HSA to be a part of it is a no-brainer for us as I love the tax savings.
I bet many people will just skip all the way until the penalty starts to hurt, which surely will in 2016 when it’s 2.5% of income or $695 a person, whichever is higher.
My union health insurance runs out in June at which point I’ll be signing up for Obamacare. I’m curious to see what my options will be.
You should probably start looking now since June is pretty much two months away, and it’ll take a couple weeks for the paperwork to go through. Good luck!