How do You Buy Cheap Health Insurance?

I hate to break the bad news to you but there really is no such thing as “cheap health insurance”, not the way you’re probably thinking about it. To most people health insurance means that if you get sick you can go to the doctor’s office, be examined, get a prescription, and maybe pay no more than $40-80 out of pocket for office visit and prescription co-pays.

In reality, someone is paying both the doctor and the pharmacy all the extra money you didn’t pay out of pocket. And where does that extra money come from? It comes from the premium that you (or your employer) pays for your health insurance every month.

Even when purchased by a large company with thousands of employees, health insurance premiums cost several hundred dollars a month per person. If you are covering your spouse or other dependents that may add another $100 or more per covered family member per month. It is not unusual for families to be charged over $1000 per month for basic health insurance.

Insurance Redistributes Costs When you participate in an insurance program you are sharing costs with other insured people. The insurance company collects premiums from all the insured people it covers. It subtracts a percentage of premiums to cover administrative costs (such as building costs, utilities, administrative staff salaries, etc.) and commissions to sales agents (or these costs may be included in the administrative costs). The rest of the money is used to pay claims by insured people. If anything is left over it is invested by the insurance company to build up reserve wealth against future catastrophic claims.

There Is Only One Way to Reduce Your Premium If you want to pay a lower premium you have to sacrifice some of the benefits that the basic insurance plans offer you. Or, rather, you don’t add extra benefits that the premium plans include. So that could mean you pay higher copays, higher deductibles, and higher co-insurance. But it may also mean that some health issues won’t be covered. American health care is so expensive compared to other parts of the world that insurance companies AND the government do everything they can to cut costs — by cutting corners. You, the insured person, are expected to make up the difference.

But What About Discount Insurance Plans? Yes, there are some discount insurance plans available. Their benefits, costs, and availability may change in future years as health care laws change. But these plans are often hard to find, may be hard to qualify for, and usually provide only temporary benefits. In fact, it is possible for many people to buy Short-Term Health Insurance plans. These plans are intended to help you get through a difficult period (such as after you leave a job).

Short-term Health Insurance plans offer reduced coverage and may not cover some existing conditions. Although laws will vary from state-to-state you should not plan on keeping Short-term Coverage for more than 1 year. In some situations you may be able to extend it by up to six months (to 18 months).

What is COBRA Insurance? If you were let go from a job you may be offered COBRA coverage. This keeps you on your former employer’s health care plan but you have to pay the full premium. COBRA coverage may be less expensive than buying health insurance independently but it can still be very expensive. COBRA coverage lasts from 18 to 36 months, which is twice as long as you can expect to be covered by a Short-term Health plan.

Supplemental Insurance Can Help If you simply cannot afford full major medical insurance you can buy an Accidental Plan from a supplemental insurance provider like Assurant or maybe AFLAC. Accident plans only cover some expenses but if you fall or injure yourself it would be better to have a plan than not. Most accident plans cost between $25 and $45 a month, and they can cover your family members. A good accident plan will reimburse you for ambulatory and post-accident expenses but you should expect to be responsible for up to 50% of these costs yourself.

Many accident plans reimburse you after you pay the doctor or hospital, but you may be able to sign over the benefits (per accident) to the health care provider at the time you are treated for an injury.

In addition to Accident coverage there are also plans for Cancer and Catastrophic Illness. If you are not considered a high-risk candidate for stroke, heart attack, or cancer these plans may not make good sense for you.

You can also combine dental insurance with accident and short-term insurance plans. Although nothing is quite like an employer-subsidized major medical plan, you may be able to provide some health care coverage for yourself and your family when you don’t have any other options.