Healthcare costs are on the rise!
In my house, our healthcare costs have gone up approximately 43% in the past 3 years for a healthy family of 4. Yes, like many families, we’ve had an occasional arm break. But in general, aside from the occasional urgent care visit, we rarely see a doctor or hospital and are very healthy.
So what do I mean by 43%?
3 years ago we paid $487/month for healthcare for all 4 of us. Today through my wife’s employer (which covers the majority of her portion), we pay a little under $700/month. So most of that $700 is really only for 3 of us since 90% of her portion is covered by her employer.
That’s a lot of money considering we see the inside of a doctor’s office or urgent care facility fewer than 4 times a year (all of us combined). We also virtually never get prescriptions.
So what are we paying for?
Find out why accounting for healthcare costs in different states could save you a headache down the line. https://t.co/zaheBfutuY
— David Hermann (@dvdhermann) May 31, 2017
Think of healthcare like you do car insurance. You hopefully will never get in a car accident. Thus if that’s true for you, “technically” all that money spent on auto insurance was “wasted”. But look at it a different way. Insurance is managing and deferring risk.
Say you have full coverage auto insurance and hit an oil slick and smash into a Rolls Royce. You total it and send that driver to the hospital with life threatening injuries. The total costs of that accident could be hundreds of thousands if not millions of dollars.
Without insurance that could bankrupt you!
Healthcare is no different. You are deferring the risk of serious injury or illness onto someone else. And when someone else takes the risk for us that’s the service we pay for.
The reasons healthcare costs have gone up so much are many. The issue is also very divisive. But without getting into politics, let’s dig in a little anyway.
— iQuantified (@iquantified) May 21, 2017
Healthcare cost increases are a combination of:
- People not taking responsibility for their own health
- Not fully understanding the purpose of insurance (and thus going to the emergency room every time someone stubs a toe)
- Our politicians focusing more on appeasing insurance companies than citizens
- The fact that we don’t allow true country-wide competition among insurance companies (which would naturally cause them to be more competitive)
- We rarely, if ever, ask the amount of treatment before selecting a provider. Would you buy a TV from Best Buy before knowing the price? I didn’t think so. Why should medical treatment be any different? If the government really thinks legislation is the answer, they should require all medical providers to list treatment costs. Then, and only then, could we truly shop around.
What to do if your employer doesn’t offer healthcare
Many smaller employers don’t offer healthcare. Or if they do, it can be expensive since group insurance rates only get affordable when the group is large. That’s the boat I’m in with my employer.
When I was with my former employer, the largest natural foods grocer in the world, my insurance for all 4 of us was paid for virtually in full. But they also have upwards of 100,000 employees.
If your employer doesn’t offer healthcare or it is cost prohibitive you DO have options!
Anyone can buy health insurance online. But in the US, the government forces us to buy it during a small window of time they call “open enrollment”. Whether you don’t have coverage or do but want a cheaper policy, you’ll need to wait to switch until Open Enrollment starts.
You can’t cancel a current policy and then buy a new one outside of the open enrollment period. However, if your insurance company cancels your policy or goes out of business, you can buy it anytime. There are also a number of other reasons why you might be eligible to buy healthcare outside of open enrollment, such as:
- Moving to a new state
Open enrollment for buying healthcare typically starts November 1st each year. It remains open for 6 weeks. If you don’t have coverage now and don’t qualify to buy it outside of the window, you’ll want to start looking the moment November rolls around.
If you have insurance currently but want a better and/or cheaper policy you’ll also want to start looking 11/1. Just make sure to cancel your existing policy. Get their confirmation of the cancellation in writing and have the new policy start the day the old one ends; that way there’s no lapse in coverage.
Is the government website the cheapest way to buy healthcare?
No! Whether you love Obamacare or hate it (and if you do we’re not getting into the politics of it here), in my experience the healthcare.gov website is not the cheapest option.
I have logged into the government healthcare website each of the prior 3 years just to see if it was able to get us better coverage for the same money or the same coverage for less money.
In each of those 3 years, it was not able to do either one. In fact the first year it was up it was grossly incompetent and barely functioned.
Thus while my family is currently on health insurance under my wife’s employer, for most of the prior few years we bought healthcare on our own.
For my family’s health insurance prior to going on my wife’s plan at the start of this year, we used Esurance to find and purchase our insurance. That’s not an affiliate link; just who I have personally used (also used them for renter’s and auto insurance before too).
Esurance is a broker so essentially they will shop around multiple companies and you can pick the best deal. The company we went with for those prior 3 years was Humana.
What can you do to keep healthcare premiums as low as possible?
For starters, you’ll want a plan that is essentially a catastrophic plan. That means you really only use it for serious hospital stays and possibly preventative care.
Most Health Care Providers Don’t Know How Much An ER Visit Costs https://t.co/BKRNnTR6IZ
— Don Freeman (@don_free_man) May 31, 2017
Insurance companies tend to like (and pay for) preventative care like check-ups or breast exams since it can catch or prevent other more expensive problems down the road.
You will also want to pick a high deductible (which is a great idea on ALL insurance). If you have an emergency fund in place (and you should), that can be what you use in the event of a serious, unplanned medical issue creating large out of pocket expenses.
Find out more about emergency funds in one of my most popular posts called 9 Reasons You Should Have a Rainy Day Emergency Fund.
There are also some confusing terms in the insurance world, so let’s define some of the most used:
- Deductible – How much of the bill you have to pay before insurance starts to pay. Often there are deductibles for the whole family and per person. These are annual limits typically going by calendar year. In some cases, such as for annual physicals, the deductible is waived.
- Co-Insurance – After the deductible is met, this number (usually a percentage) shows how much of the remaining bill you have to pay and how much the insurance company pays. 80/20%, for instance, would mean that you still have to pay 20% of the bill after you’ve paid the deductible. This is essentially a co-payment, but being a percentage, the amount fluctuates based on the total cost.
- Out-of-network – Doctors and facilities contract with certain healthcare providers to (in theory) keep costs down. Plus those doctors and businesses have an established relationship with the insurance company which (also in theory) makes it easier to handle billing. Thus, the insurance company really wants you to use one of their “in-network” people and if you don’t, it can often cost you 20% or more in addition to what you were already going to pay. Thus its always a good idea to check your insurance company’s website to see which doctors are in-network and choosing one of them.
- Out-of-Pocket-Maximum – The total maximum amount you could expect to pay in a single year combining deductible and co-insurance/co-payments
So you can now see why the higher your deductible and co-insurance percentage, the cheaper your premium could be. I recommend selecting as high on those amounts as you can go financially, again knowing that your emergency fund will be there to help if you need it.
Of course, one additional thing you can do to keep costs down is to not smoke. I know that’s pretty basic and hardly new information, but given that about 15% of the adult population still smokes (according to the CDC), it obviously is a message that still needs to be reiterated. It will also help greatly with the cost of your life insurance!
Want to dig in more on life insurance? I’ve covered that topic in a previous post too called 5 Key Life Insurance Tips to Protect Your Family.
Why you can’t afford to NOT have healthcare for your family!
In short, you can’t afford NOT to buy healthcare! What if your kid breaks an arm? That’s happened 3 times in my house. Our out of pocket expense on each of those was about $8,000. But the total bill on each was closer to $30,000.
If we didn’t have healthcare, guess what? That’s right we would have owed almost $100,000 in medical bills just for those 3 broken arms. That could have bankrupted us and the financial pressures could have destroyed our marriage! After all, money problems are among the Top 3 Reasons for Divorce!
Aside from the arm breaks, in the 10 years, my kids have been on the planet we’ve been in hospitals 2 other times and in the Urgent Care places probably a dozen times. All that expense added up if we didn’t have healthcare would have been tens of thousands of dollars.
What would you do if faced with a HUGE medical bill?
Learn more here about Annual Open Enrollment which is a health sharing plan where members help each other by sharing in the cost associated with eligible medical expenses.
Seriously! How would that affect your family? Would you take out a loan, refinance your house or (even worse) put it on credit cards? You’ll not only be paying that for years to come but depending on the interest rate you could easily find that $30,000 you owed ended up costing you upwards of $50,000 in the long run.
How can I afford healthcare?
So I hear you saying “that’s great Jeff but how can we pay $700 to almost $1,000 per month making $50,000/year for a family of 4?
That’s a tough situation. I know and I’ve been there and have asked myself that question. The answer is you have to create a budget for your household. The budget is your key to maximizing your hard earned cash and making sure you and your spouse know exactly where every dollar is going each month.
I have covered the budget on multiple occasions in previous posts, so I won’t repeat myself. But I strongly encourage you to start with How to Make a Budget. In that post, I walk you through the basics of how to set up a monthly budget for your family.
Thus finding a way to pay for coverage for your family is crucial. Even if it means fewer or less lavish vacations. Even if it means cutting back on non-essentials every day or week like Starbucks, alcohol or smoking. Perhaps you don’t get that new car every couple of years?
Let’s face it. Lots of us, myself included waste money every day on things that aren’t essential for life or even happiness. There’s a difference between a want and a need. Healthcare coverage is a need. Aside from food, gas in your car and utilities for your house and some household basics, everything else is a want.
Thus we have to make it a priority. Not doing so could devastate your family and seriously impair your financial future.
Do you struggle to afford healthcare? What are your suggestions to keep costs down?
I want to hear from you!
Feel free to comment here or email me with any questions as I am here to help!
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