Health insurance premiums have been going up at several times the rate of inflation for years and previous attempts to curb that trend weren't conclusive. The solutions health insurers put in place to protect their financial health remain in effect, and not understanding these rules, as well as tax laws, incentivize certain behaviors that will cost you dearly. Here are three common health insurance mistakes to avoid at all costs.
Only Choosing Based on Premiums
It is a costly mistake to choose a health insurance plan based only on its. If you only look at the deductions from your paycheck or premiums you pay out of pocket, you’ll make a major mistake if you have to pay significant medical bills with limited reimbursement. In general, your reimbursement rate as a dollar amount or percentage of the expenses is based on the premium. The higher your premiums, the higher the reimbursement rate. The difference between 60% and 80% cost sharing with the insurer really adds up if you see a number of practitioners.
Another factor to consider is medical cost caps. The higher your premiums, in general, the greater the total amount the health insurer will cover. Your deductible is how much you have to pay out of pocket before insurance pays everything else. When you pay lower premiums, the insurer offsets their risk of losses by requiring you to pay far more in medical bills before they cover it. This is why the ultra-cheap insurance plan can leave you in serious financial hurt if you run up major medical bills.
Compare health insurers through sites like medicalhealthinsurancetoday.org so you can find a health insurance plan that balances premiums with out of pocket costs.
Confusing Health Savings Accounts versus HCRAs
A Health Savings Account or HSA lets you put money pre-tax into a savings account that you can use without tax toward medical costs. This money rolls over year after year and if you leave your current employer, you can continue to use the HSA account, although the financial services provider may start charging you an account fee.
A Health Care Reimbursement Account or HCRA lets you put money in while reducing your taxable income. If you take money out of the HCRA, it isn’t taxed. However, any HCRA funds left at the end of the year are forfeit, though you may have a few weeks into the next tax year to get reimbursements.
HSA and HCRA have different contribution limits and you are not allowed to use both. Conversely, an HCRA is available to anyone while an HSA stipulates you need a high deductible health plan.
Not Paying Attention to Services and Service Eligibility
Maternity care and prenatal care are essential services. However, if you sign up for health insurance in October and the baby is due in January, you’re probably going to have to pay for most of the hospital bills because many insurers don’t provide full maternity coverage until you’ve been on the plan for a year or more. Determine what services you need and verify the insurance plan you want covers them.
Avoiding these crucial mistakes could save you literally thousands in the long run.