If you’re young and healthy and you exercise and eat right, you may think that there’s no need for you to have health insurance. After all, an annual check up doesn’t cost very much—and paying for it out of pocket is a lot cheaper than paying a monthly health insurance premium.
Sadly, this line of thinking assumes that you won’t have any kind of major, short-term accident or illness requiring intensive treatment at any time in the future, and it could spell financial disaster if you aren’t careful.
How Health Insurance Helps
Often, when people think of insurance policies, they imagine high-premium coverage that offers them a low copayment when they need a procedure. But health insurance is more complex than that. Young and healthy people who have little need to visit the doctor, get medications, or have any ongoing treatments can benefit greatly by obtaining a high-deductible insurance policy.
High-deductible health insurance is a less expensive policy that allows the insurer to share the burden of bills with the insured through a deductible and a co-insurance split, up to the policy’s out-of-pocket limit, which help to contain your ultimate expenses.
For example, let’s say you have a deductible of $2,500 in your high-deductible policy and an out-of-pocket maximum of $7,000. If you need treatment you will pay up to $2,500 first, then the insurance company will likely split the remaining costs with you, with them paying around 80 percent and you covering the additional 20 percent (depending on the terms of your policy) until you’ve spent a total (including your deductible) of $7,000, at which point the insurer takes over completely.
But that’s not all; insurers have agreements with medical facilities and physicians in their network. These agreements limit the amount that policyholders can be charged for their procedures and treatments. So a surgery that might normally cost $300,000 if you were uninsured would cost maybe $100,000, with the insured only responsible for a small portion of that.
The Health Savings Account
Another benefit that policyholders with a high-deductible plan enjoy is the ability to open a health savings account (HSA). An HSA allows you to accumulate a pool of tax-deductible savings that you can pay toward medical treatment. But the pool is not just good for copayments and doctor visits; it can also be used to pay for vision appointments, glasses and contacts, dental visits and more. And if you don’t use the funds from year to year, they automatically roll over and can grow if the account pays interest or you’re permitted to invest it. If you find that your good health holds out and you have money left in the account at 65, you can use it to supplement your retirement savings.
In 2014—next year—every citizen who resides in the U.S. and who files a federal tax return will be required to obtain insurance or will face a penalty, unless the cost of the least expensive coverage (with subsidies) is 8 percent or more of their household income. If you’ve avoided coverage in the past, this may actually be a good thing for you—especially since the government is subsidizing the premiums of those who earn between 100 and 400 percent of the federal poverty level.