We all know that health insurance costs are going up every year. In 2006, the cost of health insurance premiums rose 7.7 percent. Actually, this was the slowest growth since 1999, but that was still more than twice the pace of inflation or workers' earnings.
Interestingly, the lowest premium increases were for the high-deductible catastrophic health plans. The HSA type plans consist of a catastrophic coverage plan coupled with a Health Savings Account. The Health Savings Account, (HSA) is a special savings account that you can open at your local bank. Money deposited into this account is exempt from taxation. That is, you get a tax deduction for depositing money into this account. The HSA account is very similar to the traditional IRA. The White House has been pushing these plans as a way to slow the cost increases by giving the consumers more say over their medical treatments. So, your first task is to learn about HSA type plans. They will save you money.
It is good to save money, but I promised to show you how to decrease your risk and decrease your premiums.
Let's look at an example:
Assume a family with a 38 year old male and a 36 year old female with two children. All are in standard health.
A $500 deductible 80/20 major medical plan plan is $815 per month. The maximum out-of-pocket expense should one of them had to be hospitalized for five days is $2,500 -- that is, the total financial risk is $2,500. (By the way, five days is the average length of a hospital stay.)
Consider an alternate choice:
Let's look at a $2,500 deductible plan with a monthly cost of $615. With the same assumptions as above, the total risk for the five day hospital stay is $4,500. However, the premium is $200 per month less! Take part of this $200 per month savings and purchase an accident plan. Typically this will cost $30 per month to cover the entire family. If any member of the family is involved in an accident, they will be covered up to $5,000 per accident. Let's say one of the children is playing soccer and breaks his/her leg. That can cost close to $5,000. The accident plan pays $4,900 because there is a $100 deductible on that plan. The major medical health plan has the $4,500 out-of-pocket expense, but it is more than paid for by the accident plan. Your total risk is less than zero.
Oh, you say, but what if it isn't an accident? That is why you buy the supplemental hospital plan. That plan would cost $71.87 per month and it would cover the entire family too. Another example is necessary here:
One of the family members needs a surgical procedure to correct GERD. (Gastroesophageal Reflux Disease.) This may be a three day hospital stay. What would this supplemental hospital plan pay? First, it would pay $600 for the surgery, plus $150 for the anesthesia, or $750. Add the benefit paid for three days in the hospital or $2,000 and you have a total of $2,750. This is not enough to pay the $4,500 out of pocket, but it would if the hospital stay were six days.
A six day stay would pay $2,000 for the surgery, and $500 for the anesthesia, or $2,500. The six day confinement would pay $5,000. This totals $7,500 which is more than enough to pay the $4,500 out-of-pocket expenses. You actually end up ahead financially.
Let's total up our costs. We saved $200, but spent $30 plus $71.87 or $101.87. We still are saving $98.13 per month on our premiums and we have decreased our out-of-pocket risk considerably.
This works. This is an actual example.
Richard Day has years of experience finding the exact plan that will fit his client's needs. He adopted the HSA concept early, and will help you to understand how they work. Click this link for more information concerning the Blue Options HSA If you would like to discuss an actual example of how you can decrease your risk and decrease your premium expense, visit: http://www.RichDayHealthPlans.com
