With health care costs on the rise, even price of health insurance in the US is found escalating with time. The worst affected because of this trend is perhaps the millions of self- employed persons throughout the nation. No matter how important they feel health insurance is, the rates are making them sit back. Cost cutting is common amongst the self- employed and even small business owners but sadly, today they have restricted it to one of the most important areas and it is that of health insurance. So how do you, as a self- employed professional, bail yourself out of this situation?
The best way to fight rising health insurance costs is to choose a High Deductible Health Plan (HDHP). The deductible you pay for your health policy is nothing but the amount that you need to shell out before the insurance company swings into action and starts making the payments. Usually, once you have reached your deductible, the insurance company starts paying up for eligible medical bills. Please note that the company never pays the entire amount, only maybe 70% to 80%, after you meet the deductible amount. But the good thing about a high deductible plan is that it lowers your premiums. On the flipside, you may have to make more out- of- pocket expenditure before the company starts bearing some of the costs. Finally, though, it works more towards your advantage since you save a lot every month (due to low premiums).
Usually deductibles remain between $50 and $250 but in exceptional cases they can range from $2500 and $5000. Catastrophic coverage is how these high deductible plans are known as. Such plans will work well if you are ready to pay more in order to lessen monthly premiums. Here are a few things you ought to check before opting for a high deductible plan-
- Affordability - It is great if your plan is offering extensive but is it affordable? This is the first thing that you must find out. In case of an HDHP, you have to tread a fine line while paying higher deductibles to lower your premiums. The financial burden may just exceed your expectations. Under such circumstances, it is best to choose a high deductible plan with an HSA feature on it. A Health Savings Account allows you to make tax- free deposits which you can later use for eligible medical expenses.
- Look for other options - Juggle between options before you finally settle for an HDHP. Apart from HSA plans, you may also consider HRA policies. Health Reimbursement Arrangements (HRA’s) are greatly favored by self- employed people since they allow immense freedom. In case you do not use part of your deposits for medical expenses, you can keep the amount.
- Are there limits? Most insurance companies restrict coverage upto a point that is you have the pay the rest of the expenses. In most cases, this leads to people spending more than their fair share in the form of out- of- pocket expenses. You need to see to it that your plan does not make you bankrupt on one hand and offer you with only limited benefits on the other. Also, check for pre- existing conditions that the company may not want to cover. Many companies tend to impose elimination riders and pre- existing condition exclusion periods.