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What you need to know about enrolling in a health-care plan and staying out of medical debt

Key Points
  • Open enrollment for Affordable Care Act health insurance coverage ends on Sunday, December 15.
  • The average household spends almost $5,000 per year on health-care expenses, according to the Bureau of Labor Statistics.
  • Starting a new year with a better understanding of health insurance is a smart move for financial reasons.
  • It can help manage medical bills and keep you out of high-interest debt.
What you need to know about enrolling in a health-care plan and staying out of medical debt

It's no secret Americans spend a lot on health care. The Bureau of Labor Statistics says the average household spends almost $5,000 per year on health-care expenses. If you're older, have a large family, or ongoing health issues, that figure could be many times higher. Managing your health-care expenses requires an understanding of your family's needs, how you're being billed, as well as which resources are available for paying off any remaining balances.

Health insurance basics

A good place to start when you're trying to get a handle on your health-care costs is to take a good look at your insurance coverage and review whether it's still the right choice. Compare plan options via your HR department, or if you buy insurance in the open marketplace, use the comparison tools available on the marketplace site.

The essential things to consider when comparing plan costs include the plan's monthly premium payments; the deductible ( or amount you must pay out-of-pocket before coverage kicks in); your costs for doctor or ER visits; and what percentage of costs you must pay for hospitalizations, major surgeries, or other health situations.

Generally speaking, the higher your monthly premium, the lower your deductible and out-of-pocket costs. And plans with higher premiums also tend to offer lower costs for medical visits and lower total out-of-pocket maximums.

If your family is generally young and healthy, it might be reasonable to opt for a plan with lower premiums, but higher deductibles. Review your health-care expenses over the past year to understand your actual health-care spending patterns. How often did you visit the doctor this past year, and how much in total did you pay out-of-pocket? Could you have saved money with a different plan? And how do you expect your health-care usage to compare this year? Do you have new family members, or are you perhaps anticipating the need for surgery or other treatments?

That's why it is important to do a little comparison shopping to understand your options, and whether you might save with a different choice. And remember, if you do purchase your plan via the ACA marketplaces, recall that open enrollment ends December 15.

Planning for the unexpected

If you lose your job, can you afford extending your insurance via COBRA, or would you be better off buying your own on the open exchanges? Could you consider a short-term health insurance plan while you find a new job? You need to ask yourself these questions now, before an unexpected situation arises, so that you can plan for the unforeseen. Otherwise, you might be stuck with higher costs than you expected.

If you do find yourself with a bill you can't afford, these are some things to keep in mind. First, you might qualify for financial assistance from your hospital or medical organization. Call their billing department and ask. Based on your income, household size, and debt level, you may be eligible to have all or some of your debt forgiven.

If your debt doesn't qualify for financial assistance, you'll likely qualify for a big discount (usually 20-30%) if you can pay it in one lump sum. If not, you can negotiate an interest-free payment plan, allowing you to make affordable monthly payments. And finally, never put medical bills you can't afford on credit cards. Since medical providers will usually allow you to create interest-free payment plans, there's no reason to take on interest-bearing debt by putting it on your card.

One last word of advice: Always double-check your medical bills for any billing errors. (Some studies show alarmingly high error rates on patients' bills.) Like credit reports, medical bills should be reviewed regularly for errors and discrepancies in billing. If in doubt, always consult with your medical provider and insurer; it can pay-off handsomely and avoid unnecessary or excessive payments.

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