Don't Cut Corners When It Comes to Health Insurance

Health insurance is a gathering storm for the Obama Administration and will be one of the next major policy decisions for the new president. With nearly 50 million Americans under 65 lacking health insurance and premiums for employer-sponsored coverage rising four times as fast as our income, it’s an issue that needs reform in a bad way.

Kimberly Lankford, contributing editor for Kiplinger’s, says that until major change is instituted many Americans will continue to look to save on their insurance by making cuts and skimping here and there. But nickel-and-dime-ing your own healthcare can end up costing you.

1) Low premiums not always the answer: More plans are switching from co-pays -- where you pay a fixed dollar amount for doctor's visits and prescriptions -- to coinsurance -- where you pay a percentage of the cost. If you take expensive medications and the insurer charges a high co-insurance rate, you could have to pay a lot more money out of your pocket than you would with a higher-premium policy that charges smaller co-pays. The same is true for out-of-network doctors and hospitals. Some of the lowest-cost policies are HMOs, which limit the doctors and hospitals you can use.

2) Don't cut the amount of coverage: Some policies charge much lower premiums but also offer much less coverage. Policies that offer maximum benefits of less than $1 million could leave you with tens of thousands of dollars in out-of-pocket costs (some student policies provide low co-payments for doctor's visits but just $50,000 to $100,000 per accident or illness, which is way too little to cover most major medical issues). A better way to lower your premiums is to buy a high-deductible health insurance policy that provides much better coverage for major medical issues. You could have to pay $1,000 or more out of your pocket before coverage kicks in, but you'll protect yourself against having to pay tens of thousands of dollars in catastrophic costs if you have a major illness or accident.

3) COBRA vs. Personal Insurance: COBRA lets you keep your employers plan for 18 months. The stimulus package provided a 65 percent subsidy for COBRA premiums for up to nine months for people who were laid off since September. But after that subsidy ends, the price can jump significantly. The average employer policy costs $4,700 for individuals or $12,600 for families, and when that COBRA subsidy ends (or if you don't qualify for the subsidy), you need to pay 102 percent of that cost yourself. Many healthy people can find an individual policy for $250 a month or less (or $100 a month or less for young, healthy people), especially if you buy a high-deductible policy with a health savings account. You can get price quotes for individual policies at eHealthInsurance.com or find a local agent at nahu.org.