How to Get More Coverage and
Pay Less Money, Starting Today
Every day we talk to people paying too much money for coverage with gaping holes, leaving them exposed to bankruptcy (and disaster) if a major medical event were to happen. Almost everyone pays more than they should for medical care. And few take advantage of the tremendous tax deductions available to people who structure their health care correctly.
That is why we decided to put together a comprehensive strategy that would help our clients get the coverage they need, while keeping more money in their pocket year after year.
The three simple principles explained here will enable you to save thousands of dollars every year, while giving you the peace of mind in knowing that if something big happens, you really are well protected.
Principle #1: Get the Coverage You Need at the Lowest Available Cost
Most people pay too much money for their health insurance and they still don’t have enough coverage. So the first place to begin when designing your coverage is to ask yourself what your purpose is.
Your main objective will be to protect your finances in the event of a major medical event. If you fall and break your back, if you get diagnosed with cancer, if you eat a contaminated cantaloupe and get listeria – its probably going to cost you a lot of money.
You’ll be facing bills for hospitalization, outpatient treatment, doctor visits, prescription drugs, lab tests, and more. If it is something very serious, you may be out of work for a month, or 6 months.
So it is these things that are most important to protect yourself against. Do not get side-tracked by plans that cover doctor visits for $20 or cover health club dues, or any other side benefits – those benefits can be great, but make sure you’re spending your money where you really need it.
Action Step 1: Choose A High-Deductible Health Insurance Plan
High deductible plans keep the premiums lower. For most people, after just a couple of years the money saved from having this kind of plan will be more than enough to cover the deductible.
Most high-deductible plans are also HSA-qualified. This means you can set up a Health Savings Account, where you can put aside pre-tax money to cover future medical expenses. If you stay healthy, the money just grows tax-deferred, like an IRA, and is always your’s to keep.
The result is lower premiums now, and into the future. More information on how HSAs work is on our HSA page.
Action Step 2: Choose critical illness coverage to further protect your assets.
Most people carry health insurance, but many have no protection if they are out of work for an extended period of time. In fact, nearly half of all bankruptcies are related to a medical event, yet 70% of people did have health insurance. It was being out of work for several months left them unable to pay their mortgage and other bills.
You may already be covered by a disability plan, or your family may not depend on your income. If that is not the case, then the more economical way to provide protection in this area is with a critical illness plan. These plans will pay a lump sum – say, $40,000 – if you get diagnosed with cancer, a heart attack, a stroke, or one of several other critical illnesses.
This is paid directly to you, and will give you money you can use to pay your bills until you get back on your feet. More details and an online application are available on the Critical Illness Plans page.
Action Step 3: Add an Accident Plan
Part of the calculation when designing your coverage is to try to assess your own risk and coverage needs. For people who are generally in good health, the biggest risk they usually face is that of an accident. A simple knife cut or bicycle accident can result in emergency room charges of hundreds or even thousands of dollars.
For people with children, or higher risk hobbies like skiing, the risk of an accident is even higher. So most people will benefit from having an accident plan. These plans have a $100 deductible, and then cover 100% up to $5000 or $10,000.
That should be enough to cover most or all of your deductible on your health insurance policy, thus leaving you with only $100 exposure for an accident. You can read more about these plans and sign up for a plan on the Accident Plans page.
Principle #2: Pay Less Money for your Out-of-pocket Medical Expenses
The medical industry – doctors, hospitals, pharmacies – operate with the assumption that the person buying the product or service is not the person paying for it. And they are often right – it is insurance companies or Medicare or Medicaid that pays most medical bills.
The result though, is a system where the provider doesn’t even feel an obligation to tell you the price before you buy. And where consumers are routinely charged more than they should be in a free market economy.
But if you know how to do it, you can cut thousands of dollars every year from your annual medical expenses, just by being a smart consumer.
- Purchase lab work – such as annual blood tests or cholesterol measurements – directly from the lab instead of from the doctor or hospital. You’ll typically save 60 – 80% by eliminating the middleman.
- Use a discount card for local pharmacy purchases, and purchase long-term maintenance medications from international pharmacies, at discounts of 30 – 70%.
- Have all your medical bills over $200 renegotiated by a medical bill negotiation service. You’ll get 70% of any savings they are able to negotiate for you.
- Pay direct for x-rays, cat scans, and other imaging services. Savings are usually 50% or more.
- Compare prices, and ask for a cash discount when paying for medical services directly. Doctors will often discount cash payers to avoid having to deal with the insurance company.
Action Step: visit our Additional Benefits page to get direct access to these discounts and services, at rates available no where else but ColoHealth.
Principle #3: Maximize Your Health-Related Tax Deductions
To finalize your Complete Protection Strategy, you’ll want to do all you can to minimize your income taxes. There are 3 key steps, which may reduce your annual income tax burden by literally thousands of dollars.
Few people take advantage of all the ways to reduce your taxes, based on how you pay for your health insurance and other medical expenses. Paying taxes may be one of those necessities of living in a modern civilization, but by no means should you pay more than you are legally obligated to pay.
Action Step 1: Maximize Your HSA Contribution.
If you have an HSA-qualified health insurance plan, take advantage by maximizing your contribution. Every dollar you put in your HSA is a dollar you don’t have to pay taxes on. Individuals can contribute up to $3,450 for 2018, and families can contribute up to $6,900. People over 55 years old can contribute an additional $1000.
The money in your health savings account is always yours, and grows tax-deferred just like an IRA. And if you ever need to take the money out to cover a medical expense, that withdrawal is tax-free!
If you make a contribution to your HSA as an individual, you get to deduct it on your 1040, when determining your adjusted gross income. So for instance, if you are in a 28% federal income tax bracket and paying 5% state income taxes, a $6,900 contribution will reduce your April 15th tax bill by $2,277.
Action Step 2: Have Your Business Fund Your HSA, to Save Even More
If you are self-employed and are able to have your business fund your HSA, you will save even more. Because while an individual HSA contribution does reduce income taxes, it does nothing to change self-employment taxes.
During most years, self-employment tax is 15.3% of your gross income – 12.4% for social security, and 2.9% for Medicare. (The 2010 Tax Relief Act reduced this tax to 13.3% in 2011 only.)
In order for your business to fund the HSA, there must be an employer-employee relationship. So this will work for a sole proprietor only if the spouse can be set up to work in the business. The business can then fund the spouse/employee’s HSA, so with a $6,900 contribution you would save an additional $1,055.7 in taxes by setting it up this way.
Three simple principles make up the ColoHealth Complete Protection Strategy:
- Get the coverage you need at the lowest available cost.
- Pay less money when spending for medical care.
- Pay less in taxes, by maximizing your health-related deductions.
Everyone’s situation is different. So after doing some research and reviewing your options, please contact us if you still have additional questions. We’ll be happy to help you explore your options, and custom design a protection package that will maximize your benefits, and minimize your costs.