How to Save Money With High Healthcare Expenses

woman reading her bills
Choosing a health plan wisely can help you save money if your expenses are so high that you reach your out-of-pocket max each year. BJI/Getty Images

If you reach your health insurance out-of-pocket maximum every year, you may have opportunities to save money. Coinsurance expenses can be prohibitive if you:

  • Are on an expensive medication
  • Require frequent infusions
  • Need recurring costly treatments

But, your high healthcare expenses are the key to two savings opportunities.

  1. You may be able to save on your out-of-pocket expenses like copays, coinsurance, and deductibles.
  2. You may be able to save on health insurance premiums

These savings techniques only work for people who expect to reach their plan’s out-of-pocket maximum each year.

Choose a Plan With a Lower Out-Of-Pocket Limit

Health insurance companies pay 100 percent of your covered expenses for the rest of the year after you meet your yearly out-of-pocket maximum. The only thing you continue to pay is your monthly health insurance premium, and the charges for any services that simply aren't covered by your plan (things like adult dental care, for example, or elective surgery).

Therefore, if you choose a health plan with a lower out-of-pocket maximum than you’re currently paying, you may save money, depending on the difference in premiums. In many cases, you'll find that the lower out-of-pocket limit more than offsets the higher premiums.

ACA-compliant plans (ie, all major medical plans that aren't grandmothered or grandfathered) are required to have out-of-pocket maximums that don't exceed $7,350 per person in 2018. That upper limit increases to $7,900 in 2019. But in any year, there are numerous plans that have out-of-pocket maximums that are well below the upper limits.

How to Find a Plan With Lower Out-Of-Pocket Limits

Look for a plan with a relatively high deductible and coinsurance, but a lower overall out-of-pocket limit. Since most people never reach the out-of-pocket maximum, the higher the deductible and coinsurance the less the company has to pay for health care services for its typical members. This allows them to charge a lower premium.

Since you know you’ll be paying the full out-of-pocket amount during the year, the higher deductible and coinsurance don't increase your yearly costs. In fact, since you're choosing a plan with a lower total out-of-pocket maximum, your yearly costs will be lower than they would have been on a plan with a higher out-of-pocket maximum—regardless of the deductible.

In other words, the number that matters most is the maximum out-of-pocket exposure, since you know you're going to be reaching that limit one way or the other. It won't matter whether you get there via deductible alone or deductible plus coinsurance and/or copays, so the plan design beyond the out-of-pocket limit isn't as important when you're facing significant claims costs during the year.

However, the higher deductible and coinsurance has an impact on when you pay your out-of-pocket expenses, shifting that toward the beginning of the plan year. You’ll reach the out-of-pocket maximum earlier in the year because it's lower so it's easier to reach, and because your deductible and coinsurance are higher causing you to pay earlier in the year.

Choose a Plan With the Same Out-Of-Pocket Maximum but a Lower Premium

Another way to save is to shop for a health insurance plan with the same out-of-pocket limit as your current plan, but a lower monthly premium. While you’ll still have the same yearly out-of-pocket health care expenses, you’ll save money each month on the cost of the premium.

Once again, look at plans with a higher deductible and coinsurance than your current plan. Although you’ll need to have money available in the first few months of the year to meet your new expenses, you’ll have wiggle room in your budget since you’ll be paying less in monthly premiums.

Buyer Beware

If you've got a medical condition that requires significant ongoing care, it's important to pay attention to the specifics—beyond the premium and cost-sharing—of the plans you're considering. You'll want to make sure that the new plan has a provider network that includes your doctors, or that you'd be ok with switching to the doctors who are on the plan's network.

And keep in mind that each plan covers different prescription drugs. The covered drug list for a plan is called the formulary, and formularies vary from one plan to another. If you inadvertently enroll in a plan that doesn't include your medication in its formulary, you would have to switch drugs or treatments or pay the entire cost out-of-pocket. Because your health care costs are so high, it’s crucial that you thoroughly investigate a new health plan’s benefit coverage before you switch.

The Affordable Care Act Helps With Costs

The Affordable Care Act also created a health insurance subsidy to help decrease the out-of-pocket maximum for eligible people with low incomes (up to 250 percent of the poverty level). You should read on how the subsidy reduces your out-of-pocket maximum.

Before You Switch Plans

  • Make sure you’ll have enough money available early in the plan year to pay the potentially higher initial costs like deductible and coinsurance before you meet the new out-of-pocket limit and start reaping the savings. Consider a Flexible Spending Account if your employer offers one, or a Health Savings Account if you enroll in a health plan that's HSA-qualified.
  • If sticking with your current physician is important to you, make sure he or she is in-network with the health plan you’re considering.
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