How the right choice of health plan can help minimize out-of-pocket costs

The news is full of information about the increase in health care premiums for 2018 and while these increases are surely unwelcome, they are also, unfortunately, part of a national trend.

According to an article from Kimberly Amadeo, The Rising Cost of Health Care by Year and Its Causes in The Balance, U.S. health care costs grew to $3.2 trillion in 2015, equaling 17.8 percent of gross domestic product. For comparison, in 1960, health care costs were $27.2 billion, or only 5 percent of GDP. That comes to $9,990 per person in 2015 compared to just $146 per person in 1960.

The annual Kaiser Employer Health Benefits Survey found that for 2017, annual premiums for employer-sponsored family health coverage reached $18,764, up 3 percent from last year. And for those buying insurance on an exchange or private market plan in 2017, the average annual increase before subsidies was 25 percent, according to the National Conference of State Legislatures.

Over the past five years, premiums for an employer-provided family insurance plan have climbed 19 percent, while worker pay increased only 12 percent, a Bloomberg analysis of data from Kaiser and the federal government shows. Meanwhile, the U.S. Department of Labor’s Consumer Price Index climbed only 6 percent in that time.

Amadeo, in her look at the rising cost of health care, cites government policy and lifestyle changes as two causes driving the increase. The United States relies on a combination of company-sponsored private health insurance and government programs like Medicaid and Medicare to help those without employer-sponsored insurance. This has led to demand for health care services, giving providers the ability to raise prices.

Chronic illnesses such as diabetes and heart disease have also increased. According to the Centers for Disease Control and Prevention (CDC), 86 percent of the nation’s annual health care expenditures are for people with chronic and mental health conditions.

With health care costs rising across the board, it can be challenging to decide which insurance plan is the best option. While cost is definitely a big factor, there may be other priorities, such as choice of provider, prescription coverage, and even personal risk tolerance.

For anyone looking to purchase healthcare this year, including pre-Medicare PERACare enrollees, the following questions may be particularly useful to ask when choosing a health plan:

Is keeping your current doctor or primary care provider important?

If it is important to you to keep your current doctor or providers, call their office and ask if they participate in the plan options you are considering. If they do not participate, but you continue to see them, you’ll either pay more or possibly the entire cost. You could also consider changing doctors.

What is your risk tolerance?

You will usually pay lower monthly premiums if you agree to a higher deductible. A good rule of thumb: if you didn’t come anywhere close to hitting your deductible this year or last, you can probably choose an even higher deductible for the upcoming plan year and save a lot on premiums. But consider whether you have the savings you need to pay the full deductible if this becomes necessary.

What kind of care do you anticipate needing in the next year?

If you’re relatively healthy and have enough savings to cover a health care emergency, choosing a higher deductible plan often makes sense because of the savings in premium. But if you tend to have high health care costs, or you’re short on savings, take a careful look at what your health care needs could be in the next year – both what you expect, and what you might need in a worst-case scenario. It may be worth paying more upfront for a lower cost when you need care.

Remember that preventive care is covered in full, including annual physicals, vaccinations, and preventive tests – as long as you use an in-network physician.

The importance of estimating your cost.

Once you’ve considered the care you may need in the next year, estimate your health care costs. Remember that health insurance is not designed to pay for everything, but for the insurance to share cost with you. Your share comes into play via deductibles, coinsurance, copays, and premiums.

Resources:

PERACare Pre-Medicare Enrollment Guide

PERACare Pre-Medicare 2018 Health Benefits Program