Insurance

3 Reasons Why You Should Get Health Insurance

3 Reasons Why You Should Get Health Insurance

You are not alone if you do not currently have health insurance. According to the US Census Bureau, 26.1 million people in the United States were uninsured in 2019.

Because of the individual mandate under the Affordable Care Act, you had to pay an extra fee when you filed your taxes for a few years prior to 2018. (ACA). The individual mandate penalty is no longer in effect as of 2019, so there is no penalty for not having health insurance, right?

Not so quickly. Even if you’re young and healthy and have no fear of the tax collector, there are numerous reasons why purchasing health insurance is a good idea.

Reasons to Purchase Health Insurance

Although you will not face a tax penalty if you choose not to purchase health insurance, there are other financial factors to consider. In many cases, the advantages of having a plan far outweigh the disadvantages and costs.

1. Insurance helps to reduce the cost of unexpected medical bills.

According to the Peter G. Peterson Foundation, the United States has some of the most expensive health-care systems in the world, and the cost of health-care in the United States is expected to rise. According to the National Health Expenditure Accounts, U.S. health-care spending increased by 4.6 percent in 2019, reaching around $11,582 per person, for a total of $3.8 trillion.

When you are uninsured, you are responsible for paying any medical bills on your own. If you’re only paying for annual checkups or a course of antibiotics, those costs may not be prohibitively expensive. However, if something were to happen to you, such as an injury or an acute medical condition, such as kidney stones, you would be responsible for all treatment and care costs.

Although medical costs vary greatly depending on your location and the type of provider you see, HealthCare.gov lists the following as some common medical expenses:

  • $7,500 for a broken leg
  • Over $100,000 for Cancer Treatment
  • $30,000 for a three-day hospital stay

You could argue that most health insurance plans have a deductible, which you must pay out of pocket for treatment and care before your coverage kicks in and pays the bill. That is both true and untrue.

You will almost certainly have a deductible unless you purchase the Cadillac of health insurance plans, the platinum plan. The deductible amount varies depending on the type of plan you purchase and whether you buy an individual plan or an employer-sponsored plan. Deductible amounts differ depending on whether you have a family plan or an individual plan.

If you break your leg and require a cast and other treatment and have a deductible plan, you must pay your deductible before your insurance will cover you. So, if your deductible is $6,150 and you don’t have any copays or coinsurance, and your broken leg treatment costs $7,500, you’ll pay $6,150 and insurance will pay $1,350.

If you require additional medical care during that year, your insurance will cover the cost as long as you visit an in-network provider. If you have coinsurance or copays, you must still pay them after you’ve paid the full deductible until you reach your annual maximum out-of-pocket limit.

However, there are times when insurance will step in and cover your expenses even if you haven’t met your deductible. Preventive care, such as your annual flu shot, Pap test, and wellness checkup, must be covered by insurance. You don’t have to pay for preventive services out of pocket if you have insurance.

Your insurance also allows you to pay less for the services you receive. For example, if you go to the doctor for a sinus infection and don’t have insurance, the bill could be $350. However, if you have a plan and the doctor is in the network of the insurance company, the doctor will have an agreement with the insurance provider.

For example, under the terms of the agreement, the doctor may accept $150 for treating your sinus problems. You will still have to pay your deductible if you have one, but you will save $200.

If you choose a high-deductible plan to lower your monthly premiums, you can also use a Lively health savings account (HSA). A health savings account (HSA) allows you to save for medical expenses while lowering your taxable income.

2. Insurance Lowers Your Chances of Bankruptcy

According to United States Courts, there were 659,881 nonbusiness bankruptcies during the 12-month period ending June 30, 2020. Although the United States Courts do not have data on the number of bankruptcies filed due to medical expenses, CNBC reports that medical issues are a factor in more than two-thirds of bankruptcies.

According to a 2018 study published in the New England Journal of Medicine, there appears to be a link between hospital admissions and bankruptcy filings. The likelihood of filing for bankruptcy increases in the years following a hospitalization.

Having health insurance will not prevent you from having to pay medical bills or going to the emergency room. However, it does place a limit on those bills, allowing you to avoid bankruptcy. Most individual health insurance policies include a deductible, coinsurance or copays, and an annual out-of-pocket maximum.

You are responsible for your deductible amount, whether it is $1,000 or $8,000. You may also be required to pay coinsurance, which is a percentage of your health-care costs that you must pay after you have met your deductible. Certain goods and services, such as nonpreventive doctor’s appointments and prescription drugs, are also subject to copays in some plans.

Your plan also includes a yearly out-of-pocket maximum. When you reach your out-of-pocket maximum, your insurance company is required to cover the full cost of in-network care.

For example, suppose you have a $4,000 deductible and a 20% coinsurance. Your leg is broken, and the hospital charges your insurance company $7,500. You will pay the full $4,000 deductible plus 20% of the remaining $3,500, or $700. The remainder will be covered by your insurance company.

Assume you have a particularly bad year and break your leg yet again. The hospital bills your insurance company $7,500 once more. Because you’ve already paid your $4,000 deductible for the year, you’re only responsible for the 20% coinsurance, which in this case is $1,500.

However, if your plan’s out-of-pocket maximum is $5,000 and you’ve already spent $4,700 on your first broken leg this year, you only have $300 left before you hit the limit. You pay $300, and the insurance company pays the remaining $7,200.

If you broke your leg a third time that year, your insurer would pay the entire $7,500 bill to an in-network provider. Your total out-of-pocket cost for all three broken legs with insurance would be $5,000. It would be $22,500 (3 x $7,500) without it.

3. Insurance can motivate you to take better care of your health.

It is a common misconception that health insurance is only for people who have a chronic, serious illness or who are at a higher risk of becoming ill or injured. Health insurance is also for people who are in good health. In fact, if you’re in the best health of your life, purchasing a health insurance plan can help you stay healthy.

Most health insurance plans are required by the ACA to cover a long list of preventive services. These services are divided into three categories, according toHealthCare.gov: those for all adults, those for children, and those for women. Preventive care services are free if you have a plan that covers them and see a provider in your plan’s network.

Here are a few notable examples of preventive care services:

  • Screening for cholesterol
  • Type 2 diabetes screening HIV screening
  • Several vaccines (such as the flu shot, HPV vaccine, tetanus shot, and chickenpox vaccine)
  • Tuberculosis testing
  • Services for tobacco use screening and cessation
  • Folic acid supplements for pregnant or potentially pregnant women
  • Pap smears STI testing
  • Contraceptives

Preventive services provided for free by an in-network provider are not only convenient and cost-effective. Getting preventive care also allows you to get the treatment you need as soon as the doctor notices any health problems.

For instance, if your doctor orders a cholesterol screening and the results show that your cholesterol is slightly elevated, you can take immediate action. To help lower your cholesterol, your doctor may recommend dietary changes or an exercise regimen. If you had postponed the screening, your cholesterol levels could have risen to the point where they were only manageable with medications and medical intervention.

Getting preventive care all of your life will also help you stay active. The longer you remain healthy, the longer you will be able to work and do the things you enjoy. If any conditions are detected early and managed with lifestyle changes, you will not need to take time off work for extensive treatments.

Treatment of conditions with lifestyle changes or moderate measures is also far less expensive than more invasive options such as surgery or extensive medical treatments.

What You Can Do If Your Health Insurance Premiums Are Excessively High

The advantages of having health insurance are obvious. But what can you do if paying $300 or so per month for insurance seems excessive?

If the monthly cost of health insurance appears to be too high for your budget, there are ways to reduce your premium.

1. Determine Your Eligibility for a Credit

If you buy an individual or family plan through the HealthCare.gov marketplace, you may be eligible for a tax credit or subsidy that will lower your monthly premium. According to the Department of Health and Human Services, 85 percent of people chose a plan with financial assistance during the 2016 open enrollment period.

Your credit amount and eligibility are determined by your family size, state, and income level. According to the IRS, credits are available for people with incomes ranging from 100% to 400% of the federal poverty line for their family size. People with lower incomes can get larger credits.

Some people may also be eligible for a tax credit in addition to cost-sharing assistance to reduce their deductible and coinsurance amounts.

2. Select a High Deductible Plan

High deductible plans typically have lower monthly payments than low or no deductible plans. A high-deductible plan may make sense if you don’t anticipate needing much more than basic health care and preventive services in the coming year.

3. Select an HMO

Health management organization (HMO) premiums are frequently less expensive than those charged by preferred provider organizations (PPOs). With an HMO, you select a primary care physician and must obtain referrals to see specialists.

To receive coverage, you must also visit providers who are part of the plan’s network. An HMO plan’s requirements and limitations help to keep its costs low.

4. Select a Catastrophic Plan

Some people are also eligible for catastrophic plans. A catastrophic plan allows you to see your primary care provider three times per year before you have to meet your deductible. Under catastrophic plans, preventive services are also provided for free. According to HealthCare.gov, these plans are for people who anticipate only needing medical care in the “worst case scenario.”

Catastrophic plans have higher deductibles than other plans, with a $8,550 deductible in 2021. They are also typically reserved for people under the age of 30 or those who qualify for a financial hardship exemption. Premiums are typically lower than for other plan options, but they are not eligible for a tax credit.

5. Think about a plan that includes a Health Savings Account.

Another option for lowering your health-care costs while still getting the coverage you require is to purchase a plan that includes an HSA. HSAs are typically associated with high-deductible health insurance plans. If your employer does not provide an HSA, you can set one up through Lively.

Contributions to an HSA must be used to pay for medical and health care expenses. Copays or coinsurance, deductibles, and the cost of prescription medications are all covered costs. When you contribute to an HSA, you can deduct the amount you contribute from your taxable income for the year, lowering your tax bill.

Any money you deposit into an HSA is kept there until you need it. You can save a lot of money if you start contributing to an HSA when you’re in good health. An HSA has an annual contribution limit of $3,600 for an individual plan and $7,200 for a family plan (as of 2021).

Contributing to an HSA now ensures that you will have funds to cover the cost of medical care in the future, potentially saving you from medical debt and bankruptcy.

SEE ALSO – Life insurance terminology explained

Last Word

We all want to believe that we are invincible and that bad things cannot or will not happen to us. But none of us can predict what will happen tomorrow, let alone in the distant future.

Even if you don’t think you need health insurance right now, purchasing a plan through the marketplace or through your employer’s health insurance company during open enrollment is the prudent thing to do. A plan not only protects your physical health, but it also aids in the protection of your financial health.

Oluwatobi Moses

Oluwatobi Moses is an entertainment blogger who's passionate about storytelling. He likes to read, research, hang out with his friends and play chess.

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