One of the most important items on your monthly personal budget list is also one of the most difficult items to calculate a value for because of several reasons. We are talking about budgeting for health insurance, which consists of several cost factors that most policyholders do not understand.
How much you pay in health insurance cost does not stay the same with each passing year. Not only do your health circumstances change, but you also have to deal with changes made by the company that covers your health insurance policy. Even if you purchase a health insurance plan in the marketplace established under the Affordable Care Act (ACA), you still have to account for several cost factors that influence the direction of your monthly personal finance budget.
What Do I Need to Know About My Monthly Health Insurance Cost?
When you purchase a health insurance policy, you should receive an information package that contains several documents. One of the most important documents describes the terms you need to know as you manage your health insurance plan.
Let’s review the most important health insurance terms to help you make a well-informed decision about purchasing the right health insurance plan.
Your health insurance premium is the payment you send to your health insurance provider over a clearly defined period. Most health insurance plans offer a monthly or an annual premium option. Deciding to pay monthly premiums is the right choice for policyholders that manage personal finances by creating a monthly budget.
The value of your premium remains the same during the time frame established by your policy. However, you might be able to take advantage of one or more tax breaks if you purchase a health insurance plan in the open marketplace managed by a company that qualifies for participation under the guidelines set by the ACA.
Learn more in How to Lower My Health Insurance Premium.
Your annual deductible represents the value of what you must contribute financially before your health insurance coverage comes into play to subsidize the costs of your health insurance. For example, if your annual health insurance deductible is valued at $10,000 per year, you are responsible for paying the first $10,000 of your healthcare costs before your plan takes over to cover the remaining costs. Some health insurance plans cover the costs of preventive health care regardless of what you pay for the value of your annual deductible.
One of the most important personal finance implications of an annual deductible is connected to your monthly premium. The higher the value of your annual health insurance deductible, the lower the value of your monthly premium. If you decide to pay a higher annual deductible to pay a lower monthly premium, you should be in excellent health, with no costly medical procedures expected to take place over the next 12 months.
If you cover the cost of your annual deductible, that does not mean you do not have to dig into your pocket to finance additional healthcare costs. Coinsurance represents a health insurance cost that kicks in after you cover the value of your annual deductible. For example, let’s assume your annual deductible is valued at $4,000 and your coinsurance charge is 10 percent. When you cover the entire $4,000 value of your deductible, you pay 10 percent of every medical bill that follows the full payment of your $4,000 deductible.
For a medical bill worth $1,000 that follows paying the first $4,000 in annual healthcare services, your health insurance policy requires you to pay $100 for the $1,000 billed to your health insurance account.
Also called copay in some health insurance brochures, copayment represents the value you must pay when you receive a specific type of healthcare service. One common example of a copayment concerns the healthcare costs associated with the treatment provided by a specialist. Another common example requires you to send a copayment if you decide to seek healthcare services outside of your health insurance policy’s preferred list of providers.
A vast majority of health insurance plans do not allow policyholders to apply copayments to meet the financial obligations required for taking care of an annual deductible.
Learn more in How Do Deductibles, Coinsurance, and Copays Work?
The value of an out-of-pocket maximum is the most you can expect to pay each year in healthcare services. After you reach the maximum amount allowed for payment out-of-pocket, your health insurance plan pays 100 percent of the subsequent healthcare services that you use. However, you still must pay your monthly premium to remain eligible to receive the healthcare services covered by your health insurance policy.
The Bottom Line: Budgeting for Health Insurance
Budgeting for health insurance requires a detailed examination of your expected healthcare needs over the next 12 months, as well as an honest appraisal of what you can afford to pay for healthcare services. If you decide to purchase a health insurance plan through the ACA-backed open marketplace, you also have to consider factors such as your age, income, and location.
Shopping for affordable health insurance that includes lower monthly premiums has gone digital. Before the Internet, consumers had to find affordable plans by letting their fingers do the walking through the Yellow Pages. Now, you can comparison shop online in one place by using a highly-rated service such as Insurance Broker Hub.
As an independent insurance broker with access to every health insurance provider operating in the healthcare industry, Insurance Broker Hub eliminates the often frustrating and always time-consuming old-school way of shopping for affordable health insurance. You do not pay broker fees or have to pay extra for health insurance premiums to use the service. The no-obligation service can help you find a health insurance plan that matches your budget, as well as your healthcare needs.
Visit Insurance Broker Hub today to receive a free health insurance quote.
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