Health insurance is back in the news … and it’s on everyone’s minds.
It’s enrollment season for the Affordable Care Act (Obamacare), which means that people who don’t get employer-covered health insurance (such as the self-employed) are shopping for health plans.
As a self-employed person, I’ve always bought my own health insurance, even before the passage of the new law. And I’ve always selected the cheapest plan possible.
By “cheapest plan,” I mean that I look for the lowest monthly premiums. This translates into a plan with a high deductible (as much as $5,000+) and a large co-insurance payment (as much as 30 percent, until you reach an annual maximum).
Nevertheless, I feel that a low-premium, high-deductible plan is the best personal choice for me. Here are eight reasons why I opt for this type of coverage.
#1: I’m young and healthy. I’m under 30 and I haven’t had any health problems as of yet. I don’t feel that it is important to spend hundreds of dollars on health insurance every month when I don’t suffer from health problems, and don’t have any major risk factors for pending problems.
(And just in case something unexpected happens, I still have health insurance — so the worst-case scenario is that I’ll be on-the-hook for my deductible plus co-insurance, up to the annual out-of-pocket maximum.)
#2: I can build an emergency fund. Low premiums are great for someone my age that doesn’t have a lot of cash to spend on health insurance. This allows me to help me build a huge emergency fund, save for the down payment on a house, and sock away money for retirement.
#3: I take care of my health. I’m pro-active about taking great care of my health. I exercise regularly, I eat healthy foods, I get adequate sleep, I take vitamins, I drink plenty of water, and I don’t party excessively. Prevention is the best (and cheapest) cure.
#4: I qualify for an HSA. One of the greatest benefits of many high-deductible health insurance plan is that it’s compatible with an HSA, or Health Savings Account. You can contribute tax-deferred income into an HSA, and then use the funds in that account to pay for qualified medical expenses. In other words: You save on taxes upfront, and then you pay your medical bills with tax-exempt money.
#5: I save enough to cover the deductible and co-pays. Every month, I save the “difference” between a low-premium and high-premium policy. Instead of handing $350 to an insurance company, for example, I’ll pay $100 and save the other $250 in my emergency fund. If I ever need to pay my deductible and co-pays, I can tap that emergency fund.
In other words, I’m making monthly premium payments to myself, rather than to my insurer.
#6: I’m frugal. I don’t want to buy expensive health insurance because I’m frugal in nature. I don’t believe in paying extra for some ultra-premium insurance plan — especially when I’m young, healthy, and have a high likelihood of not needing to use the coverage. Instead, I focus on building an emergency fund that can cover the co-pays and deductibles.
I know that my “worst case scenario” is that I’ll need to pay the annual out-of-pocket maximum, and I focus on saving enough money that I can cover that amount out-of-pocket.
#7: I purchase good car insurance. My chances of being killed or injured in a vehicle are much higher than suffering a heart attack or even being diagnosed with cancer. That is why I choose to purchase car insurance that covers medical bills related to any car accident that I get into — regardless of whether or not I’m the one at fault.
#8: It’s required by law. The Affordable Care Act has forced me to purchase health insurance (although I self-insured previously, as well). Therefore, I chose the cheapest insurance available to someone my age.
Kennedi writes about health and frugality at Face & Fitness.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.