DOLLARS AND SENSE

Common sense answers to questions on personal finance

by Joe Plemon

Q: I know that I need health insurance, but my premiums keep going up and I may need to cancel my insurance so I can pay my other bills. Can you help?

A: You can’t afford to NOT have health insurance! Without it, one medical crisis could devastate your financial life. Because the premiums are so expensive, I asked local health insurance specialist Rodney Henry to show me how the average family can afford them.

I learned some very exciting things: by purchasing a High Deductible Health Plan (HDHP), a family can realistically expect to lower their monthly premiums by 50%! Rodney shared actual quotes for a family of four comparing the traditional $25 co-pay plan ($1,000 deductible per person and 80% coverage up to $5,000) with an HDHP requiring a family deductible of $4,000 per year, but paying 100% after the deductible is met. The premium for the traditional plan is $595.60 per month while the HDHP is only $283.45 monthly.

Yes, it is true with the HDHP that you will pay the first $4,000 out of pocket, but do the math: the premium savings of $312.15 per month is $3745.80 in a year’s time. Besides, the traditional plan also has a deductible; potentially $5,000 in a year. And get this: the HDHP has $5 million maximum lifetime benefit per person compared to $2 million with the traditional plan.

And the news just keeps getting better. Congress has created a tax break to help you save your deductible amount: all contributions to a Health Savings Account (HSA) are pre-tax dollars.

To summarize, the HDHP plan saves $3745.80 per year in premiums. If you contribute that amount to an HSA, you will have a nest egg for all of your medical expenses and you will save about $1000 in taxes.

This is a no brainer! Health insurance is critical for everyone and with the new HDHP plans, it is also affordable.