Paying the Premium

When considering to enroll in a health benefits plan there are two major factors; coverage and cost. Coverage varies in the types of plans available to you through employer groups, state programs, and individual plans. Cost is very important to any budget. At what point is it smart to enroll in a plan or just pay cash for medical costs and service?

We are told that it is imperative to be enrolled in some type of health benefit plan. While having coverage is very nice to have in case something happens, what if nothing ever happens? Money spent becomes money lost and no one can afford to lose money.

A typical HMO plan for a family costs around $400 per month through an employer-based group plan. That comes out to $4,800 per year! You can pay for your monthly premium out of your gross wages (before income taxes) ultimately lowering your taxable income. What a great perk! However, any qualified medical or dental expense you pay for cannot be deducted unless it totals 7.5% of your annual income. For someone earning $50,000 per year, qualified expenses paid out-of-pocket would have to total $3,750 in order to deduct it from your income tax. Assuming you pay a co-payment of $20 per doctor visit and you were prescribed one medication per visit. Let's assume your prescription cost $20 as well. You would have to go to the doctor 93.75 times in one year to spend $3750. For a healthy family, that just does not happen.

In response to this the Health Care Savings Accounts were formed. Sadly, these accounts are very under-utilized because many do not understand how they work. Visit our Health Care Savings Accounts section to learn more.

Hospitals and doctors charge differently for types of payment. They assume automatically that you have health insurance. They charge the insurance companies an hourly rate, sometimes administrative costs, and even for the supplies they use to care for you. For example, a bill for a child's annual check up was submitted to an insurance company for $350, as a courtesy to the parent. However, paying cash for that very same doctor would have only cost $80 on the date of service. Doctors and hospitals justify this because they say the insurance companies take awhile to pay the bill. This is insurance fraud, by mere definition, but it is never reported as such. I can only assume that the insurance company figures paying $350 for 4 people to get an annual check up and charging that family $4,800 per year in premiums still leaves a nice net profit of $3,400 per year. The profit your giving the health insurance company could be accumulating for an emergency in a Health Savings Account or your own checking account.