Personal Health Insurance
Cost Factor Options

Personal health insurance cost factors over which consumers have some control are:

• Premium cost: This is the focus for most consumers. The higher the exposure of the insurance company to covering other cost factors, the higher will be your premium. Your best approach is to adhere to the premise that insurance is designed to cover catastrophic costs, not the everyday expenses you could afford to pay yourself;

• Deductible: The higher the deductible, the lower your premium. Surveys have shown that 92 percent of people never reach their annual deductible. You save money by becoming a more active steward of your healthcare without sacrificing your health;

• Health Savings Accounts: For qualified high deductible health plans, an HSA matches with the deductible as an IRA-type, portable account that permits you to save and control funds on a tax-advantaged basis. HSA funds can be applied to pay qualified healthcare expenses;

• Co-Pay: Low co-pays are very expensive and definitely not cost effective for consumers. Typical consumers visit a physician two to four times a year. For most, eliminating co-pays will essentially be offset by reduced premium cost in a year or two;

• Co-Insurance Factor: The co-insurance factor is the percentage of claims expenses paid by the insurance company after the deductible has been satisfied. The higher the co-insurance factor (for example 80% versus 70%), the higher the premium;

• Maximum Out Of Pocket: The MOOP is the maximum annual aggregate amount a consumer would pay after deductible as the consumer portion (say 20%) that complements the insurance company’s co-insurance payment (80%). The lower the MOOP amount, the higher the premium;

• Claims: Claims frequency in the healthcare arena has been high as a result of low deductibles. Insurance carriers have responded to more claims with lower rates for consumers who have filed few or no claims, as well as stricter underwriting and higher rates for those who have had many claims or serious health issues.

With the traditional plan model, most people have wrongly focused on minimizing premium cost, deductibles and co-pays. They have sought first dollar benefits, which ninety percent do not need. This caused overuse of insurance and the higher claims frequency. As a result, the traditional plan has been priced out of reach for many.

Rather than low deductibles and co-pays, your focus should be on co-insurance factor, MOOP and claims handling. These are the critical core issues of your insurance coverage. They establish the catastrophic loss limit beyond which you must protect. You mind your business best by waiving co-pays you can afford to pay and by increasing the deductible that will become an issue only eight percent of the time for most people.

In this manner, you can optimize protection against losses in excess of your loss limit at the lowest and most effective total cost for insurance.