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Most families are paying anywhere from $6,000 to $12,000 in annual premiums for family health insurance, depending on whether you have employer-sponsored group insurance or a privately purchased individual health plan. If you are considering switching to a high deductible health plan (HDHP) to lower your premiums, make sure you understand the terms before deciding. HDHPs, when used in conjunction with a health savings account, (HSA) can be a good option for families in tune with their health care usage patterns.
For example, a family of five would have had an employer contribute $8,950 toward the family's PPO health insurance premiums. The family would have paid another $6,800 in premiums. This family would then paid $300 in co-pays for office visits throughout the calendar year, plus more than $3,600 in prescription co-pays. This would result in nearly $11,000 in out-of-pocket expenses for health care. Even though the insurance company collected nearly $16,000 in premiums from the employer and the employee, it only paid out a little more than $3,000 in benefits to providers. However, if the family had a HDHP instead of a PPO, the same family would have used an HDHP with a deductible of $5,000 and a HSA. If the employer and employee split the HDHP premiums of $7,000, the family would pay $3,500 in premiums. But there is still the $5,000 deductible to consider, so the family could use payroll deductions to deposit that money in equal chunks into the HSA. The family could then turn around and use the money from the HSA, which by the way gets deposited on a pre-tax basis saving the family in the 28% tax bracket, $1,400 a year. This $1,400 could be used for their own medical expenses. The family's gross out-of-pocket expenses would be a maximum of $8,500 for the year. Factor in the $1,400 tax savings, and the net medical expenses for the year are $7,100 or a savings of nearly $4,000 for the year.
If the family's expenses hit the $5,000 mark, the HDHP benefits would become active. However, if the expenses do not reach the $5,000 mark, any money left in the HSA rolls over to the following year earning interest tax-free. Even if the HDHP does not pay out benefits in the year, the security of knowing that should a major medical event strike the family, a family would be covered worthy of the premiums paid. The benefits of an HDHP when the employer does not contribute may or may not prove worthwhile for everyone, so consider the total costs before you decide.
If you do not have a family health insurance plan, getting family health insurance at an affordable rate is quite easy. You can still find low-cost,child health insurance. InsureKidsNow.org is a Web site sponsored by the United States Department of Health & Human Services. It includes links to information on affordable health insurance plans for children in all 50 states plus the District of Columbia.
Each state has its own plan and enrollment eligibility requirements, but the goal of each is to provide health insurance benefits to as many children as possible. Even if one or both parents are working and earning a decent income, your children will probably qualify, so check it out now!
A FSA, or flexible spending account, is a federally approved, employer-administered account to which you can contribute money that you then use to pay for out-of-pocket medical expenses. FSAs are woefully misunderstood and underutilized by American families. FSAs provide benefits a couple of different ways. First, the money you deposit into your FSA does not get taxed. The money is deducted from your pay before your employer calculates Medicare, Social Security, and income taxes.
For someone in the 28 percent tax bracket, every dollar you deposit to an FSA, you can cut your federal income tax bill by $0.28. If you place $3,000 a year into your FSA, that would result in a savings of $840. The other great thing about FSAs is that even though the total amount of the contribution will be deducted from your pay in equal installments throughout the calendar year, you can file claims against the full contribution from Day One as if it were sitting in your account already. For example, if you three family members will need new eyeglasses, schedule your eye exams and purchase your glasses in January. Even if the bill is $1,500 and you've only deposited $150 to your FSA, you can submit your receipts and receive reimbursement from your FSA for the full $1,500. The only time this can come back to bite you is if you leave your job mid-year. At that point, you would need to make an additional contribution to cover the benefits that had been paid to date.
Be careful when you estimate your annual FSA contribution, because if you overestimate and do not use all the money, it reverts to your employer who then uses it to offset the overall cost to provide employee benefits. Also, while FSA contributions can be used to pay for just about any out-of-pocket medical expense from co-pays to over-the-counter medications, FSA contributions cannot be used to pay for family health insurance premiums.
COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is a federal regulation that requires companies with 20 or more employees to allow employees who have left their job voluntarily, laid off, or fired for reasons other than gross misconduct, to continue their health insurance benefits even after they no longer work for the company. Individuals eligible to continue their insurance under COBRA include the employee, the employee's spouse, and the employee's dependent children, including those born or adopted during the period of COBRA coverage.
There are a handful of "qualifying events" that qualify you to continue your insurance under COBRA, each of which are slightly different for the employee, the spouse, and the dependents. Coverage under the COBRA rules is usually good for eighteen months, but under special circumstances, can continue for thirty-six months. You will be responsible for paying all premiums yourself with no contribution from the employer. Even though that will be expensive, premiums for group family health insurance coverage are almost always less expensive than a privately purchased policy.
If you or your spouse has recently become ineligible for employer-sponsored family health insurance coverage do not worry, getting family health insurance coverage is not impossible. It is very likely that you qualify for COBRA. The employer has thirty days to notify you of your COBRA rights, including the deadline by which you must notify the employer of your intent to continue coverage. For more information on COBRA, visit the United States Department of Labor Employee Benefits Security Administration's Web site.
Mail-order prescription services can save you money on your overall medical costs. However, all mail-order prescription drug services are not created equal, so you will need to make sure you are selective about which one you choose. Your best bet is to use the mail-order prescription service that is run by your family health insurance plan.
Families with one or more members on regular medications, will reap the most savings. For example, if dad is on two blood pressure medications and an anti-depressant, and mom is taking two different asthma medications. If you pick those up at your local pharmacy, there would be five co-pays. Depending on your plan, you could get a three-month supply of those same medications for one-month's worth of co-pay. For example, if you pay $115 a month in co-pays for the five prescriptions at your local pharmacy, you would pay that same $115 from a mail-order pharmacy for a three-month supply. That would be $230 in savings! Over the course of the year, you could save nearly $1,000.
Calculating how much to contribute to your flexible spending account (FSA) can take time, if you have never done this before. However, it is well worth the time used. If this is the first time you have used an FSA, you should play it conservatively until you know your actual usage patterns. The most common things people use FSA contributions for include paying for annual deductibles, co-pays, and goods and services not otherwise covered by your family health insurance plan. These services include things such as eyeglasses, over-the-counter medications used to treat diagnosed conditions, and co-pays for dental care.
For example, if you have a child with lactose intolerance, you probably go through Lactaid tablets fairly often. At anywhere from $7 to $14 a box, save your receipts, and you can get reimbursed for them. In fact, you will need to get in the habit of saving your receipts for all out-of-pocket medical expenses, including co-pays for office visits, prescriptions, and any other approved expenses. If you keep these receipts, then once a month you can fill out a simple claim form and mail or fax your receipts in. It usually takes anywhere from two to four weeks to get your check. Keep copies of anything you submit. If there is a problem with the paperwork, you can refer back to your receipts.
Keep in mind that the money you contribute in a given calendar year must be used to pay for goods or services received in that calendar year, but you have until March of the following year to submit your claim. It is a good idea to check your balance in October to see if you are at risk of forfeiting any money. If you still have not used your full balance, start scheduling appointments and stocking up on prescriptions and over-the-counter medications before the end of the calendar year.
Whether you have group or individual family health insurance, there are a few concrete steps you can take to lower your costs when receiving family health insurance. Given the diverse health needs of families, from pediatric care to routine tests for mom and dad such as mammograms and colonoscopies, flexibility is the key to reducing your costs.
Generally speaking, a health maintenance organization will have the lowest premiums. In exchange for the savings, you have a number of forms to fill out and reduced flexibility in your medical services. On the other end of the spectrum, an indemnity or fee-for-service plan offers the most expansive service coverage and allows complete flexibility in choosing caregivers, services, and frequency of service.
As you might expect, the premiums are almost untouchable for the average family. A good middle ground for families would be to subscribe to a preferred provider organization (PPO). With a PPO, you have the flexibility to decide when, where, and how often to receive services. The plan is structured to give you an incentive, such as lower co-pays, to use providers that are part of the insurer's network of approved providers. If you avoid emergency room visits for minor problems and stick with in-network providers, you will have the lowest out-of-pocket expenses. As far as the premiums for PPOs go, they generally fall somewhere in the mid-range between those for HMOs and fee-for-service plans. You can further reduce your health care costs by opting for a higher deductible, which will lower your premiums.
Many married couples maintain separate health insurance coverage even though it may not be cost-effective to do so. Examine both your coverage and your spouse's coverage to see if it makes sense for either of you to join the other's plan. Keep in mind that most plans allow you to add a spouse to your plan within a certain time period after you get married (e.g. 30 days). Otherwise, you may have to wait for the plans' annual open enrollment period. Often it is less expensive to obtain a family policy (2 adults and up to 3 children) than it is to insure two adults individually.
You may also be able to coordinate both plans for maximum coverage. In some cases, it may be cheaper to have separate insurances such as if one spouse has a chronic, preexisting condition which may cause your insurance to double in price if he/she joins. There may also be a limit as to how much an insurance company will pay for your claim if both you and your spouse file under two different insurance plans. A coordination of benefits clause usually limits benefits under two plans to no more than 100 percent of the claim.
|Jennifer Mathes, Ph.D.|