Reducing Your Health Insurance Costs

Rates for health insurance rose 9% this year to $15,000 per family according to the Kaiser Foundation. My thoughts on the cost of health insurance.

Highlights From the 2011 Kaiser Foundation Report

In regards to employee sponsored health programs:

• The average premium is $5,429 for single coverage
• The average premium is $15,073 for a family
• An 8% increase for single coverage from 2010
• A 9% increase for family coverage from 2010
• Since 2001, premiums for family coverage has increased 113%

Allow Individuals To Purchase Health Insurance From Out of State

Presently, health insurance can only be purchased in-state. From that standpoint, it is regulated and can be seen as a monopoly.

Why not open up the market for good healthy competition? By doing so, prices can find their own equilibrium, driven by consumer interest.. This will let consumers bid for their own plans from a choice of many, rather than a few state licensed providers.

Distribute Health Insurance Payments Differently

Instead of the higher weighting of premium towards the end of a persons' life, health insurance companies should make premium payments higher in the middle of a persons life. This way, for the young and old, insurance premiums are lower allowing those age groups to get a head start in life and prepare for retirement comfortably.

Ideally, a standard distribution curve:

Instead of one where one gets hit hard at the end:

The way the payment schedule is currently laid out, insurance companies want you to live to at least 65 years old because they can grab more money from you at a higher premium rate. . With the average lifetime of a US citizen to be 78 years old, health insurers have a high probability of success. After 65, Medicare kicks in and Uncle Sam will cover the rest.

Why have medical costs soared?

1. Your doctor doesn't like to get sued and is scared of medical malpractice. Implements defensive medicine to cover himself by authorizing more tests
2. Filling out forms and pushing paper costs doctors, hospitals, and insurance companies more money to administrate
3. New medical technology is expensive
4. Medical specialists charging way too much
5. Cost of medical education is high. Start up costs high as well
6. Price fixing for services between doctor, hospital, and insurance company
7. For-profit public companies want to increase stock price
8. More demand as baby boomers head into final years
9. Everyone feels entitled to healthcare so its abused: Doctors, insurers, patients, equipment, drug companies, suppliers, etc.
10. Lack of price discipline to drive down costs by insurers
11. Greed

The High Cost of Surgery

The number one medical emergency is a heart attack. It is estimated that the typical cost is $50,000-$100,000 per incident for angioplasty surgery.

You can see that the health insurance company loses out big because you will never pay that amount of insurance premiums in total in your life.

Whatever you do, don't go without health insurance

What could happen if you are uninsured and can't pay your hospital bill? A number of bad things:

• You will get your wages garnished whether you like it or not
• Collectors will be calling you constantly and harassing you
• Your credit rating will sour
• You could have liens placed on your assets including your house
• You may have to declare bankruptcy if you can't make the payments

Health Insurance Is Protection

Many affordable health insurance plans are avaialble at under $150/month on a $3500 deductible.

"Your frame of mind should be that you buy health insurance to prevent financial disaster"

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You goal is to look for health insurance that covers the basics and stay away from the bells and whistles that can increase cost. In most cases, these "ala carte" items will make your premium look so expensive to not want you to be covered. Choose what you can afford.

If you don't need brand name drugs, use generic. If you don't go to the doctor often, choose the cheaper plan with fewer visits and higher co-pay for doctor visit. If you don't need dental and eye insurance, don't add it.

What you really want is just coverage in case of medical emergency at a deductible that your current financial situation could afford. Set aside $2500-3000 for medical emergencies to cover your deductible. Don't touch it. Use that as your deductible when shopping for health insurance.

You can do all of this online instead and don't need an insurance agent. All the major health insurance providers are on the web and have a way to get a quick quote. Many providers allow you to customize your needs by letting you choose from many plans . Some of the major providers to consider are:

• Aetna
• Blue Shield
• Blue Cross/Anthem
• Cigna
• Kaiser

In Summary

• More competition is needed. People should be able to buy health insurance anywhere, not just within their state
• Buy health insurance only with the idea of catastrophic financial failure
• Avoid adding services you don't need to keep cost down
• Health insurance can be obtained. You have to do your homework and make a decision to cover yourself.

About Kerry Kobashi

Kerry is the founder of KerryOnWorld. He lives in Silicon Valley and has worked as an engineer and project manager. He owns Kobashi Computing a consulting company.