Individuals when stuck between high deductibles and unpredictable medical bills often feel like not having health insurance and may consider themselves underinsured or functionally uninsured. At times, many people despite having major medical insurance find it difficult to pay for their healthcare due to a high deductible threshold. It is observed that many insured Americans struggle to pay for their healthcare due to large and unforeseen medical expenses or a high deductible beyond their affordability to pay out of pocket. Thus, to feel adequately insured and to better deal with medical bills, they should select a health plan with the lowest annual deductible possible. However, they should know that lower deductible plans usually have higher monthly premiums.
What is a High Deductible Health Plan?
In 2020, a high deductible health plan is any health plan with a deductible of at least $1,400 for an individual or $2,800 for a family, as per the IRS. Though, according to plan and region, the deductibles vary. The total annual out-of-pocket expenses including deductibles, co-payments, and coinsurance for high deductible health plans cannot be more than $6,900 for an individual or $13,800 for a family.
Who Is Underinsured?
Individuals are considered underinsured if they have major medical insurance but still, they struggle to pay for healthcare. According to a latest health insurance survey people were defined as underinsured if over the prior 12 months’ period they met the following conditions:
- Their out-of-pocket costs, along with premiums were equal to 10% or more of their household income.
- If their out-of-pocket costs including premiums were either 5% or more and they were living under 200% of the federal poverty level.
- Their deductible amount accounted for 5% or more of their household income.
It was observed that there has been a rise in the number of people who can be termed as underinsured. Many of these underinsured are delaying necessary treatments simply because they are not able to afford it. It is observed that many individuals are avoiding health care due to high deductibles despite suffering from serious conditions like heart disease, diabetes, and cancer. Thus, the fact is that insured individuals with chronic conditions are twice as likely as other insured individuals to report difficulty in paying medical bills.
Huge Healthcare Bills become Reality
Individuals are not able to know their healthcare costs until they receive it and after their claim has been processed. People generally anticipate how their plan benefits will cover in-network care. Sometimes people face surprise bills despite visiting in-network providers, as they are charged based on the care delivered by an out-of-network professional who works within an in-network facility, this is known as balance billing.
According to a recent analysis by the Health Care Cost Institute, it was discovered that 1 in 7 patients received a surprise bill despite obtaining care at an in-network hospital. However, legislation is working to address balance billing practices on a national level and states like Texas are expected to soon pass their own bipartisan legislation to protect their citizens from balance billing. Surprise medical bills are a prime concern for many Americans, who can now just avoid them.
Alternatives for Underinsured or Functionally Uninsured
In the absence of nationwide protection in place, Individuals can opt for the following measures on facing steep medical bills after being insured:
Opt for Short-term Health Insurance
Short-term health plans generally have up to 50% less monthly premiums than major medical plans, and may also have lower deductibles than the national trend. Some of the short-term plans even come with a low deductible option of $1,000. Short-term plans are often more affordable because these plans are not required to adhere to ACA requirements. Thus, these plans don’t have to provide coverage for all ten essential health benefits and these plans also don’t cover for pre-existing conditions. However, short-term plans do provide a range of benefits to help people pay for unexpected medical expenses resulting from injury or illness.
Short term plans are the valid option for individuals who require temporary affordable coverage between major medical insurance plans and for individuals who are seeking an alternative to gain financial relief from ACA plans. Individuals can apply for short-term plans all through the year and depending upon their respective state, they can obtain coverage for 30 days to up to 364 days. As far as unexpected high medical bills are concerned, some of the short-term plans promise no balance billing. It means that is a claim is paid at the negotiated rate and the doctor sends another bill for the remaining amount to the patient, then the customer can submit their bill to a third-party who will negotiate it.
Opt for an HSA
Individuals who are seeking comprehensive coverage just like the ACA-compatible major medical plans at a relatively low monthly premium, then they should consider an HSA-compatible high deductible health plan paired with an HSA or Health Savings Account. Individuals can set aside a pre-tax amount in this account for eligible medical expenses in the future. They can choose the amount to set aside, up to an annual limit in 2020 is $3,550 for self-only and $7,100 for family coverage under a high deductible health plan.
If an individual or any of their family member incurs qualified medical expenses, then they can use the pre-tax income in their HSA account instead of using their long-term savings. The funds saved in the account roll over from year to year and accrue tax-free interest, this means that individuals can use the fund if needed or let them accumulate for larger medical expenses at a later date. The best thing about this account is that HSA funds may be used at any point and can also be considered as a part of retirement planning. Healthcare is one of the biggest retirement expenses and accounts for an estimated 15% of the average retiree’s annual expenses including Medicare premiums and out-of-pocket expenses. After the age of 65 years, people can use the funds even for non-qualified medical expenses without penalty, however, the money will be taxed as income.
Check your Subsidy Eligibility
ACA-subsidies based on income includes premium tax credits that lower an individual’s monthly premium, and cost-sharing reductions, and also lower their deductibles, copayments, and coinsurance amount if they buy a silver plan. Cost-sharing reductions also lower out-of-pocket maximum of individuals if they reach that amount, then their insurance plan covers 100% of all covered services. Thus, cost-sharing reductions help to reduce large medical bills of individuals who qualify. Individuals who think that they will qualify for a cost-sharing reduction should enroll through a state or federal health insurance exchange and apply for subsidies.
Maintain Good Health
To avoid a lot of medical bills people should maintain good health and practice safety in their daily life. There are some healthcare services such as preventive care that major medical plan covers before people meet their deductible. Thus, by using preventive care like screenings and shots may help people easily identify illness or manage illness before they become serious and potentially more expensive. Individuals are anyway paying for their health insurance, so they should take advantage of the no-cost preventive care. Individuals should check with their healthcare provider to know about the covered preventive care to avoid additional charges for tests and screenings.
This should be adopted under dire circumstances or as a last resort. In this people have to rely on the generosity of friends and family or even relative strangers if they get stuck with hefty medical bills and feel trapped. Nowadays individuals turn to crowdsource fundraising to address substantial healthcare costs.