How to Save Money on Health Insurance

How to Save Money on Health Insurance article image.

Health insurance is essential to protecting your health, but the high cost of coverage may leave you feeling ill. Fortunately, you can lower the cost of health insurance while still getting the coverage you need. Try these tips to save money on health insurance.

How Much Does Health Insurance Cost?

When looking for ways to save on health insurance, consider the following costs:

  • Premiums: The amount you pay for insurance. If you get insurance through your job, the employer typically pays most of your premiums. For 2021, the average annual premium for employer-sponsored family coverage was $22,221; of that, employees paid an average of $5,969.
  • Deductible: The amount you must pay out of pocket for medical expenses before your health insurance begins to cover the cost.
  • Coinsurance: The percentage of medical costs you pay out of pocket. For instance, a plan with 30% coinsurance means you pay 30% of the cost and your insurance company pays the rest.
  • Copayments: A set amount you pay for specific health care services. You might have a $40 copay for a doctor visit, for example, and the insurance company pays the rest.

Copays, deductibles and coinsurance may all work together to split the cost of medical care between you and your insurance company. Fortunately, there's a limit to how much you can pay. The out-of-pocket maximum is the most you can pay annually for deductibles, coinsurance and copays. Once you've reached this maximum, your health insurance pays for all your medical care for the rest of the year.

8 Ways to Pay Less for Health Insurance

To save money on health insurance, start by assessing how you and your family use health care. Does anyone have a chronic condition requiring frequent care? Do you take lots of prescription medications? On average, how often do you visit the doctor? Armed with this information, you can better estimate how much different insurance plans could cost.

1. Shop Around

Whether you buy insurance through the government Marketplace or get it from your employer, you may have options for different insurance carriers, coverage and premiums. In general, health insurance plans with higher deductibles charge lower monthly premiums. If you don't expect to need a lot of medical care in the next year, a high-deductible health plan could reduce your costs. On the other hand, if you frequently visit the doctor or take expensive medications, a plan with higher premiums but lower deductibles, copays and coinsurance may be your best choice.

2. Get Added to a Family Member's Plan

Employer-sponsored health insurance is the cheapest option for most people, but it doesn't always have to come from your employer. If your spouse (or your parent, if you're under 26) also has employer-sponsored insurance, compare the coverage both employers offer. Joining a family member's plan might be more cost-effective.

3. Get Help From an Insurance Broker

Are you buying your own health insurance, either through the health insurance Marketplace or as an individual? An insurance broker can help you compare the costs and benefits of different insurance plans to find the one that delivers the coverage you need at the price you want.

4. Understand Your Plan's Rules

Review your plan to learn how to maximize your benefits. For example, you may need preapproval before visiting a specialist. Most health insurance plans cover more of your costs if you use their preferred or in-network doctors. If you visit an out-of-network doctor or medical facility, you'll pay more—and might even be responsible for 100% of the charges.

5. Use a Tax-Advantaged Savings Plan

Several tax-advantaged plans can help you save money for health care.

  • Health savings accounts (HSAs) are available to people with high-deductible health plans (HDHPs). You contribute money to the HSA and withdraw it tax-free for qualified medical costs such as deductibles, copayments and coinsurance. Your employer may offer an HSA, but you can also open one yourself, and the money is yours to keep.
  • Health reimbursement arrangements (HRAs)are set up and funded by employers. Employees can't contribute money, but they can withdraw from their accounts for qualified medical expenses.
  • Flexible spending accounts (FSAs) are offered by employers. Employees contribute pretax funds to the account and withdraw money tax-free for qualified medical expenses.

HRAs and FSAs don't require a high-deductible health plan. However, the money typically must be used by year-end, and if you leave your job, you lose the account.

6. See if Your Health Care Costs Are Tax-Deductible

You can take an income tax deduction on the amount of qualifying out-of-pocket medical costs (including health insurance) for yourself, your spouse and dependents that exceeds 7.5% of your adjusted gross income. You'll need to calculate whether your itemized deductions would be greater than the standard deduction. For tax year 2021, that's $25,100 for married couples filing jointly or $12,550 for single taxpayers and married couples filing separately.

7. Find Out if You Qualify for Government Assistance

Depending on your income, you may qualify for government-funded health insurance through Medicaid or the Children's Health Insurance Program (CHIP). If your income is too high to qualify for these programs, you may still be eligible for premium tax credits or cost-sharing subsidies to help pay for insurance purchased on the Marketplace.

In early 2021, the average Marketplace premium was $575 per month—but the average subsidy was $486 per month, reducing the out-of-pocket cost to just $89. In March 2021, The American Rescue Plan boosted the availability of tax credits and subsidies for all income levels, making Marketplace plans more affordable and even free in some cases.

8. Review Your Insurance Plan Annually

In preparation for open enrollment (the time of year when you can change your employer-provided or Marketplace health insurance), you should reassess your health insurance every year and review any new options to ensure you still have the best plan.

Keep Medical Costs Under Control

Health insurance helps to keep your health care costs manageable. Without insurance, you could find yourself dealing with hefty medical debt, which can negatively affect your credit score—not to mention your health.

If you pay for your own health insurance, consider setting up autopay from your bank account so you don't miss a payment and risk losing insurance coverage or hurting your credit. Worried you may not always have enough in your bank account for the premiums? You may be able to pay for health insurance with a credit card. Just make sure to pay the full balance every month, because accruing interest charges on an unpaid balance could erase any savings on your health insurance.