These days, everyone's mind is on their wallets, and we welcome any chance to save some money. At the same time, we all know that it's important not to skimp out of basic health insurance coverage. Doing without it just isn't financially prudent – the cost of medical care is rising and a single visit to the emergency room could easily deplete most of your savings. Not to mention the many medical issues that come from living increasingly sedentary lifestyles.
There are still ways for most people to get the health insurance they need and have money left over for emergency savings and retirement planning. Let's look at some of the ways you can lower your health insurance rates so you can set aside a little extra money for yourself.
Standard Techniques for Securing Lower Rates
We'll start by considering the standard policy coverage tweaks that you can discuss with your agent or broker (see Medical Concierge and Insurance Broker: What's the Difference? to learn more about your options). These adjustments could result in some significant savings over time.
Get a Head Start – Buy Early
A lot of factors go into calculating your premium price. For health insurance, a big one is your age at the time you purchase the policy. One of the best ways to secure a lower premium, then, is to buy your health insurance as early in your life as possible (see The Perfect Age to Get Life Insurance to find out why you should consider doing the same with your life insurance policy). The older you get, the higher your risk of health issues and complications; the higher your risk, the higher your health insurance premiums.
Many insurance companies will also offer a "claims free discount" for policyholders who have not filed a claim in the previous years, something that you are more likely to qualify for at a younger age.
Getting coverage at a young age is also desirable because your chances of rejection are low and you will be able to secure the broadest, most comprehensive coverage available to you. You are also likely to have fewer pre-existing conditions, which would be excluded from your policy.
Of course, there is a bit of a catch here. Buying a policy while you are still young will likely secure you a lower premium, but some of those savings will be offset by the simple fact that you will be paying premiums from an earlier age. While your monthly rate will be lower, you might end up paying more over your lifetime than you would if you purchased coverage later on.
Still, going without health insurance, even while you're young, is a risky gamble and any money you might save by starting your policy later in life might be greatly offset by having to pay out of pocket for various medical expenses – including a lifetime of expenses for pre-existing conditions.
Increase Your Deductible
The deductible is the amount you will pay out of pocket on a loss before the insurance claim is processed and paid out by an insurer. So, if you have a $100 deductible on your policy and you file a $300 claim, you will have to pay the first $100 of that claim before your coverage kicks in and your insurer foots the remaining $200.
Increasing your deductible is one way to lower your rates. With a higher deductible, there will be more medical expenses where it simply doesn't make any sense to file a claim. If a visit to your doctor's office costs $89 but your deductible is set at $100, you'll simply have to pay the entire expense yourself. Decreasing the likelihood that you will file a claim, however, makes you a lower risk for the insurance company which, in turn, will translate into a lower premium.
Tighten Your Coverage
Getting less coverage is the simplest but also the least desirable way to reduce your rates. For example, you can lower your reimbursement rate for prescription drugs (say from 70% to 60%), do without supplemental healthcare expense or preventative dental care coverage, remove private hospital room coverage, or eliminate emergency travel medical coverage from your policy.
All of these will net you a lower premium, but they will leave you with less protection. What you choose to have covered should be decided based on what you think you will need. If, after thinking long and hard about it, you realize that you have no plans of ever traveling out of state, you might well be better off without the travel coverage. But I would never advise doing without any coverage you think you might need. There are better ways to save money.
Using Wearable Devices to Save on Health Insurance
We live in interesting times. Technology has drastically changed the way we live, and it is quickly changing the way insurance companies do business (find out how in 5 Ways New Technology Will Change the Way You Buy Insurance).
One development that is of particular interest to the health insurance industry is wearable technology. These are small electronic devices that people wear on their bodies, as accessories or even as implants, and use to track various aspects of their body's performance. They've quickly become commonplace and it's not unusual to see people working out at the gym or hiking on the trail wearing a fitness tracker around their wrist that measures their step count, heart rate, and the number of calories they burned throughout the day.
Wearables are a great way to keep tabs on your fitness goals, but they're also a great way for your insurer to keep tabs on your health. Auto insurers have been using telematic devices in cars to track their policyholders' driving habits and offer safe drivers discounts based on their driving speed, distance, and the time of day they typically hit the road (see An Intro to Usage-Based Auto Insurance and Telematics to learn more). Likewise, health insurers can use the data acquired from your fitness tracker to offer reduced rates and insurance perks to policyholders who display some healthy habits.
And that's just fitness trackers. As wearables become more sophisticated, and users become more comfortable with them, insurance companies could eventually track a lot of biometric data. If your step count gets you a lower premium, you might be able to get an even lower rate once your insurer can get data on your blood sugar levels, nutrient intake, and metabolic rate.
Various companies have already taken steps to make this happen. The health insurance company Oscar has partnered with the wearable developer Misfits to distribute devices to their customers and offer insurance rates based on how much time they spend walking. The Paris-based insurer AXA offered $100 off the insurance policy of any insured whose fitness tracker showed them walking over 7,000 steps each day over the course of a month. And Manulife Financial took this concept further by considering not only the policyholder's step count but a variety of other good medical habits, such as getting regular physical exams and staying up to date with their vaccinations.
These tracking technologies also offer an additional, indirect way to save money. By taking steps – literally and figuratively – to lower your premium by developing healthier habits, you will reduce the likelihood of illness. In other words, lowering your premiums in this way will likely lower your healthcare costs and, as a result, you will have to pay less out of pocket to meet deductibles and other expenses. And let's not forget all the other, non-financial benefits that come from being fitter and healthier.
If your health insurance is eating up a little too much of your budget, try one of these options to help you manage the costs. Whether you speak to your agent about modifying your policy or you take up the challenge of improving your rate by improving your health, you can enjoy a little extra money in your bank account each month.