The average cost of a family health-insurance policy has jumped to nearly $13,500 a year, according to the latest survey by the Kaiser Family Foundation. Worse, workers who get help paying for health insurance from their employers are paying much higher premiums, on the average of about $3,500 out-of-pocket each year -- that's double the amount they were paying just 10 years ago. And these days more insurers are monitoring, and in some cases penalizing individuals with higher premiums, for unhealthy habits such as smoking or lack of exercise. If you're single, there's a bit of good news in the Kaiser survey -- health-insurance premiums for individuals stayed relatively stable, averaging about $779 a year.
So what can you do to combat rising costs? Despite the jump in premiums, there are a number of ways to keep costs low. If your health-insurance provider gives you the option, consider raising your deductible -- the amount you pay before insurance kicks in. The higher your deductible, the lower your premiums. To protect yourself from a whack to the pocketbook, consider setting up a health-savings account with your bank or insurance provider. (First, check with your insurer to make sure the plan you choose qualifies for an HSA.)
With an HSA, you make tax-deductible contributions -- up to $3,000 for singles and up to $5,950 for a family in 2009. Individuals 55 older can make an additional cash contribution of $1,000, but once you become eligible for Medicare at age 65, you can no longer contribute. Unlike traditional flexible spending accounts, you don't have to fear about forfeiting your savings at the end of the year -- HSA contributions roll over year-to-year. I consider HSAs a kind of back-up retirement-savings account, because you can use the money to pay for health-care costs for the rest of your life. With everyone still so uncertain about how health-care reform will shake out, and who will end up paying the price, having a back-up savings plan is a no-brainer.
Next, check your credit history for errors that may be keeping your score low. (You're entitled to one free credit report each year, from each of the "Big Three" credit-reporting companies, at Annualcreditreport.com). Believe it or not, insurers have found that people who live fast and loose with their credit often do the same with their health, so they charge them more. That goes for your auto and home insurance providers as well, by the way. Big Brother is watching.
Finally, if you've ever needed a kick to live a healthier lifestyle, this is it -- quitting smoking, joining a gym or weight-loss program, and participating in employer-sponsored wellness programs and events can not only help you live a longer life, but shave your health-care costs as well as your waistline.
Readers, what kind of experiences are you having with the rising cost of health-care insurance. Have you found easier ways to cut costs? Do you think it's right that insurance companies penalize people who smoke or are overweight with higher premiums?
Terri Cullen is an award-winning financial journalist.She was one of the original team of editors who helped to launch The Wall Street Journal Online. Terri is also the author of "The Wall Street Journal. Complete Identity Theft Guidebook."
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Blog made possible with support from the Corporation for Public Broadcasting.
Comments
The debate on Healhtcare reform has one common area of agreement, that is that the need for it is dire. The contention is in the how to area, which will eventually come to a plan that will at least start us on the way to overhauling the system. But another major problem that needs to be addressed, is the Food Industry. It is a large, if not the largest, contributor to our collective health problems. Viewing the aggressiveness of the Insurance Industry's efforts to fight reform, one can only imagine the fight that would put up by Large Food Companies. The need for reform in that area is just, if not more, dire.
1. According to the bureau of labor statistics, individuals between the age of 18 and 42 hold an average of 10.8 jobs. That means they are on each job an average of only 2.222 years. This means they are not with any particular employer for the long cost savings to be achieved.
http://www.bls.gov/news.release/nlsoy.nr0.htm
2. Your figure of $779 per year is very far off the mark.
Using the Kaiser average family premium you cite, $13,500, divided by 12 [months] we get an average monthly family premium of $1125! With an average family size of 3.2, that would yield an average cost of $351.56 per month per insured life or $4,218.72 per year.
The number you cite for individual coverage sounds more like a figure for average individual employee contribution.
3. The administrative load embedded in health care premiums is at least 18%. Self insured plans claim to reduce the load but they fail to tell employers that their contracts allow the embedding of administrative costs and profit in the line items called claims. Of the $13,500 you mention, $2300, and often more, reflect the cost of carrier administration. Thus, the net to medical providers is more like $11,200.
4. Under the current system, medical providers have to pay out considerable sums to collect from individuals and insurance companies. Approximately 30% of all health care charges accrue to administration at various levels. So, the actual net to providers, after aggregate administrative load, is more like $9450 per year. The administrative load would amount to $4050.
5. Finally, countries like France and Great Britain pay approximately half what we pay in the US. Using the Kaiser survey average, that would come to $6750 for family coverage.
I agree that people with unhealthy life stiles should pay much higher premiums!!!
With higher and higher deductables people will avoid going to see a doctor for preventive care. The situation will only get worse as costs go up.
One problem with the health care system is no one knows the real cost. If you walk in and ask to pay cash they do not know what to charge. Everyone should get the same negotiated rate!
We need to stop getting our health insurance through our employers so everyone will see and feel the true cost of health care.