Affordable Health Insurance – Consider Catastrophic Coverage
Many of us are wondering about affordable health insurance for individuals and where to find it. I have a suggestion in that regard since I purchase my own individual health insurance coverage, and have done so for many years. There are those who believe that paying for one’s own health insurance is costly, and it can be, but it doesn’t have to be if we consider various alternatives.
First, a little background about health insurance. It used to be that insurance was for major and unexpected events. Today, it’s common for health insurance to serve us more like a pre-paid medical service plan.
If we rewind our thinking a bit, and reassess our need for insurance, we might be able to reduce our cost of coverage by considering catastrophic coverage only. If we elect catastrophic coverage, we can minimize the need to shop and compare to find affordable medical insurance because catastrophic is easy to understand. As with every decision in life, there are pros and cons. First, let me explain what catastrophic coverage is, and then let’s look at the pros and cons.
What is Catastrophic Coverage?
Catastrophic medical insurance coverage is a policy that offers comprehensive coverage for illnesses and injuries, but it only kicks in after the insured has met a rather high deductible. It’s not uncommon for deductibles to range from $5,000 to $10,000 to $20,000 annually. Such policies can include a small benefit for annual physicals, and modest coverage for minor accidents.
As a cost comparison, let’s look at what my options are as a 54 year old male, non-smoker, when I insure myself through a major medical insurance provider that is recognized across the country. Here are just two options available to me for the same five million dollar coverage, but varying deductibles and co-pays:
- $500 deductible and $1,500 co-pay costs $13,200 per year and covers many minor routine expenses as well as extensive medical procedures.
- $10,000 deductible and no co-pay costs $6,300 per year for this catastrophic only coverage, and it provides the same coverage as above, once the high deductible is met.
There are benefits and drawbacks to each offering. To decide which one, you’ll need a crystal ball with respect to your health, and a calculator to project annual savings.
The Pros and Cons
The advantages of catastrophic coverage include:
- Minor preventive care and limited accident coverage is usually provided.
- Monthly payments are minimized.
- Coverage where you need it most, for major accidents and illnesses.
- Some clinics offer sliding scales based on income for uninsured individuals and those with catastrophic coverage only.
If you’re generally a healthy individual, catastrophic coverage can be an excellent way to have affordable health insurance.
The disadvantages of catastrophic coverage include:
- You’re largely self-insured up to the point of your deductible and co-payment requirements, so you’d have to save money to meet those future financial needs.
- Routine expenses like allergy shots, dental work, blood analysis, optical exams and the like are all paid for by you, not your insurance carrier. These can range into the thousands of dollars per year for an individual.
- Coverage for annual physicals and accidents is limited.
If you’re generally sick, accident prone, or require regular care by a physician, you might find that out of pocket expenses are greater than the monthly savings you might realize through reduced premiums associated with catastrophic coverage.
How I Would Decide
I consider myself to be healthy, and I rarely get sick. I’m also careful, so I tend to have very few accidents and injuries, and when I do, they’re minor in nature. Another personal trait is my ability to save money, so paying less now doesn’t mean I’ll be engaged in discretionary spending, it means I’ll use the money saved to build up a reserve for when I need it. Lastly, my regular doctor visits are limited and minimal in terms of costs. I spend about $2,400 a year out of my pocket, so that’s less than what a smoker would spend on cigarettes if they smoked between one and two packs a day.
So, if I look at my annual medical expenses, I can see they are dwarfed by the annual premiums (plus co-pays) of the $500 deductible plan. Next, I look at the largest deductible program and calculate the amount of time I would have to be free of major accidents and illnesses, to make it worthwhile to choose it. To save up the $10,000 deductible, when compared with the other more costly program, it would require about one and a half years of being healthy and accident free. Here’s how I figured it.
$13,200 annual premium plus $500 deductible plus $1,500 co-pay equals $15,200 annual cost for the program. From $15,200, subtract the $6,300 annual premium of the alternative plan, and then subtract the additional $2,400 that will have to be paid out of pocket each year. That leaves you with a savings of $6,500 over the more costly plan each year. Divide $6,500 into $10,000 and you can see that in one and a half years, you could save up enough money to pay the hefty deductible associated with the catastrophic coverage.
I don’t think one and a half years is an unreasonable length of time to expect one to go without a major accident or illness. In my case, I haven’t had any major accident or illness in more than 10 years.
So, if I only had these two plans to pick from, the catastrophic coverage with its high deductible would work best for me. It provides what I want – catastrophic coverage – and matches with the good condition of my health. So, I might not ever use the health insurance coverage, but if I need it, it will cover me, and most likely I would have the deductible set aside for that very purpose.
Catastrophic coverage isn’t for everyone, but it can be a viable alternative when it comes to health insurance for individuals. Consider your current state of health, your expected annual out of pocket expenses, cost savings, and your ability to save up to meet the higher deductible.
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Clair Schwan has had catastrophic health insurance coverage for more than 10 years, and he’s found that to be an acceptable means of keeping insurance costs low, while still providing good protection for his health and lowering the risk to his assets that might otherwise be present if he were uninsured.
