Time to be real Texas! Health insurance is ridiculously expensive. There’s no way to sugarcoat it. it doesn't matter if you live in Amarillo, Austin, Waco or Fort Worth, you pay too much for health insurance. And most of the time it feels like nothing is covered or you're always out of network. Everyone is frustrated with health costs that are always out of pocket expenses and health insurance premiums skyrocketing.
While it feels out of control and unexplainable, there are a number of factors that contribute to the high cost of health insurance for Texans.
- High administrative costs: The U.S. healthcare system has a lot of administrative overhead, which drives up the cost of health insurance. For example, insurance companies have to hire a lot of people to process claims, review medical records, and fight with providers over payment. Conversely, physicians have to also hire a lot of people to make sure payments are made to them for services rendered.
- Rising prescription drug costs: The cost of prescription drugs has been rising steadily for many years. This is due to a number of factors, including the increasing complexity of new drugs, the lack of competition in the pharmaceutical industry, and the high cost of research and development. When drug companies are advertising their new products during the Super Bowl, you know that the prescription will be expensive.
- The aging population: The U.S. population is aging, and this is putting a strain on the healthcare system. Older people tend to have more chronic health conditions, which means they use more healthcare services. Not only do they need more care, but a lot of it is managed by specialists which come with a higher cost for medical expenses as well.
- The lack of price controls: The U.S. Government does not have much control over the prices of healthcare services or prescription drugs. This means that insurance companies and drug companies are mostly in control of the prices, which are very high. Since neither of those two parties have an incentive to reign in the cost of health coverage, it's become an escalator up with no end in sight.
As a result, health insurance has become very expensive for individuals and families. Especially for Texans that do not have access to an employer based health plan. This can make it difficult for people to afford the care they need. Many simply choose to go uncovered because of the rising costs.
What Can Texans Do About Securing Affordable Health Insurance?
In my 12 plus years of selling health insurance, I have worked with numerous insurers and have seen many changes. I have also been personally affected by the rise in premiums. One option I always like to offer my clients to mitigate the high premium prices is a High Deductible Health Plan coupled with a Health Savings Account (HSA). You can save premium dollars AND have strong options for future savings. For any individual looking for health insurance or business owner who needs affordable employee health options I will always bring up an HSA option. Here’s why:
- Tax advantages: Contributions to an HSA are tax-deductible, earnings in the account grow tax-free, and withdrawals are tax-free when used for qualified medical expenses. This means that you can save money on your taxes multiple times by contributing to and using an HSA.
- Lower monthly premiums: HSAs have to be paired with high-deductible health plans (HDHPs), which have lower monthly premiums than traditional health insurance plans. This is because HDHPs require you to pay more out-of-pocket expenses for your medical expenses before your insurance starts to pay. The good news is that those up front costs come with lower Maximum Out Of Pocket totals for the year. So your savings increase if you have a major health event. However, if you have a healthy lifestyle and don't typically have a lot of medical expenses, you may be able to save even more money by choosing an HDHP and an HSA and paying cash for some health care costs.
- Flexibility: You can use the money in your HSA to pay for any qualified medical expenses, including doctor's visits, prescription drugs, and even vision and dental care. Unlike a Flexible Spending Account that many employers offer, the health savings account will allow you to rollover contributions from one year to the next which allows your money to grow. This gives you more flexibility to manage your health care costs over time. Nevermind that using the account to pay for eligible medical expenses is generally as simple as using a debit card.
Additional Benefits of Health Savings Accounts
In addition to these benefits and premium savings, health savings accounts can also help you save for retirement. If you fund your HSA up the maximum contribution limit each year and do not need to use those funds for medical expenses, the money can continue to grow year over year in your financial institution in a number of vehicles including mutual funds. You can withdraw money from your Health Savings Account after age 65 for any purpose, but if you use it for qualified medical expenses, you won't have to pay taxes on the withdrawal. This means that you can use your HSA to save for future medical expenses. An added bonus for HSA eligible individuals is that your money can be rolled into an IRA and be used to supplement your retirement income. Obviously, consulting with a Tax Advisor is vitally important in making these financial decisions.
Important Considerations For Health Savings Accounts
If you're considering opening an HSA, it's important to compare the different plans and financial institutions available to you. You'll want to look at the annual contribution limits set by the IRS, the fees associated with the plan, the investment options, and the costs of the High Deductible Health Plan you ultimately choose. You can also talk to your health insurance provider or a financial tax advisor to get more information about HSAs.
Oftentimes, Texans will pushback with the concern of the HSA having a high deductible health plan. Our friends and neighbors worry about out of pocket medical expenses resulting in cash flow problems during a claim. Independent Insurance Agents like the ones at Insurance for Texas have solutions that will help offset high deductibles and high yearly maximum out of pocket expenses. Limited benefit health plans were made to cover these eligible expenses while keeping your overall costs down.
Ultimately, you DO HAVE choices. With a friendly independent insurance agent you can be given options that can fit your budgetary goals and produce the value that you deserve. Click the button below to let us help you with your health insurance journey and keeping your medical expenses in check.