Reasons for obtaining health insurance in Canada
For a few years before 2018, if you didn’t get insurance, you had to pay an extra fee when you filed for taxes because of the individual mandate under the Affordable Care Act (ACA). As of 2019, the single-state penalty is gone, which means there’s no cost to not having health insurance, right?
Not so fast. Even if you are young and healthy and not afraid of the tax collector, there are still plenty of reasons why buying health insurance is the smart thing to do.
Important reasons to get health insurance
Although you won’t pay a tax penalty if you decide to skip purchasing a health insurance plan, there are other financial factors to consider. In many cases, the benefits of covering a plan far outweigh the disadvantages and costs.
1. Insurance reduces the cost of unexpected medical bills
According to the Peter G. Peterson Foundation , the United States has some of the most expensive health care in the world, and the cost of health care in the United States is expected to increase. National Health Expenditure Accounts estimates that US spending on health care increased 4.6% in 2019, to about $11,582 per capita, or a total of $3.8 trillion.
When you are not insured, you are in trouble to pay any medical bills on your own. If you only pay for annual checkups or a course of antibiotics, those bills may not be too high. But if something happens to you, such as an injury or an acute medical condition, such as a kidney stone, you will be responsible for all costs of treatment and care.
Although medical costs vary greatly based on your location and the type of provider you see, HealthCare.gov notes that some common medical expenses are as follows:
- Broken leg: $7,500
- Cancer treatment: over $100,000
- Three-day hospital stay: $30,000
At this point, you might argue that most health insurance plans have deductibles, which you pay out of pocket for treatment and care before your coverage begins and they bill for you. This is true and incorrect.
Unless you buy Cadillac’s health insurance plans, the Platinum plan, you’ll likely get a discount. The deductible varies based on the type of plan you’re buying and whether you’re buying an individual plan or a plan through your employer. Deductible amounts also vary if you have a family plan or an individual plan.
If you break your leg and need a splint and other treatment, and you have a deductible plan, you must pay any deductible before your insurance covers it. So if your deductible is $6,150 — and you don’t have any co-pays or co-insurance — and it costs $7,500 to treat your broken leg, you’d pay $6,150 and insurance would pay $1,350.
If you need any other medical care during that year, insurance will pick up the tab as long as you go to an in-network provider. If you have co-insurance or co-pays, you will still have to pay these amounts after paying the full deductible until you have reached your maximum out of pocket for the year.
But there are cases where the insurance revokes and covers your costs even if you haven’t met the deductible yet. Insurance plans need to cover the cost of preventive care, such as the annual flu shot, Pap test, and health screening. With an insurance plan, you don’t have to pay out of pocket for preventive services.
Your insurance coverage also helps you pay less for the services you receive. For example, if you visit a doctor because you have a sinus infection and you don’t have insurance, the bill could be $350. But if you have a plan and the doctor is in the insurance company’s network, the doctor will have an agreement with the insurance company.
For example, under the agreement, the doctor may accept a payment of $150 to treat sinus problems. You still have to pay your deduction amount if you still owe one, but you’ll end up saving $200.
Pro tip: If you choose a higher deductible plan to lower your monthly premiums, you can also use a Lively Health Savings Account (HSA). An HSA allows you to save on medical expenses while reducing taxable income.
2. Insurance reduces the risk of bankruptcy
During the 12-month period ending June 30, 2020, there were 659,881 non-business bankruptcies, according to US courts. Although US courts do not have data on the number of bankruptcies filed due to medical costs, CNBC reports that medical cases play a role in more than two-thirds of bankruptcies.
A 2018 study published in the New England Journal of Medicine indicated that there appears to be a relationship between hospital admissions and bankruptcy filings. The likelihood of a person filing for bankruptcy tends to increase in the years after hospitalization.
Getting health insurance coverage will not prevent you from having to pay medical bills or visit the emergency room. But it puts an end to those bills, helping you avoid bankruptcy. Most individual health insurance plans have a deductible, co-insurance or subscriptions, and a maximum out of pocket per year.
You are responsible for the amount of your deduction, whether it is $1,000 or $8,000. You may also be liable for coinsurance, which is a percentage of the health care costs you must pay after you pay the deductible in full. Some plans also have co-payments for certain goods and services, such as nonpreventive doctor’s appointments and prescription drugs.
Your plan also has a maximum out of pocket for this year. Once you reach your out-of-pocket limit, all costs of in-network care must be covered by your insurance company.
For example, you have a $4,000 deductible and 20% co-insurance. If you break your leg, the hospital pays your insurance company $7,500. You’ll pay the full $4,000 deductible, plus 20% of the remaining $3,500, which is $700. Your insurance company will pay the rest.
Let’s say you had a particularly bad year, and you broke your leg again. Again, your insurance company’s hospital bills are $7,500. Since you’ve already paid $4,000 in your deductible for the year, you’re just on the hook for 20% of your coinsurance, which is $1,500 in this case.
But if your out-of-pocket plan capped $5,000, and you actually paid $4,700 during the year to fix your first broken leg, you only have $300 left before you hit the limit. You pay $300, and the insurance company pays the balance, which is $7,200.
If you somehow break your leg for the third time within the same year, your insurance company will pay the entire $7,500 bill to an in-network provider. With insurance, the total out-of-pocket cost for all three broken legs would be $5,000. Without it, it would be $22,500 ($3 x $7,500).
3. Getting insurance may encourage you to take better care of your health
It’s a myth that health insurance is only for people who have a chronic and serious illness or who are at a higher risk of getting sick or injured. Health insurance is for people who are in excellent health as well. In fact, purchasing a health insurance plan if you are in the best health of your life can help you stay healthy.
Under the ACA, most health insurance plans must cover a very long list of preventive services. According to HealthCare.gov, these services fall into three categories: services for all adults, those for children, and those for women. Preventive care services are free to you as long as you have a plan that covers it and see a provider in your plan’s network.
Some notable examples of preventive care services are:
- Cholesterol check
- Type 2 diabetes screening
- HIV screening
- Certain vaccines (such as the influenza vaccine, the HPV vaccine, the tetanus vaccine, and the chickenpox vaccine)
- Tuberculosis screening
- Tobacco cessation and screening services
- Folic acid supplement for pregnant women or women who may become pregnant
- Cervical smears
- STD Examination
- Contraceptives
Having preventive services available to you for free from an in-network provider isn’t just good news and fit your budget. Getting preventive care also helps you get the treatment you need quickly if your doctor discovers any health problems.
For example, if your doctor orders a cholesterol test and the results show a slight rise in your cholesterol level, you can take action right away. Your doctor may recommend dietary changes or suggest an exercise routine to help lower your cholesterol. If you waited to get tested, your cholesterol level may have continued to rise until it could only be controlled with medication and medical intervention.
Getting preventative care throughout your life also helps you stay active. The longer you stay healthy, the more you will be able to work and continue to do the things you love. You will not have to take time off work to get intensive treatments if any condition is caught early and treated with lifestyle changes.
Also, treating conditions through lifestyle changes or moderate procedures is much less expensive than invasive options such as surgery or extensive medical treatments.
What can you do if your health insurance premiums are too high
The benefits of getting health insurance are clear. But what can you do if paying $300 or so per month for the premium seems too high?
If the monthly cost of health insurance seems too high for your budget, you have options to lower your premium.
1. See if you qualify for credit
If you purchased an individual or family plan through the HealthCare.gov marketplace, you likely qualify for a tax credit or subsidy that will reduce the amount of your monthly premium. During the 2016 open enrollment period, for example, 85% of individuals chose a financial assistance plan, according to the Department of Health and Human Services.
The size of your credit and whether you qualify depends on your family size, state, and income level. According to the IRS, credits are available to people whose income is between 100% and 400% of the federal poverty line for their family size. Greater credits are available to people with lower incomes.
Some people also qualify for a tax credit in addition to cost-sharing assistance to lower deductibles and coinsurance.
2. Choose a plan with a higher discount
Plans with a higher discount usually have lower monthly payments compared to plans with low or no discounts. If you don’t anticipate a need beyond basic health care and preventive services over the next year, a higher-deductible plan often makes sense.
3. Choose HMO
The premiums charged by HMO plans are often less expensive than those charged by Preferred Provider Organizations (PPOs). With HMO, you choose a primary care provider and need referrals to meet with specialists.
You should also see which providers are in the plan’s network to get coverage. The requirements and limitations of an HMO plan help keep its costs low.
4. Choose a catastrophic plan
Some people also qualify for catastrophic plans. With a catastrophic plan, you can see your primary care provider three times a year before meeting the deductible. Preventive services are also free under disastrous plans. These plans are for people who only anticipate that they need medical care in a “worst-case scenario,” according to HealthCare.gov .
Catastrophic plans have higher deductibles — $8,550 for 2021 — than other plans. It is also usually reserved for people under the age of 30 or people with financial difficulties. Premiums are usually much lower than those of other plan options but do not qualify for a tax credit.
5. Consider a plan with a health savings account
Another way to help lower your health care costs while getting the coverage you need is to consider purchasing a plan that has an HSA attached to it. HSAs are usually attached to health insurance plans that have high deductibles. If your employer does not offer an HSA, you can set up one with Lively.
The contributions you make to the HSA must be used to cover the cost of Medicare and health care. Covered costs include subscriptions or coinsurance, deductibles, and the cost of prescription drugs. When you put money into an HSA account, you can deduct the amount you contribute to the account from your taxable income for the year, which helps reduce your tax bill.
Any money you put in HSA remains there until you need to use it. If you start contributing to an HSA when you’re healthy, you can save a significant amount. The maximum annual contribution for an HSA is $3,600 for an individual plan or $7,200 for a family plan (as of 2021).
Contributing to an HSA now means you have the funds to cover the cost of Medicare in the future, helping you avoid medical debt and potential bankruptcy.
