As the cost of traditional health insurance rises, some Americans are seeking alternatives that provide some sort of protection without busting their monthly budgets. Here are five viable options worth considering.
- Traditional health insurance policies are the go-to plan for medical coverage, but consumers have other options.
- Alternatives include primary care membership plans, medical cost-sharing programs, health savings accounts (HSAs), medical services discount cards, and high-deductible policies.
- Primary care membership plans allow participants to receive care from a primary care physician for a flat fee, usually paid monthly.
- Medical cost sharing programs allow participants to pool money to cover each other's medical expenses.
1. Primary Care Memberships
Some medical practices and independent primary care physicians offer services for a flat monthly fee, rather like a gym membership. This is often referred to as a concierge medical service.
An individual or family can get the usual services provided by a primary care physician, including virtually unlimited doctor visits, blood tests, and pediatric care, all with no copay. Of course, such an arrangement does not cover surgery, hospitalization, major injury treatment, or specialist care.
Most who choose this option supplement the primary care membership with a high-deductible, low-premium health insurance policy that covers catastrophic illnesses or injuries.
2. Medical Cost Sharing Programs
Participants in programs such as Medi-Share pay monthly fees similar to insurance premiums. By pooling their resources, they share each others' medical costs as they arise. Each member who needs medical services pays an "incident fee," similar to a copay. The remainder of the medical costs is covered by the pooled fees.
These programs often negotiate discounts with primary care physicians and hospitals to keep costs down. The monthly fee is typically less than traditional health insurance while offering similar levels of reimbursement.
Many cost sharing programs are from faith-based organizations that exclude some services, such as birth control and substance abuse treatment. Otherwise, the programs function much like a regular insurance policy at a lower overall cost.
Still, if you're thinking about a medical cost sharing program, be sure to read the fine print—very carefully. Some of these programs don't guarantee you'll be reimbursed at all for any bills (it might be "voluntary"), and many have very limited per-incident and lifetime caps.
3. Health Savings Accounts
A health savings account (HSA) can help cover medical expenses while offering tax advantages. A health savings account must be combined with a high-deductible health plan (HDHP) to cover catastrophic illnesses or injuries.
HSAs are available through many employers, but may also be set up by individuals. Payments made into an HSA are pre-tax deductions, and there is no tax penalty for spending or withdrawing money as long as it is used to pay medical expenses.
The IRS limits maximum contributions to an HSA account. For 2020, you can contribute $3,550 for individual coverage (up from $3,500 in 2019). For family coverage, the 2020 limit is $7,100 (up from $7,000 in 2019). If you're age 55 or older, you can stash away an extra $1,000 per year.
4. Medical Services Discount Cards
For those who prefer to operate on a cash-only basis for medical costs, a variety of medical discount cards are available. Some discount cards can be used for physician and hospital services, prescriptions, or a combination of these. The discounts can be substantial, up to 80% or more.
Some cards come with a one-time membership fee, while others may have a small monthly fee. Keep in mind that these are discounted fee-for-service programs—not health insurance plans. And the services you need may not be covered, so be sure to read the fine print.
There are typically restrictions on where the discount cards can be used, similar to those for a healthcare plan that requires using doctors within a specified network.
One notable advantage is that the cards can often be used for major dental services. The dental coverage in traditional health insurance policies is usually severely limited, expensive, or both.
Discount cards can also be used in combination with high-deductible catastrophic illness or injury insurance coverage.
5. High-Deductible Policies
Younger adults in generally good health who do not expect to incur much in the way of medical costs during the year can often make do with a low-premium, high-deductible policy that covers only unexpected major injury or illness. A catastrophic health insurance policy ensures coverage in the event of such unforeseen medical expenses while keeping insurance costs to a minimum.
If you have a high-deductible health plan, it makes sense to open (and fund) a health savings account. This allows you to set pre-tax money aside to pay for medical expenses, which effectively gives you an automatic "discount" (equal to your tax bracket) on every bill you pay.
The Bottom Line
Healthcare is expensive, and costs are expected to keep climbing. Even if you're in perfect health today, you can't count on staying healthy or avoiding injuries. If you can't afford a traditional health insurance policy, these options can help. Still, keep in mind that these are not perfect solutions, and that benefits vary. It's essential that you read the fine print so you understand exactly what type of coverage you'll have.
Also, many providers offer a discount if you pay for services on the same day you receive them, but you have to ask for it. And, many health systems offer financial assistance—either interest-free payment plans or discounts, typically based on your household income. If you're facing a large bill, always ask about discounts and financial assistance.
Finally, remember that one of the best ways to control healthcare costs is to prevent illness and injury to begin with. Eat well, be active, and focus on a healthy lifestyle.