Financial Literacy - Insurance
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Slash your insurance costs

How to cut costs on ...
2. How to cut costs on health insurance

Group health insurance is almost always cheaper than individual coverage. According to Lankford, employers generally pay about 75 percent of the premiums for their employees. Smaller employers sometimes cut costs by raising premiums or reducing coverage for their employees, in which case it may pay to see if you can find a more attractive individual policy on your own. Be sure to check the premiums and coverage every open enrollment season at your workplace.

But don't automatically choose COBRA coverage when switching jobs. The main thing is not to let coverage lapse, but shop around because there might be better deals in the marketplace. If you have a medical condition, though, COBRA may be your best bet since you may be unable to find a cheaper policy elsewhere. "Don't give up your COBRA option before finding out for sure whether you can get an affordable individual policy," warns Lankford.

Look at ehealthinsurance.com to see how changes in coverage affect costs, suggests Lankford. "The National Association of Health Underwriters site, NAHU.org, is a great resource to look to if you have a medical condition because it's where you can find an independent broker who can help you shop around for a policy among several companies and present a strong case to insurers," she adds.

Watch out for fraudulent health coverage offers. If it sounds too good to be true, it probably is, warns insurance commissioner Sandy Praeger, president-elect of the National Association of Insurance Commissioners. "Companies are out there blast faxing or telephone soliciting for these super-great deals: $89.99 a month, your entire family is insured, you can get every service that's available, all the doctors and hospitals in your region participate -- and it's not worth the paper it's written on." Before dropping existing coverage, call your state insurance department and check the company and its complaint record.

Use Bankrate's handy work sheet to help you shop for health insurance.

It's not possible to be overinsured on heath insurance, but the mistake people make is on the deductible. Get a higher maximum coverage and offset the added cost by taking a higher deductible. "You know how much extra cost is on the deductible, but you don't know how much more you could be in for on the big end," says Lankford.

Always check the coverage cap on student health and other low-cost plans. They may have limited benefits of $50,000 or so (instead of the usual $1 million or more) that can easily be surpassed in the case of a serious accident or injury, leaving you responsible for hundreds of thousands of dollars more. Check to see what's covered and what isn't.

Praeger warns that many add-ons to health insurance are of dubious value. If you have health insurance, you probably don't need the discount card, and read the fine print for specific-illness insurance like cancer coverage carefully, because you may just be paying double. "If you're insured, there may not be any additional benefit offered through some of those additional kinds of coverage," she says.

Look at your health history to determine which treatments or services you'll likely face, then look for the policy with coverage that's right for you.

Health insurance strategies are very different if you have an employer policy or get coverage on your own. Employers may offer several types of plans, such as an HMO, a PPO and a consumer-directed plan, so check out all options carefully.

Employers generally subsidize the cost of insurance, but have begun charging more in co-pay and for things like drug coverage. If you take prescription drugs, you'll need to run numbers to see which plan has the highest out-of-pocket costs. "That's where the hidden costs are," Lankford says. "Not just the premium, but all other costs as well."

For the self-employed, a great strategy is to have a high deductible along with a health savings account, or HSA, according to Lankford. The money you contribute to HSAs is tax deductible and can be used tax-free for medical expenses. That represents a discount of up to 35 percent on medical expenses. To qualify, you must have a deductible of at least $1,100 for individuals; $2,200 for families.

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