Seven Ways To Lower Your Health Insurance Premium

July 23, 2009

by John Newcomer:

Health Insurance Premiums Out of Control

chartEveryone knows health insurance premiums are spiraling out of control. But did you know that even if your employer is paying the premium it still impacts you. Katherine Baicker and Amitabh Chandra from Harvard University published a study that concluded that a 20% increase in health insurance premiums increases the likelihood that employers will lay people off by 2.4 % — the equivalent of 3.5 million workers.

More importantly, for those lucky enough to have a job with benefits, a 20% increase in health insurance premiums resulted in an annual wage reduction of $1,700 per employee. A 10% increase in health insurance premiums results in 2.3% decline in wages.

The bad news is that health insurance premiums have been increasing more than 20% over the past three years, and there appears to be no end in sight to annual premium increases. So, if you think it’s just your employer’s problem, you’re wrong. It is everyone’s problem. Everyone has to work together to lower premiums.

What Can You Do About It?

The following are seven ways to reduce health insurance premiums. Some are for businesses (if you are an employee, remember the cost of health insurance is being directly passed on to you). Others are tips for individuals to reduce the cost of health insurance premiums.

  1. Raise Deductibles. Yes, this shifts more cost to the employee, but it can dramatically reduce premiums. Typically, the employer will also institute a health savings account to off- set the increased deductible. This can result in savings for both the employer and the employee.
  2. Change Co-pays. This is how much you pay after your deductible has been met. A common ratio is 80/20 in which the insurance company pays 80% and you pay 20%.  It’s just like raising the deductible means a lower premium, but it does shift more risk to you if something happens.
  3. Shop Around. Each time your health insurance is up for renewal look around for better deals. Chances are you can find a better deal.
  4. Start a Wellness Program. A wellness program can reduce health insurance claims. If employees are healthier and getting sick less often, a business owner can negotiate lower premiums. Wellness programs also have an additional benefit of reducing absenteeism and employee turnover, while boosting morale and productivity.
  5. Cut-out dangerous hobbies. Hobbies such as sky diving or scuba diving are considered dangerous. Any hobby that poses a significant risk of injury will necessarily increase your premiums. A dangerous hobby is not a pre-existing condition. If you truly want to lower health insurance premiums you may have to alter your lifestyle.
  6. Get Healthy. This means stop smoking, eat healthy, go on a diet, and exercise. Insurance companies do not like to insure smokers or obese people. If you maintain a healthy lifestyle not only will you feel better, but you will pay less for your health insurance.
  7. Clean Up Your Driving Record. You may not realize this, but your driving record is taken into consideration when health insurance companies determine your insurance rate.

Goal:  Most Affordable Plan

When lowering your health insurance premium keep in mind that you do not want to be foolish. You need to have health insurance that meets your needs.  The goal is not the lowest premium, but the most affordable plan that protects you and your family.  High deductibles and less favorable co-pays lower premiums, but can come back to haunt you if you think you are at risk for serious injury or illness.  Remember almost any serious encounter with the health care industry can bankrupt most middle class families if they are not adequately insured.

One final tip, never cancel any current health insurance policy until you have a new one. Strange things have and will happen even if you are uninsured just for one day.