Low Cost OH Health Insurance: Causing More Problems Than It Solves

March 08, 2013

This is a topic I rarely talk about, in fact it might be the first time I have specifically addressed “low cost health insurance.” There is a reason for that and it’s simply not an oversight on my part.

The problem I have with the term “low cost health insurance” is that it can get you into a lot of trouble. When I say trouble I mean, serious financial trouble. The kind of trouble that ends with you selling major assets to pay for uncovered medical bills.

This is not some kind of fear tactic to scare you into buying “high cost health insurance,” it’s simply my honest opinion of the trouble you can cause if you start chasing low cost health insurance.

What’s the Problem?

Health insurance, even low cost health insurance, costs more than what you want/expect to pay. When you first start your health insurance journey and realize that even the cheapest plan costs more than what you wanted to pay, that can create negative expectations.

The truth is, if you were to consider a plan that costs a few dollars more, you could get two or three times the coverage.

What Should You Do Instead?

Everyone has a break even, tipping point or tolerance level when considering health insurance options. Your goal should be, if you are a low cost, budget shopper, to find that tipping point that aligns the proper deductible with the proper price.

Most of the time this will come in the form of a high deductible health savings account (HSA) plan. If you find yourself in a situation where you are deciding between a “low cost” value or saver plan and a HSA, the HSA should wins hands down.

I say this because the HSA’s main concern is protecting your two biggest concerns when it comes to your health insurance. That value or saver plan is usually dangling benefits (limited copays) in front of your face that you think you want or need, while letting you ignore what’s really important (out-of-pocket maximum).

Will Obamacare Take Care of This?

The short answer, it should, or at least it's suppose to.

With its list of 10 essential health benefits and other mandates that “improve” coverage, it should all but eradicate those wannabe health insurance plans and straighten up the wayward saver plans.

The biggest threat the Affordable Care Act posses is completely annihilating “low cost health insurance” altogether.

What Did You Just Say?

If health insurance rates go where everyone says they will, and by everyone I mean high ranking insurance executives, then you will be paying substantially more for your health insurance next year.

What About Those Tax Subsidies?

That’s a great question. People who qualify for premium subsidies are only allowed to pay a certain percentage of the their total income for health insurance. If rates increase even by 25-50 percent, that’s going to mean some serious subsidy money will be handed out.

Unless the federal government plans on printing money 24/7, those subsidies have to be funded somehow and I don’t think the government has the extra cash hanging around to do so. I would tell you to look at their balance sheet, but it’s currently on fire.

All jokes aside, unless they plan on hosting weekly celebrity golf tournaments to raise the money (seriously, no more jokes), it has to come from somewhere. Right now it looks like that money will be coming from health care reform taxes on specific industries related to the health insurance and the medical field, who will ultimately pass it on to you. In addition, cuts to existing programs, like Medicare, will help fund these newly created subsidies.

The Bottom Line

Low cost health insurance is a great option, as long as it does the job you need it to do. Don’t be seduced by the, bottom barrel, lowest price available. Most of the time, those plans are priced that way for a reason. Remember, you get what you pay for.

A lot of those options will cease to exist in 2014, in a post healthcare reform world, however it’s important know what effect all the changes will have on costs, directly and indirectly related as a result.