It sounds counterintuitive to say this — considering we’re amid a pandemic that has infected millions — but health care spending is down in the United States. The sudden drop in expenditures has left health insurance companies scrambling to figure out pricing for the year ahead. Insurance costs have been steadily climbing in the U.S. for several years, and that trend doesn’t appear to be changing.
Why are health care premiums projected to cost more in 2021?
It’s still not clear how much of an increase in health care costs we should expect in 2021, but a new survey from the Kaiser Family Foundation points out that premiums for a family now reach $ 21,000, while deductibles have doubled since 2010. There are two main reasons why insurers are having a difficult time plotting out the year ahead. To understand the first reason, we have to go back to last spring and the pandemic’s first wave.
“In the spring, we watched images of overrun hospitals, [and] almost all non-urgent health care services came to a halt,” says Deb Gordon, former health insurance executive and author of The Health Care Consumer’s Manifesto. “The effect was much less health care spending, which in our system means a financial win for health insurers and a financial disaster for many hospitals and doctors.”
An analysis released in April projected a reduction in health care spending of between $ 75 billion to $ 575 billion if that early trend continued. Now people are returning to medical appointments, but volumes are still down — and this has insurers worried. A surge in demand could overwhelm the system and lead to higher costs. Also, vast sums of money are being spent on developing a vaccine, providing testing and treating those infected with COVID-19.
[ Read: The Best Health Insurance Companies ]
If you combine all of these elements, you get a muddled picture, but the general view is that consumers can expect to pay more for their health care next year. For example, Covered California, the Golden State’s official health insurance marketplace, projects premiums will increase between 4% and 40% in 2021.
5 moves you can make to keep your 2021 health care costs in check
Whether health care costs don’t increase now or for another year, there are things you can do to keep costs down.
1. Make sure you have the right insurance plan
Choosing a plan starts with understanding your situation. Do you get insurance through your work, or do you pay for it through one of the marketplaces established by the Affordable Care Act (ACA)? What is your budget? What are your medical needs?
[ Read: The Best Cheap Health Insurance ]
An older person with medical conditions that require regular care doesn’t need the same insurance as someone younger and healthier. Shop around for a plan you can afford and one that meets your medical needs. Also, look into health savings accounts (HSAs). These accounts allow you to set aside money tax-free that can be used to pay for things like deductibles and copays.
2. Take advantage of free preventive care
Chances are if you take steps to stay healthy, then you’re less likely to need costly insurance. Plans offered through the ACA’s Marketplace have to include certain preventative care services. The list is long and includes things like diet counseling, vaccines and depression screening. Under ACA guidelines, medical professionals can’t charge you a copayment for these services.
3. Consider a high-deductible plan
There is a certain amount of risk involved when choosing a high-deductible plan. The IRS classifies these plans as having deductibles of at least $ 1,350 for individuals and $ 2,700 for families. Your monthly payments may be lower, which could help those who don’t have a lot of disposable income. If you’re young and healthy, then this might be a good option for you. However, let’s say you have a plan with a deductible of $ 1,350. It’s important to remember that this means you could be on the hook for that amount should something happen.
4. Choose in-network health care providers
This is perhaps the easiest way to save money. Before seeking care, make sure the provider is in your network. This means the doctor and your insurance company have worked out an agreement on fees. Going out of network can be costly. Just look at this scenario: A person who visits an out-of-network provider and someone who goes to an in-network provider are both charged $ 22,000 for services. The out-of-network plan only covers 60% of costs, whereas the in-network plan pays for 80%. Since the insurer doesn’t offer a discounted rate to the out-of-network provider, the total out-of-pocket expense is $ 13,600 compared to $ 2,800 for a visit to an in-network provider.
5. Know the difference between urgent and emergency care
Here’s another easy way to avoid a hefty bill. The emergency room is where you go if you have a life-threatening situation. Urgent care clinics should be reserved for things like ear pain or if you have a cold. Let’s say you have an earache. A trip to the ER for this issue will cost you about $ 400 on average. By comparison, getting that earache taken care of at an urgent care clinic will cost you $ 110.
Too long, didn’t read?
Health care spending is down. In the early stages of the pandemic, people put off appointments for fear of contracting the virus. This drop and the rise in costs associated with the pandemic, as well as a potential surge in demand, have caused uncertainty in the insurance industry. Insurance rates are expected to climb, but by how much isn’t clear. Consumers can keep their health care costs in check by shopping around for plans, taking advantage of preventative care procedures, choosing a high-deductible plan, making sure only to visit in-network providers and knowing when to visit the emergency room.
We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.
Image Credit: Nuthawut Somsuk/Getty Images
