In this economy, many people hang on to difficult jobs just for the health insurance benefits. In the days when I was employed by a company, I paid about $240 a month for two people through the group plan. I quit my job and continued my work health plan through the government’s COBRA program.

Sticker shock set in after one month when I paid nearly $900! So I decided to shop around. I found several private plans that were still at least $500 a month for two people. Then I learned how to save big money and lower my yearly income tax bill through a high-deductible health insurance plan that included a health savings account (HSA).

HSAs allow individuals and families to set aside money in a separate account designated solely for health and medical care costs. Those contributions are untaxed. Individuals may contribute up to $3,100 and families $6,250, respectively, from 2012 pre-tax income. Then you can deduct the contributions when you file taxes in 2013. Anyone 55 or older may contribute an extra $1,000 into their HSA account. And when you spend those dollars on qualified health and medical care expenses, they remain tax free.

Think of an HSA like an employer-sponsored Flexible Spending Account. But unlike FSA accounts, you aren’t obligated to use all your funds by year’s end.

If you’re thinking of starting an HSA, be sure to first purchase a high deductible health insurance plan that includes an HSA account. Many such plans carry a yearly deductible of up to $5,000 per year. This means that you’ll need to spend $5,000 of your own money before your insurance company pays any of your health and medical care costs. Examine each plan closely before you buy and factor in your overall health. For example, if you are planning on having a baby or have a major health issue, a high-deductible plan may not be for you. Most HSA-based plans have a waiting period before they cover pre-existing conditions.

I pay $256 a month for a plan with a $1,000 deductible. I estimate my savings at $16,000 a year over the COBRA-based plan. Further, I lower my income tax bracket by maximizing my contributions to the HSA.

This has been a guest post by Halina from Madison, WI.
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7 thoughts on “Fit Finances: How to Save Thousands on Private Health Insurance”

  1. HSA with HDHP’s (high deductible health plan)  can also a good option if you have insurance through an employer (if they offer the option).  But HPDH’s are not for everyone- you need to evaluate your typical annual medical spending first to determine if it is right for you.  If your HSA contributions are direct deductions from your payroll, then they can also be pre-tax.  In my experience your premium is also less because you have selected the HDHP.  Remember to check the exclusions on HSA’s also.  For instance there are rules about simultaneously having HSA’s and FSA (Flexible Spending Plan), it is possible to have both, but it has to be a special type of FSA.

  2. Amanda says:

    In some cases depending upon your income situation and your local hospitals policies you are better off having no insurance than a high deductible plan with a deductible of several thousand dollars. I used to work for a community health center, chc’s recieve government funding therefore must provide a sliding fee scale for those without insurance. So for example if you had no insurance and you incurred a bill for $300, with the sliding fee scale and self pay discounts you would end up having to pay about $75 out of your pocket, however if you have insurance (even with a high deductible thats not covering you yet you still count as being insured) you would be responsible for the amount not covered by your insurance which in this case is the full $300. The same goes for many non profit hospitals, if you end up in the ER with no insurance and incur a $6000 bill they will often write off a large portion (usually at least 50% sometimes even more) and you can set up a payment arrangement for the remainder. If you go in with a high deductible insurance you are on the hook for your entire $5000 deductible. Do your homework and see what types of hospitals and medical providers are in your area and what kind of help they offer for the uninsured. You may find that putting the amount you would pay monthly for a high deductible insurance into an emergency savings account will be a better option for yourself. In the event that you are at high risk for cancer then obviously you might opt for the insurance plan.

    • Anonymous says:

      We have a High Deductible plan through work, and it is great.  I highly recommend maxing out your HSA contribution every year.  Any leftover money at the end of the year is just carried over, and it’s tax-free.

      I don’t suggest going without insurance to save money on medical bills.  If you get seriously sick, you may have to file bankrupt.  That trick of saving money by not having insurance only works for emergencies.  An alternate thought though would be to get a High Deductible plan, which is relatively low cost.  Then if you have an emergency, I’m not sure you have to give them your insurance info.  You could get the cash discount, and still be covered by your plan if you get a long-term illness.

      I’m no medical lawyer, but it seems like an option to me.

  3. As of October 2010, Private plans DO NOT cover maternity. So if you get pregnant, you’re on your own, 100%. When my daughter was born, I was on my employer’s insurance, but it would’ve cost me $400 a month to add her to my school insurance so I had no choice but to find a private plan. Most private insurers won’t cover babies under 2 without a guardian, and to this day we still can’t afford to cover my husband and me both on insurance so I switched insurance. I’m constantly taking a risk that I’ll get pregnant again and dig myself into massive debt with the healthcare costs.

    • Anonymous says:

      What do you mean by a ‘private plan’? Is this the same as an individual who works for himself carrying insurance?

      I only ask because my husband carries insurance for our family privately and both my pregnancies were covered. Not sure if it’s a different type though. He owns his own business so that may not be considered a private plan.

  4. I am trying to help my mother purchase a private plan. Can you provide more information on the company and or plan you purchased and anymore details? Thanks.