Periodically I see articles on various news sites that have headlines with themes about saving money, and more specifically what you need to do to be prepared for the unexpected, such as the loss of your job. Most say things along similar lines: Have at least 6 months worth of salary saved up to cover expenses, and make sure you estimate medical costs, unexpected car repairs, and other things of that nature. If you use any sort of bill paying software, such as Quicken, a tool like that can really help to make it easy to run a report quickly and simplify some of the estimating.
I suspect a lot of people don’t even think about something that I think is critically important, and none of the articles that I’ve read have really addressed it either. How many of you know what your health insurance costs each month? I’m not talking about how much is taken out of your paycheck, I’m talking about adding that to what your employer subsidizes to get the TOTAL cost, or what you would pay if you had to get your insurance through COBRA. In case you’ve never heard that term before, COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, which was passed into law in 1986. According to information on the US Department of Labor website it “contains provisions giving certain former employees, retirees, spouses former spouses, and dependent children the right to temporary continuation of health coverage at group rates”. So basically if you got health insurance through your employer and lose your job, under certain conditions you can continue to get that insurance at those group rates. However, and here’s the kicker – your former employer will no longer subsidize or pay a portion of that insurance for you. You’ll need to pay all of it yourself, and if you thought you were lucky because your former employer didn’t charge you a lot for health insurance when you were working , well, you might want to be sitting down when you get that information, because that same non-subsidized health insurance is really expensive!
How expensive, you ask? At my former employer, coverage for my husband and I for health, supplemental life and dental went from $320/month to $1170/month. Think about the implications of that for a moment…so now not only do you NOT have an income, but you get to shell out an extra $1000 or more a month for insurance. For that same high-deductible plan you had before. And if you were unlucky enough to get laid off at the end of the year, or don’t find a job right away and are still unemployed after the start of the next calendar year rolls around, your deductibles and out-of-pocket costs reset, which means that you get to start all over again meeting those too. So any money you had in that lovely HSA account can be used for the insurance or medical bills, but trust me, it will go very quickly.
If you’re confused on the difference between deductible and out-of-pocket, you’re not alone! I’ll try to explain it here, and add in a good website resource as well. Your deductible is the amount you first need to pay before your insurer will start to help you with what you owe toward bills. After that, the insurer will pay part, and you’ll pay part, until you hit your out-of-pocket maximum, at which point the insurer pays all of it. Where it can get confusing is adding in family members. If you have just two people insured, you can have one meet both the deductible and their out of pocket maximum, but the other person is still paying the full amount for everything because they haven’t yet met THEIR deductible. If you have more than two people by adding in children, then those deductibles still need to be met but at least the out-of-pocket maximums are cumulative toward the family out-of-pocket maximum. Yikes! I know that our insurer has a really nice graphic on the website showing where we were at all times with meeting deductibles and out-of-pocket maximums, and I would expect most others do as well. MoneyUnder30 has a good page on their website that can help with understanding those and other health insurance terms.
So yes, think about your monthly expenses, but educate yourself too on what your insurance will cost you if you’re not working. It’s eye-opening, and probably far more expensive than you think. Even routine annual checkups can add up when you start adding in lab tests and x-rays, since most visits are “cafeteria” type, meaning each thing done gets a charge. For those with high deductible plans, here are some AVERAGE costs that will wipe out small to medium savings:
Office visits for physicals…$180-240
Adult office visit for illness…$130-180
Child office visit for illness $115-160
Adult ER visit (visit only, doesn’t include labs, x-rays, etc) $580-700
Child ER visit (visit only, doesn’t include labs, x-rays, etc) $510-635
Blood count tests…$5-15
As you can see, start adding in labs, x-rays, etc, and it doesn’t take much before things add up. Add in a couple of sick kids, or sports injuries and physical therapy and the money is gone.
Costs may vary by region of the country, insurer, and contracts negotiated, among other things. The prices listed above came from a couple of sources, including Blue Cross Blue Shield of Massachusetts, and CostHelper.com. You can probably find cost estimators at your insurer as well.
So besides planning for the rent or mortgage, the car payment, gas, utilities, food, clothes, the pets, school events, and all that other stuff, don’t forget to educate yourself about the true costs of ALL of your healthcare costs.
For more information on COBRA, go to the Department of Labor website.
PS, preventing illness is still a great idea and saves money! It’s flu season, and flu shots are cheap and readily available. Some county health departments will do them for free, I’m seeing Costco/CVS offering for around $20, Walgreens and Target for $40. If insurance covers medication, your flu shot might be covered too. Don’t forget to get yours!