USA health insurance
Introduction
If you’re between the ages of 12 and 50, I’m sure you’ve had at least one health insurance panic attack.
Maybe you just turned 26, switched from your parents’ plan, and spent 3 hours looking at healthcare.gov until you closed the tab and gave up. Maybe you got your first job, looked at 12 nearly identical plan options, and chose the first one because you didn’t know what any of the words meant. Maybe you’re one of those millions of people. You’ve started reading this content of ours. It’s the best way to change your fate.
Learn more about how adult health insurance actually works. And you’ll never pay more for a plan again. Read the information below carefully. It will help you succeed throughout your life.
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Table of Contents
- What Is Health Insurance, Actually? (Hint: It's Bankruptcy Protection)
- The Only Two Numbers You Need To Compare First: Premium vs. Deductible
- Out-of-Pocket Maximum: The Safety Net No One Tells You About
- All The Life Moments When You Can Sign Up For Insurance
- Marketplace vs Employer Insurance: Which Is Actually Better
- HMO vs PPO: Stop Overthinking This One
- Copays, Coinsurance, And The Free Care You Did Not Know You Had
- HSAs: The Best Secret Deal For Young Healthy People
- The Most Dangerous Myths That Will Cost You Thousands
- The Exact First Thing To Do When You Get A Medical Bill
1. What is health insurance? (Hint: it’s bankruptcy protection)
Let’s start by setting aside every textbook definition you’ve ever heard. Health insurance is not a “wellness plan.” It’s not a discount card for going to the doctor. At its core, health insurance is a simple thing: a group agreement to protect you from going bankrupt for medical bills.
Here’s how it works, in two sentences: Thousands of people put a little money into a shared pool each month. Most people will use very little of that money in a given year. But for the 1 in 10 people who get cancer, get into a car accident, or need emergency surgery, the pool pays their $50,000 or $100,000 bill.
That’s it. That’s the gist.
When I was 24, my roommate fell off his bike, broke his ankle, and needed emergency surgery. The final bill from the hospital was $78,312. He had a $90 monthly health insurance plan. His total out-of-pocket expenses for the entire year were? $1,200. So I would suggest that if you can afford it, get health insurance. It won't do any harm without benefit. But yes, find an organization that has a government license and registration.
2. The Only Two Numbers You Need to Compare First: Premium
vs. Deductible
90% of people pick the wrong health insurance plan because they only look at one number.
Let's define the only two numbers that matter, in plain English:
Your premium is the monthly bill you pay just to have insurance. You pay this every single month, no matter what, even if you never see a doctor a single time all year.
Your deductible is the amount of money you pay 100% out of pocket for care, before your insurance starts paying for anything.
Here is the single most common, most expensive mistake people make every single year: They automatically pick the plan with the lowest deductible, and end up paying thousands extra a year for no reason.
I will use my own plan as an example. Last year I had two options:
- Option 1: $215 a month premium, $500 deductible
- Option 2: $82 a month premium, $2800 deductible
I have had the second plan for 6 years. In that time, I have been to the doctor twice, and urgent care once. I have never once hit my deductible. In 6 years, I have saved over (9500 in premiums. That is money in my bank account, not given to an insurance company for a benefit I never used. For 80% of people under 50 who are not managing a serious chronic illness, this will be true for you too.
3. Out-of-pocket maximum: The safety net no one tells you about
I want you to memorize this word. It’s the most important rule in all of U.S. health insurance, and 7 in 10 adults don’t know it exists.
Your out-of-pocket maximum is the most you’ll have to pay for covered medical care in a year. Once you reach that number, your insurance pays 100% for everything for the rest of the year. There are no exceptions. It’s not a plan benefit. It’s federal law.
No matter what happens to you. If you have leukemia. If you get into a car accident that requires 6 months of care. If you have a baby after 2 months in the NICU. The bill will stop at your OOP Max.
That changes everything. That’s why you don’t need to be afraid of a high deductible plan. Let’s go back to my $2800 deductible plan. My OOP Max is $4500. This means that if I have the worst medical year of my life, my worst-case scenario is that I pay a total of $4500. That's it.
Many people pay an extra $150 per month, just to lower their deductible from $3000 to $1000. They are paying $1800 per year forever, just to protect themselves from the worst-case difference of $2000. This is the worst deal you can get.
4. All The Life Moments When You Can Sign Up For Insurance
One of the biggest myths people believe is that you can only sign up for health insurance one time a year. That is not true. There are half a doze$n common life events that give you a special 60 day window to sign up for a new plan immediately.
Let's list them in the order you will experience them:
You can stay on your parents' health insurance plan until the day you turn 26. Period. This is federal law. It does not matter if you are married, live in a different state, have a job that offers you insurance, or are not claimed as a dependent. This is the best deal you will ever get, and you should take it for as long as you can.
The day you turn 26, you get a full 60 day special enrollment window. You do not have to wait for open enrollment. I have met dozens of 26 year olds who went 6 months uninsured because no one told them this.
If you lose or quit your job, you get 60 days to sign up for a new plan, no matter what time of year it is.
The only time you need to wait is for open enrollment, which runs every year from November 1 to January 15. This is the time of year anyone can change or sign up for a new plan for any reason.
5. Marketplace vs Employer Insurance Which is Really Better?
Everyone automatically assumes that your job insurance is the best, cheapest option. That was true even 20 years ago. It’s often false these days.
First, there’s one rule you need to know: If your employer offers you a plan where your own monthly premium is less than 9.12% of your monthly income, you’re not eligible for tax credits on the federal Marketplace. But that’s where the fine print ends.
Regardless of what your job offers, you should always go to healthcare.gov and run the numbers for yourself. I had two separate jobs where the employer plans were $180 a month and $5,000 deductibles. I left both jobs, went to the Marketplace, and got the same plan from the same insurance company, with the exact same network of doctors, for $12 a month after tax credits.
If you make less than $20,385 a year as an individual, you’re eligible for a $0 premium plan on the Marketplace. Zero dollars a month.
8 out of 10 people who shop on the Marketplace qualify for a plan that costs less than $10 per month.
I've helped friends who make $45,000 a year get a better plan than the $30 monthly plan that was better for their job than the $200 monthly plan. Always check the Marketplace first.
6. HMO vs. PPO: Stop Overthinking This
7. Copays, Coinsurance, And The Free Care You Did Not Know You Had
Let's cl$ear up the last two annoying terms, and then tell you about the free care everyone gets but almost no one uses.
A copay is a flat, fixed fee you pay for a visit, like $25 for a primary care appointment, or $75 for urgent care. You only pay this after you have hit your deductible.
Coinsurance is the small percentage you pay for care after your deductible, and before you hit your out of pocket max. For almost all plans, this is 20%. That means once you pay$ your deductible, you pay 20% of all bills, and insurance pays 80%, until you hit your OOP Max.
Now for the best kept secret in health insurance: All preventative care is 100% free, always, no exceptions. This is federal law, not a plan benefit.
That means your annual checkup, all vaccines, birth control, STD testing, depression screenings, blood pressure checks, mammograms, and colonoscopies cost you $0. You do not pay a copay. You do not have to meet your deductible first. They cannot charge you a single cent.
I cannot tell you how many friends I have had skip a doctor's visit for years because they thought "I haven't hit my deductible yet, so it will$ cost hundreds". This is not true. Next time you need a checkup, book it. You will pay nothing.
8. HSA: The Best Secret Deal for Young, Healthy People
If you choose a high deductible plan, you’ll be eligible for something called a Health Savings Account, or HSA. It’s not a health insurance benefit. It’s literally the best financial product available to the average person in the entire United States.
Here’s how it works in three sentences:
Every dollar you put into your HSA is 100% tax deductible. If you put $3,000 into your HSA this year, you’ll subtract (3,000) from your taxable income.
The money in your HSA grows tax-free forever. It’s not a use-it-or-lose-it account. It rolls over every year and stays with you for the rest of your life, even if you change jobs or insurance.
When you spend money on a medical expense, at any point in your life, you don’t pay any taxes on it.
It’s better than a 401k. It’s better than a Roth IRA. It’s the only account in the entire U.S. tax code that’s triple tax-free.
If you're young and healthy and already have a low-premium, high-deductible plan, it's free money. I put $100 a month in my HSA. I get a tax deduction on every dollar. That money has been growing for 6 years. If I need surgery next year, it's waiting for me. If I never spend it, I can withdraw the entire amount as retirement income at age 65, no penalties. Stop sleeping on your HSA.