5 Health Insurance Mistakes to Avoid

Before you go, we thought you'd like these...
Before you go close icon
Health Overhaul Texas
LM Otero/APBefore launching into the health care sign-up process, understand how the policies work.
By Geoff Williams

The Affordable Care Act brought health insurance to the forefront of the public's collective consciousness, but that doesn't mean we're necessarily any smarter about how we use our policies. Everyone who has health insurance, whether it's from a private or government marketplace, should take care to avoid these common missteps.

Not focusing on the big picture. "The most common mistake people make when buying health plans is only looking at premiums and deductibles," says Abir Sen, co-founder and CEO of Gravie, a free service that helps individuals and employers comparison shop for health insurance. (For those who are new to paying for your own health insurance, the premium is your monthly payment; the deductible is the amount you are responsible for paying before your plan takes over and pays all or most of the costs.)

While they are important, Sen says, considering only premiums and deductibles is "kind of like choosing a car based only on the monthly payment and ignoring things like gas mileage, reliability, safety, maintenance costs and so on."

Sen says most people "don't read the fine print regarding how the terms of the plan may affect them if they actually get injured or really sick. This could be everything from the copay for doctor's visits ... how much the plan will pay out after the deductible is met, whether or not there is an added cost to seeing specific specialists and more."

Lawrence Thaul, president of Millenium Financial Inc., a company that specializes in designing company health, retirement and executive benefits plans, concurs. "People are reducing their initial out-of-pocket premium costs in many instances, but they are exposing themselves to more on the claims end," he says, noting that some companies have tried to expand their deductible limits up to $4,000 and beyond. In general, he adds, the health insurance industry has changed so much that you can't get a policy and forget about it indefinitely.

"Don't bet the house budget on a long-term plan which may not be offered next year. This is a one-year-at-a-time environment," Thaul says.

Not learning how your policy works. Ivan Williams, senior policy director for GetInsured.com, an online health insurance marketplace, says many people don't fully understand what's included in the "in-network" portion of their plan or what a deductible is.

There's good reason for that, of course. Health insurance is confusing, particularly when it comes to in-network pricing. But if you don't try to learn how your policy works, you risk spending more than you need to – possibly far more.

"For example, a hospital may be in your network, but the doctor you're seeing there may not be, so you'd be charged out-of-network prices, which are generally higher than in-network prices, for that doctor's services," Williams says.

He adds that individuals with ACA coverage will likely be protected from high out-of-network costs due to special rules in place. Still, he advises, "Check with your insurance provider before any scheduled procedure to be sure you fully understand what services and doctors are considered 'in-network' and where you may be exposed to out-of-network prices."

Deductibles are also a maze of confusion because some health care bills are subject to the deductible and some aren't. %VIRTUAL-article-sponsoredlinks%Williams says that's why health insurance will promptly pay for doctors' visits, prescription medicine and certain preventive care services, but often not diagnostic lab tests, X-rays, outpatient surgery and hospitalizations.

"Some people think they have to pay their entire annual deductible before they can use their insurance to see a doctor, which isn't true," Williams says. This is also a little scary, since one can imagine consumers with health insurance still not going to a doctor, thinking they can't afford it.

And while plenty of consumers have been disappointed by what they discover in their insurer's policy, there are hidden gems as well, according to Jennifer Fitzgerald, co-founder of PolicyGenius, a soon-to-be launched national insurance education platform and exchange.

"Don't forget to take advantage of your health plan's perks, like gym membership reimbursements or free smoking cessation programs," Fitzgerald advises.

Not reporting changes to your insurer. This is not a mistake people currently make, but Williams suspects many people will in the future if they aren't careful. Now that there's a government marketplace for insurance through the ACA, Williams says you need to report any major changes to your income or household size to the marketplace where you bought your health insurance policy.

"For example, if you purchase insurance using tax credits and you end up making more money during the year than what you estimated when you qualified for tax credits, you could end up having to pay some or all of it back when you file your taxes," Williams says. "Conversely, if you have a new baby or your income decreases at some point during your policy, you could qualify for additional tax credits that will help you pay your monthly premium for the remainder of your policy."

Not bothering to consult your insurer when you have questions. Colonial Life & Accident Insurance Co. recently surveyed almost 400 employee benefits counselors about the top mistakes they see employees make during their annual benefits enrollment. They reported that 69 percent of employees don't read their benefits information before they enroll, and the same number don't know what benefits they have or what they cost.

William Byron, vice president of customer service operations for Geisinger Health Plan, headquartered in Danville, Pa., sees a similar lack of initiative in employees when it comes to finding out what's covered and what's not.

"The top mistake individuals make is not calling their insurance provider's customer service team when they have questions regarding their coverage," Byron says. "The most common issues, including not having a prior authorization to see a specialist or visiting an out-of-network provider, can cost an individual more or may not be covered at all. Individuals should talk with the experts provided by their insurance company."

He adds that information can also often be found on any insurer's website.

Overinsuring yourself. It's understandable if you do. You may plan on using your health insurance fairly often, and the last thing you want is a string of unpleasant billing surprises. So why not simply insure yourself for everything and go for a high premium and the lowest deductible possible?

It may work, of course, but be sure to crunch the numbers first. Sen says a lot of people lose money every year by covering themselves for services they don't need.

"It's almost like buying food at the grocery that you don't like simply because it's on sale and you want to save money, but then you end up throwing it away," Sen says. "There's no cost savings in that."

More from U.S. News

14 Money Mistakes to Avoid in 2014
See Gallery
5 Health Insurance Mistakes to Avoid
Interest rates are low, but that's no excuse to accept 0.01 percent interest rates on your savings. Just a little shopping can find you many FDIC-insured savings accounts paying as much as 1 percent in interest, usually with no fees and easy availability to your money through electronic funds transfers. Compared to the near-zero rates that uninsured money-market mutual funds and other alternatives pay, high-interest savings accounts are a much safer way to save.
Banks still try to get customers to pay more for less, with one recent threat to charge fees for basic deposit accounts if the Federal Reserve cuts interest rates further. But many online banks not only offer fee-free options on their checking and savings accounts but also pay interest, and many have extensive fee-free ATM networks or reimbursement arrangements. If your bank follows through on threats to raise fees, taking your business elsewhere is your best move.
Bankrate reports that the average credit card charges around 16 percent in interest. That's a guaranteed money-maker for the banks that issue cards, but a big loser for those who carry balances on their cards. With many cards offering promotional interest rates as low as 0 percent, using them to get rid of high-interest cards is a no-brainer move and can help you pay your debt down faster.
Mistakes on your credit history can keep you from getting a loan that you want to buy your next home or car, but they can also have consequences you'd never imagine. Increasingly, insurance companies, apartment rental agents, and even prospective employers order copies of your credit report to see if you're financially responsible. Be sure to take advantage of your free credit check at the government's annualcreditreport.com website to make sure the three big credit-rating agencies have everything right before mistakes come back to bite you.
Payday loans have gotten more tightly regulated recently, but banks and other financial institutions still offer ways to let you get quicker access at your cash -- for a hefty fee. Resorting to short-term money fixes can land you in even more problematic situations down the road, because those solutions often create debt spirals from which it's hard to emerge unscathed. Set up an emergency fund instead and be prepared in advance for the money woes that life throws your way.
Interest rates have risen during the last half of 2013, with a typical 30-year mortgage carrying a 4.5 percent interest rate. But many homeowners still carry higher-interest mortgages from before the financial crisis. Now that home prices have risen, you might be able to refinance for the first time, and many homeowners have used lower rates to cut hundreds from their mortgage payment or shift to a shorter-term 15-year mortgage to pay off their debt faster.
Too many people never update their insurance coverage to deal with changes in their coverage needs, whether it comes from changes in family status for life insurance, health conditions for health-care or long-term care insurance, or even what types of property you own for homeowners' insurance. Don't wait for disaster to strike; check with your insurer or agent to see if your current coverage meets your needs.
In the past, investors had to pay hundreds or even thousands of dollars just to make a simple stock purchase. Now, though, the rise of discount brokers, low-fee index funds and exchange-traded funds, and freely available investment news and advice have made it silly to spend large amounts to get access to the financial markets. If you're still paying your broker too much to invest, look into alternatives that can help you avoid cutting serious money out of your retirement nest egg.
Everyone likes a tax break, and one of the best ones for you to use involves making contributions to a tax-favored retirement account. By putting money in an IRA or 401(k), you can reduce your current taxable income and save on your taxes while also preparing for the future. With 401(k)s, your employer might even chip in a bit on your behalf. Even when times are tough, finding even small amounts to save can put time on your side and make a big difference down the road.
Many investors found out the hard way this year that bonds aren't as safe as they thought, with some major bond funds posting double-digit percentage losses in 2013. Despite those losses, bonds still carry substantial risk in 2014, with many calling for imminent interest-rate hikes that would erode their value further. Even now, bond rates are so low that they don't compensate you much for their risk.
In contrast to bonds, stocks have soared in 2013. That has some investors finally piling into the market for the first time since 2008 and 2009, while others remain shell-shocked from the massive losses they incurred back then during the financial crisis. Even with the Dow Jones Industrials (^DJI) and other major market benchmarks near all-time record highs, it makes sense to have some stock exposure in your portfolio. Just don't go overboard in the false belief that gains of 20 percent and 30 percent will happen every year.
If you pay full price for just about anything these days, you're paying too much. The rise of deep-discount stores has led to falling prices at stores and shopping malls. Moreover, online tools like coupon sites, daily-deal offers, discounted gift cards, and cash-back credit-card deals can cut your costs as well. With all these tools, you won't find many situations in which you have no chance of getting a bargain on the items you want.
In the past, many young adults focused on getting into as strong a college as they could, figuring that their degree would pay them enough to make up for the costs they incurred. With college graduates facing a more challenging job environment than ever, smart students are thinking about college costs before they make a decision on a school. By maximizing financial aid and looking at lower-tuition schools with nearly as strong educational quality, you can avoid creating a big debt hole that you'll struggle with for years into the future.
If you don't have a will, a power of attorney for financial and health-care matters, and an advance directive to tell medical professionals whether you want certain life-preserving measures taken if something happens to you, then you're putting your family at risk. Many people don't have even these basic estate-planning documents, but getting them in place is easier and less expensive than most believe. Get your affairs taken care of in 2014 and save your loved ones some big future hassles.
Resolving to be more financially astute and to avoid common mistakes will help you get your finances in order more quickly. These tips should give you more money to help you meet all your financial goals.
Read Full Story

People are Reading