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Health Insurance for Healthy People

To someone who's never sick, health insurance seems like a big waste of money.

You know it's a good idea to have it, just in case. After all, it only takes one accident or unexpected serious illness to ring up hospital bills that could leave you with nothing. But it still hurts to see those premium dollars disappear from your bank account month after month -- money you could be using to invest, save for a down payment on a new home, or just put aside for a rainy day. Especially for young adults who are just getting started on their own, it's easy to find better uses for that money.

Even though you can't eliminate insurance costs, you can still make them as small as possible. By keeping the responsibility for paying some of your own health costs, you can save hundreds on health insurance premiums.

High-deductible plans
When it comes to setting policy limits and deductibles, health insurance isn't quite as flexible as other types of insurance. With car insurance, for example, you can usually pick from several options for every type of coverage available. You can choose the minimum coverage required by law, or you can buy higher policy limits that will protect you from really big claims. You can have the insurance company cover everything but the first $100 from an accident, or you can agree to pay the first $250, $500, or $1,000 -- the higher the amount you'll pay in an accident, the lower your premiums will be.

Health insurance usually comes in just a few prepackaged bundles, especially if you have coverage through your employer. But increasingly, insurance companies such as Aetna (NYSE: AET  ) , Cigna (NYSE: CI  ) , and Humana (NYSE: HUM  ) are offering high-deductible health plans (HDHPs) to consumers, and employers are starting to include HDHPs in their health plans. HDHPs can give healthy people big savings over more comprehensive health insurance.

Stay well and save...
The lower costs that HDHPs offer are substantial, sometimes cutting premiums by more than half from what more comprehensive plans charge. If you're buying insurance on your own, that savings goes straight to your pocket. With an employer plan, however, you'll have to look closely to see what effect choosing an HDHP will have on your take-home pay. If your employer subsidizes full coverage, you may not get much personal benefit from choosing an HDHP -- although your employer might.

Having an HDHP also makes you eligible for a health savings account, which provides tax breaks that can put even more money in your wallet. You can open an HSA at banks like Wells Fargo and Bank of America and even some brokerage firms, such as Merrill Lynch. But you don't have to open a health savings account to use an HDHP.

...but get sick and pay
The catch with HDHPs is that you're responsible for paying that high deductible amount, usually off the top. So if you have to go to the doctor one or two times, you'll probably have to pick up the whole tab yourself. Some HDHPs will cover preventive care, such as annual physicals, but many don't. For major health problems, the insurance will often kick in with full coverage after you've paid the entire deductible amount.

So it's important not to view the lower premiums you'll pay with an HDHP as free spending money. Instead, consider setting it aside in an emergency fund, so that you won't be in a bind if this turns out to be the one year you actually have to see a doctor.

Stay insured
An HDHP can be a good option for someone who's just starting out as a financially independent young adult. And it's a heck of a lot better than going uninsured -- both for you and your family. For more helpful tips for recent graduates, take a look at this month's issue of the Motley Fool Green Light newsletter. Our Starting Out Survival Guide has great advice for grads on how to get off to a good start on their own. And with our 30-day free trial, it won't strain your credit card balance.

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Fool contributor Dan Caplinger has an HDHP combined with a health savings account. He doesn't own shares of the companies mentioned in this article. Bank of America is an Income Investor recommendation. The Fool's disclosure policy always covers you.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 23, 2012, at 9:59 AM, DustinAaron8880 wrote:

    Ok, so... I have found a HDHP with BlueCross. It's Select Choice PPO Plan VIII with a $10,000 deductible, which I'll probably never reach; especially not in a year. The good side to this particular plan is that it has 'before deductible' benefits. Such as a $25 'consultation only' office visit co-pay with a PCP and Specialist. $10 Generic/$30 Brand perscription co-pays as well. (The RX co-pay may be after deductible, it seemed unclear when I reviewed it, but Ive made no final decisions yet either.) The outrageously high deductible causes some reluctants, but from what I've gathered, most people never actually meet their annual deductible anyways. Not those of my age and good health. I am, however, afraid that if something were to happen, I wouldnt be able to financially afford any extremely expensive medical bills at this time. I do not make the money that I am worth due to the economic restraint on the market that I studied for. So, here's my question(s)...

    Exactly how affective is a HSA if it is still prematurely funded by myself? Does it collect interest and are employers more apt to contribute to an HSA rather than an insurance plan they provide? I do not believe my employer has HSA qualified insurance, (I dont believe he knows either, or I wouldn't be asking like a "fool"...Lol!) so would he even be able to contribute to my HSA? Is that something that comes out of my pre-taxed paycheck or does he apply it to my account some other way?

    The HDHP is qouted at $101/month, is that outrageous or does it sound too good to be true? ;) Preventative care is 100% covered, as with most HDHPs. So, again, should I invest in an HDHP/HSA insurance plan, or wait and get a higher, unaffordable premium with my employer (which I can't apply for till May 2013) in case something does come up unexpectantly? My parents are telling me not to jump into anything, but I dont want to go uninsured much longer either. What advice do you intellegent 'fools' have?! :))

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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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