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Why Cheap Health Insurance Means More Out-of-pocket Expenses Posted: December 14th, 2009

By Kelly Richardson

Kelly C. Richardson, MEd is a freelance writer with over 15 years of experience and a digital entrepreneur. He's written for Fortune 500 companies, Google, Yahoo!, Microsoft and Wells Fargo.

Just when you thought you had the cheapest health insurance, you are faced with an out-of pocket expense.

Employed individuals are beginning to understand that premiums are rising at a faster rate than wages. For the relatively healthy working population, the increase may be of little consequence. But for the top one to ten percent of spending professionals in group health plans--such as those with chronic illnesses--the ultimate costs can be staggering. It all begins with the out-of-pocket expense, and it doesn't look like costs are going to become more affordable.

Out-of-pocket Expenses Can Drive Up the Cost of the Cheapest Insurance

Out-of-pocket expenses describe health insurance costs that policyholders are responsible for. This number varies from carrier to carrier, but many insurance companies seem to be raising the amount that the insured is expected to pay. A big out-of pocket expense can drive the cost of the cheapest health insurance plans up very quickly. Although company-sponsored health insurance plans have been among the cheapest plans on the market, they are becoming more expensive because of out-of-pocket expenses.

MarketWatch writer Kristen Gerencher relays some sobering statistics about rising out-of-pocket expenses:

  • An Increase Across the Board. Annual average costs of $729 in 2007 jumped up 34% from 2004
  • Lower Coverage Follows Suit. Job-based health plans picked up 80% of total costs in 2007, a slightly smaller percentage than in 2004
  • Breast Cancer Costs. Insurers cover the bulk of the $60,000+ treatment, but policyholders still pay an average of $6,250 in out-of-pocket expenses

Cheap Health Insurance in the Future?

With health care reform being debated in Washington, you may wonder if cheap health insurance may be in the future for everyone. A Medical News Today report reveals that those with lower- and middle-income may be responsible for premiums for up to 12 percent of their incomes. This figure includes government subsidies for the millions who currently can't afford even the cheapest health insurance. To help keep your head above water, get into the habits of keeping wellness appointments, choosing generic (Tier 1) prescriptions and searching for moderately priced doctors.

Kelly Richardson