5 Ways You May Be Overpaying for Health Insurance


If you get your health insurance at work, then you've got some big decisions to make. Drag your feet even a few days and you may leave some significant savings on the table.

That's because at many companies this is open-enrollment season. At most jobs, workers get one chance a year to make changes to their health insurance. Of course, the easiest thing to do is just to pick the same health plan and coverage options you did last year. But often, that can be a big mistake.

Here are five ways that you may be paying too much for coverage, and how to make money-saving switches before it's too late.

1. Overinsuring Yourself.

Health insurance involves two costs: the premiums that get taken out of your paycheck, and what you have to pay at the doctor. Many workers buy the most expensive insurance they can, so that they never have to worry about anything but a small co-pay when they visit the doctor or go to the hospital.

But if you're relatively healthy, less comprehensive insurance could save you a ton in premiums. If you're paying for expensive coverage that you never use, then you're throwing away money that you could use for other things. You may be able to save a ton by choosing a health plan that doesn't cover as much. That in turn will boost your take-home pay a bit each paycheck -- and those savings will add up over the course of a year.

2. Failing to Plan Ahead and Paying Too Much Out-of-Pocket.

While it's hard to predict higher medical bills, one area where you can predict them is if you're expecting a baby.

If you're pretty certain your medical expenses are going to rise in the future, you may want to pay up for better coverage so you can save on out-of-pocket costs throughout the year. By changing to more comprehensive insurance, you may be able to get most or all of your maternity costs paid for -- and that's often worth the extra premiums.

3. Assuming You'll Get the Same Coverage as Last Year.

You may assume that if you do nothing, nothing will change next year. But with employers seeing their benefits costs go up, you need to take a look to make sure your employer hasn't changed plan providers or types of coverage. Sometimes, you may need to switch to a more expensive option just to maintain the benefits you used last year.

4. Ignoring the Tax Savings of a Flexible Spending Account.

Beyond insurance, another decision you need to make during open enrollment is how much to set aside in a flexible spending account. These accounts let you take money out of your paycheck on a pre-tax basis that you can then use for medical expenses throughout the year. The plus is that you get a tax break, but the downside is that if you don't use the money, you lose it.

To get an estimate of how much to set aside for 2012, figure out how much you spent out-of-pocket on eligible medical expenses this year. That should give you a good starting point, from which you can add or subtract any expected changes.

5. Assuming You and Your Spouse Should Be on the Same Plan.

If you're married and your spouse also has health insurance at work, take a look to see which plan provides better coverage -- and which plan is better for each of you. Often, the best choice is for both spouses to stick with their own individual plans, but choosing who takes out family coverage can end up making a big difference.

Don't Miss Your Chance!

Dealing with health insurance is neither fun nor easy. But making the right choices can put some more money in your monthly budget for other things. So whenever open enrollment comes around, be sure to take advantage before the window of opportunity closes.

Motley Fool contributor Dan Caplinger deals with insurance way too much so you don't have to. You can follow him on Twitter here.

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January 12 2012 at 3:48 AM Report abuse rate up rate down Reply
Maxim Lis

Nice Description . Thanks for sharing your idea in this social site. Atleast people get to know about the health insurance and can decide the perfect one for them and for their family also.

January 11 2012 at 1:45 AM Report abuse rate up rate down Reply

Obama, Pelosi, Reid, Bernake, Geithner!

December 22 2011 at 3:53 PM Report abuse rate up rate down Reply

The bottom line is that the best way to buy health insurance is for a company and their employees to do the following:

1. Have a $5000 deductible policy
2. Buy a supplemental policy to cover the difference between $500 and $5000 or self insure for the difference.
3. Have a wellness program.

These do a couple of things that lower costs. The higher deductible policies are MUCH less expensive because they are less likely to be used for smaller claims so the claims will be lower resulting in lower expected costs to the insurance companies and premiums that reflect that cost savings. A supplemental policy that only pays out the difference between $500 and $5000, or self insuring for the difference (Employees can do this through Flexible Spending accounts, though I would've preferred the Medical Savings accounts that the Republicans were trying institute years ago since they don't have to be used annually.) normally costs less than the difference in premiums. Barring a MAJOR accident (that should be covered by auto or homeowners' insurance anyway) that puts all members of a family into a hospital at once, the odds of all members of a family hitting their deductibles and out of pocket maximums in a given year are pretty slim. Wouldn't you rather put $400 a month into your savings account than a $1000 into an insurance companies bank account when the end result will be that if you don't use the money, it will remain yours? Then even if you have to go to the doctor, the money is there to pay it, EVEN IF it doesn't exceed the $500 deductible that you'd have paying the additional money in premiums. A Wellness program helps to not only avoid some medical problems, it helps catch others early thereby reducing costs to the insurance companies that are then passed on to the customers via lower premiums.

Look at insurance as a crap game with the insurance companies being the casinos. They're betting that more people will pay more in premiums (bet) than will file claims (hit their point or win). If they have a major catastrophe happen, they end up paying out more than they collect in that year and have to make up the difference from the left over premiums (reserves) from previous years. If you haven't worked in a casino, the average casino pays out about 90% of what it takes in from slot machines in jackpots. The kicker being that the 10% difference is into the millions and then there's the money that they take in at the table games which is even higher. I also recommend belonging to a mutual insurance company if possible.

December 22 2011 at 2:44 PM Report abuse rate up rate down Reply


December 22 2011 at 2:11 PM Report abuse +1 rate up rate down Reply

What insurance! Most insurance plans are so darn expensive people can't afford them anymore. I've run into so many people having lost their jobs and now have no insurance at all. These people are not seeing Dr's and living with all sorts of medical issues. Dental work not getting done, peoples dumping their pets because they can't afford to feed them anylonger. Adults with kids When are we going to wake the hell up to whats happening in this country?
It's not bad enough most of our manufacturing jobs have gone off to China, These - - Corporations keep hiring in millions upon millions of these cheap-azz Visa workers from India to replace our own workers right here in America and I'm fed the hell up with it. Can't find qualied skilled workers they say is the reasioning for this, Yet at the same time sending millions of skilled American worker straight to all the unemployment line. Now we're having to shell out to keep paying for all these extensions to unemployment. Who do you supose is getting the screws put to them? "WE ARE" And the Republicans want to push for these same bastards getting "TAX BREAKS". HELL NO!

December 22 2011 at 12:18 PM Report abuse +1 rate up rate down Reply
1 reply to bunnyfunny47's comment


December 22 2011 at 1:18 PM Report abuse +1 rate up rate down Reply
1 reply to ohmyboehnertwo's comment

Nope it is all Obama and the left wing progressive democrats!

December 22 2011 at 3:55 PM Report abuse rate up rate down