7 Ways to Save Money on Healthcare

When you're shopping for a new appliance, you probably read customer reviews and compare features and costs to decide which one is right for you. You can use this same process to save money on healthcare costs. 

Shopping around for the right health insurance and searching for ways to reduce your out-of-pocket costs could help you get the care you need at a price you can afford. Here's a closer look at seven steps you could take to save money on healthcare costs this year and beyond.

How to Break Down and Understand Your Healthcare Costs

When you get a medical bill, you probably just look at the total amount due. Several things make up this final charge. If you have a doctor visit, there's the cost of the appointment itself. If you need labs done, those have their own bills. And if you need a prescription, you'll pay separately for that at the pharmacy. 

Each hospital charges its own rates for every product and service. Insurance companies negotiate with each hospital to determine how much the insurer will pay it for each service. The amount the insurer pays is often less than what you'd pay for the same service if you didn't have insurance. Insurance companies get a better deal, essentially because they buy in bulk.

This is where the idea of "in-network" and "out-of-network" providers comes from. In-network providers have negotiated rates with your insurance company. Out-of-network providers don't, and insurers may not cover the full cost of treatments from these providers. Some will only cover emergency expenses from out-of-network providers.

For each medical expense, you’ll usually get an explanation of benefits (EOB) from your insurer. This breaks down the cost of services you received for:

• Each doctor visit 

• Treatment received

• Lab tests 

• How much the insurer paid

• How much you have to pay, if anything. 

How much your insurance saves you depends on the hospital you visit, the care you need, and your policy terms. Try the tips below if you want to maximize your savings.

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1. Compare Health Insurance Plans

Your health insurance plan has a significant effect on how much you pay out of pocket for medical expenses. Each plan has its own rules about which providers, medications, and treatments it covers, along with its own set of costs. Here are some helpful terms to know:

• Deductibles are the amount you must pay out of pocket before the insurance company pays anything. 

• Co-insurance is a percentage of the total payment you must pay after meeting your deductible. 

• Premiums are the monthly costs you pay to keep the policy in force.

• Copays are fixed fees you pay out of pocket for doctor appointments, ER and urgent care visits, and prescriptions.

When shopping for health insurance, it's tempting to focus exclusively on costs, but this could backfire. If you choose a plan that's affordable but doesn't cover the services you need, you may have to pay for these entirely out of pocket. Focus first on essential coverage options before looking at the price. You also want to make sure the providers you normally work with are covered under the insurance plan.

Many people get health insurance through their employers or by using the COBRA option through their former employer. But if you purchase your health insurance through Healthcare.gov, you’ll shop for new health insurance during annual open enrollment, which usually runs from Nov. 1 to Jan. 15 each year. This lets you choose your coverage for the following year. Note that some states with their own healthcare exchanges have slightly different windows.

If you miss the open enrollment period, you may have to wait until next year unless you qualify for a special enrollment period. This might happen if you move to another state, add a new family member, get divorced, experience a death in the family, or if you lose health insurance coverage through your employer.

What to look for when comparing health insurance plans

When deciding which plan is right for you, pay attention to the following:

• Hospitals. Make sure the hospital you typically visit is located within the plan's network. This will reduce the amount you have to pay out of pocket to get treatment there.

• Doctors. Make sure any doctors you typically go to are also part of your plan's network. This includes specialists.

• Prescription drugs. Check your plan's formulary to make sure it covers the prescription medications you take. 

If you have any questions about what is or isn't covered, reach out to the plan provider for clarification before you sign up.

How to estimate your yearly insurance costs

You can get a rough idea of what your annual out-of-pocket insurance costs would be with a given plan by looking at the following:

• Premiums. Take the premium amount and multiply it by 12. This is how much you have to pay to keep the policy in force.

• Expected out-of-pocket costs. Estimate how often you'll need to visit the doctor and what kind of copays or co-insurance that might bring. Compare this to your plan's out-of-pocket maximum. After you hit this limit, your plan won't require you to pay co-insurance for the rest of the year.

• Prescription drugs. Note the copay you'll have for your prescriptions and multiply this by the number of times you'd need that prescription filled throughout the year.

2. Choose the Right Providers

Choosing the right care providers could also help you save money on healthcare. Some hospitals and doctors charge more than others. If you need a specific treatment and it's not an emergency, you can shop around with a few different providers.

Stay within your health insurance provider network when possible to keep your costs down. Visiting doctors outside the network aside from emergencies could mean you’ll pay a larger amount out of pocket. You can reach out to your health insurance provider if you're not sure which doctors are within its network.

If you need a specialist, check whether your plan requires you to get a referral from your primary care physician. Health maintenance organizations (HMOs), a common type of health insurance plan, require a referral for specialist care. If you don't get a referral first, your insurance might not cover the specialist visit. You could wind up with medical debt and eventually need debt relief down the line.

Another type of health insurance plan is a preferred provider organization (PPO). These plans typically don’t require referrals before a visit with a specialist. However, they tend to have higher monthly premiums than HMOs.

Emergency and urgent care cost management

You might need to visit urgent care or the emergency room for some conditions. Both facilities  are open outside normal business hours. Urgent care is typically for minor illnesses and injuries and is usually cheaper than the emergency room, which is for more severe health issues.

If your health issue isn't life-threatening and you can spare 20 minutes or so, it's worth comparing urgent care costs at a few locations in your area. This could save you money compared to going to whichever hospital is nearest.

Your plan may also cover telehealth services where you speak with a doctor or nurse remotely, often through a video call. It's not suitable for all health conditions, but for many minor ailments, it could be a lot cheaper than visiting a doctor's office, not to mention more convenient.

In addition to looking for the most affordable providers, you can also try some of the tips below, including using health savings account (HSA) funds, to cover your bills. The hospital may offer payment plans to help you with larger costs so you don't have to pay a big bill all at once. 

Consider these options before putting a medical bill on your credit card. This could help you avoid needing credit card debt relief down the road.

3. Check Bills and Statements for Errors

Billing errors can and do happen, and unfortunately, it's usually up to you to correct these errors. Always check your bills and statements to ensure they display the correct amount (which can be confusing) and cover what your policy says they should cover. Errors are often honest mistakes. They could be as simple as an incorrect code or patient number, but they can take time to correct.

You generally get a preliminary statement from your insurer, known as an explanation of benefits (EOB). The initial statement can lead to sticker shock, but often, your insurer will ultimately cover a lot of the costs. The EOB should explain what’s covered and what’s not, which can help you figure out if a mistake has occurred.

If you’re certain there’s a problem with your bill, address it as soon as possible and remain vigilant. And if you're not sure whether there's been an error, it doesn't hurt to reach out to the provider to double-check. If you're right, you could save yourself money. Consider enlisting the help of your insurer—they’re knowledgeable and generally willing to work with you. 

Common medical billing errors

Some common billing errors to watch for include being wrongly billed:

• Twice for the same service. This is often a simple clerical error.

• For a service you never received. This could happen if someone entered the wrong billing code (which you can look up online or ask your insurance company to check) or the hospital confused you with another patient.

If you notice either of these issues, contact the hospital and request an updated bill.

What to do if your insurance claim is denied

If your insurance company denies your claim, you have the right to request an appeal. You typically begin with an internal appeal, where you ask the company to reconsider its decision. It must tell you why it denied the claim. 

If that doesn't work, you can progress to an external appeal. This is where an independent third party makes a ruling that the insurer must accept. You typically have to pay a small fee for this review. Contact your insurer if you're unsure how to begin the appeals process.

How to handle large medical bills

Large medical bills are a common reason people wind up needing debt relief programs. It might be possible to avoid that by signing up for a payment plan. You'll work with the hospital to set up a monthly payment plan that may fit easier into your budget. You may not have to pay any interest on your bill if you're enrolled in one of these plans as long as you stay on top of your payments.

You could also try negotiating your medical bills directly with your provider. This may be more effective if you're already behind on your bills as it shows that you aren't able to make payments as scheduled. You can negotiate on your own or with the help of a professional debt settlement company like Freedom Debt Relief.

4. Take Preventive Measures and Create Healthy Habits

Some of our health outcomes are determined by family history and genetics, it’s true. But there's quite a bit you can do to ensure better health and save money on healthcare. 

Health insurance providers must cover certain screenings without any out-of-pocket costs if the plan is ACA-compliant. That includes obesity screening and counseling, most vaccinations, certain kinds of cancer screenings, and depression screening as well as birth control for women, and well baby and well child visits for children. You can view a full list of free preventive health services at Healthcare.gov.

Prevention also includes taking your prescribed medications regularly and getting proper care for chronic illnesses and conditions, such as high blood pressure and diabetes. We’re stating the obvious here, but eating a healthy diet, exercising regularly, getting enough sleep, and managing stress can help you control healthcare costs. 

Many insurers and employers offer wellness programs to help you create healthier lifestyle habits. Some may even include discounts on gym memberships and other money-saving perks, like nutrition tracking or personal health and wellness coaching. Find out if your employer offers any of these, and if it does, take advantage of them. They could help you catch health issues early and build healthy habits that prevent new ones from arising.

The less you have to visit a doctor's office, the less you'll pay in out-of-pocket hospital bills. However, even if you're a relatively healthy person, it's still worth taking the other steps listed here. Accidents can happen to anyone and we never know when we may need emergency care.

5. Ask for Generic Drugs

Generic medications have the same active ingredients as name-brand drugs, often at a fraction of the cost. There is no health risk to choosing the lower-cost option for most patients.

If a particular generic drug isn’t available and your insurer doesn’t cover the name-brand version, ask your doctor to get prior authorization from your insurer.

There are a few more ways to try to save money when you get your prescriptions filled. Some large retailers, such as Costco and Target, offer discounted drugs. You can also find coupons on prescription drugs through sites like GoodRx.

6. Enroll in a Health Savings Account (HSA)

If you have an eligible high-deductible health insurance plan (HDHP) that meets IRS requirements, you can open a health savings account, or HSA. This is a tax-advantaged account that you can use to pay for qualified healthcare expenses, such as your deductible and copays. 

An HSA allows you to deposit money pre-tax. That means that saving in an HSA helps you lower your tax bill now. 

If you withdraw the money for qualified medical expenses, you won't owe any taxes on it at all. And if your HSA is invested and your balance grows, that growth is also tax-free. 

HSA money can be used on a broad number of products and services, including:

• Dental care, including orthodontia

• Eye exams, glasses, and contact lenses

• Feminine hygiene products

• Birth control

• Wearable health trackers

• Medical travel

• Sunscreen with an SPF of 15 or higher

• First aid products

Some employers offer contributions to their employees’ HSAs. If you don’t use the money in your HSA, the money is still yours forever. The funds stay in the account, and if you leave your job, the account comes with you, just like a 401(k). 

If your employer doesn’t offer an HSA, you can open one on your own as long as your high-deductible plan meets the eligibility requirements. If you’re self-employed and have a qualifying health plan with a high deductible, you can open an HSA. 

7. Be Your Own Advocate

After you select your health insurance plan and follow every other step to save money on healthcare, it’s smart to stay on top of your care and ask questions frequently. Health insurance companies and many service providers are businesses, but positive health outcomes don’t always require expensive treatments or procedures. Here are some areas where you may need to learn how to advocate for yourself.

Billing

Don’t hesitate to raise concerns about billing errors, and definitely keep an eye open for false claims as well. Although a much rarer occurrence than a simple mistake, billing fraud does occasionally take place. You can report suspected acts of insurance fraud to your state insurance department. 

Be on the lookout for balance billing, which is far more common. Balance billing happens after you’ve paid your deductible, coinsurance, or copay and your insurance company has also paid everything it’s obligated to pay toward your medical bill. If there's still a balance owed on that bill and the healthcare provider is asking you to pay that balance, you’re being balance-billed. 

In-network providers can't bill you for the balance when they’ve agreed to accept the negotiated rate set by the health insurer, as long as you’ve already paid your copay and/or coinsurance. Balance billing for emergency care is generally prohibited under the No Surprises Act. Call your insurer if you’re uncertain about a bill.

Care

Learn to advocate for yourself in healthcare matters, whether it’s at the point of care or with billing. You have the right to check with your insurer about billing costs. You wouldn’t hesitate to ask a car dealer about price and product issues, and healthcare is no different. When in doubt, ask questions. For example:

• Do I need this procedure, medication, surgery, or therapy? What are my options?

• How much will I pay out of pocket for this treatment?

• Can I negotiate a lower price or a payment plan?

• Is there a discount for paying cash?

• What are the likely outcomes for this course, and are there other cost-effective treatments?

You might not think of this as a path to saving money on healthcare, but it's wise to find a doctor who listens to your concerns and questions, so you can advocate for the best care possible. If your current doctor isn't the right fit for any reason, look into your options and find a doctor who is.