You can get a better deal paying out-of-pocket for routine medical care even if you already have coverage. Another key advantage of going self-pay for medical care is freedom of choice—since every provider takes cash, you don’t have to rely on the whims of an insurance network. You’re then free to pursue whatever doctor or facility you trust the most. That being said, keep your health plan and instead let both cash-paid and insurer-paid options complement each other.
Medical insurance is a privilege not everyone is lucky to possess. Health plans aren’t cheap for you or your employer—cost remains a major factor contributing to why ~10 to 11 percent of U.S. adults are uninsured (per the Kaiser Family Foundation). The insurance company eHealth assessed the Affordable Care Act’s health plan trends from the first open enrollment period in 2014 through 2020. Though most Americans get their insurance privately through work, the costs of buying insurance directly from a marketplace are a reasonable point of reference. The math isn’t pretty. According to eHealth’s analysis, 2020 average monthly premiums—what you pay for the right to have insurance—were ~$450 per month for individuals and $1,150 per month for families, up 68 percent and 72 percent, respectively, since 2014. On top of that, average deductibles—the amount you have to pay out of pocket before coverage kicks in—were ~$4,300 per year for individuals and ~$8,400 per year for families. These levels suggest that your annual cost of using marketplace health insurance, assuming you hit the deductible, ranges from ~$9,800 to ~$22,200 (with a family). The real all-in cost is higher still because these expenses come before any copays or coinsurance. This is why you should consider, based on your current health needs so far, if such a price makes sense. For most Americans making equal to or below the median household income (~$67,500 per the 2020 census), spending on health insurance before other expensive necessities (i.e., rent, mortgage, food, taxes) is prohibitive.
So, what can you do if you’re uninsured (by choice or otherwise)? Being upfront about having no coverage is a good start. Whether you’re in contact with a clinic or hospital, mention that you’re self-paying while transitioning to asking what cash discounts there are. Reasonable savings to aim for when paying cash are between 20 to 30 percent. To better focus that discussion, ask for a fee range associated with an office visit or a particular service you have in mind. Why would a doctor’s office give discounts for cash payment? Providers are willing to do a cash discount if they save on the marginal administrative costs from billing insurance. Check if a clinic does interest-free payments or gives benefits for paying in advance.
If you happen to be someone who eats well, sleeps enough, moves enough, takes few to zero medications, and sees a primary doctor twice a year max for preventative wellness care, you’d probably get a better deal paying for routine visits with cash instead of insurance. What’s the tradeoff? According to Solv Health’s pricing tools, the national average office visit cash price at a hospital is ~$300 with the full range being $180 to $675. At the top of that range, you’re paying just over $1,300 cash for two office visits. If those two appointments were billed instead through your insurance, your final invoice amount would likely be higher because of the deductibles in play and the markups providers add to their charges to create margins after insurance discounts, operating costs, etc.
However, I’m not suggesting that you discard health plans on purpose. Suppose instead you happen to be dealing with various chronic issues, quality-of-life conditions, or have an occupation involving risk of bodily harm. Coverage makes perfect sense because there could be a high volume of complex medical work to be done. The critical takeaway is that insurance and self-pay don’t need to be mutually exclusive.
Following a proper cash-pay approach, regardless of being insured, underinsured, or uninsured, depends on how you answer three questions. What specific care do you need (preventative wellness visits or more thorough specialist work)? Will you max out a deductible or get close to its limit? How confident are you about not having a big-ticket service or procedure this year? Suppose your answers to those questions suggest that you will probably spend less on medical care than your all-in yearly health plan cost. In that case, it’s worth contacting local offices to learn the cash prices for routine services like physicals, blood draws, simple imaging techniques, and local outpatient procedures.
Tolerance for emergency and general risk is where you draw the line for using cash versus insurance. Another factor to be aware of: paying for medical care with cash usually doesn’t count towards your annual deductible. You can still call your insurance company, ask what the max allowable charge and range is for a given service (e.g., office visit, basic metabolic tests), then compare that amount with cash quotes taken from price shopping. Due to various price transparency laws passed between 2020 and 2022, hospitals legally have to disclose cash prices and good-faith estimates when asked—be persistent but polite in your self-pay journey. With all this guidance in mind, patients can trade cash for vigilant but lower-cost preventative care while using health insurance as a proper fallback should the worst come to pass.
Rushi Nagalla is co-founder of a dermatology practice.
Image credit: Shutterstock.com
