True or False: Does Paying out of Pocket Ever Make Sense?

Why would you pay a monthly premium for health insurance only to purposefully pay out of pocket when you require medical care?

While this might sound like a huge waste of money, it can actually make sense for your budget in certain situations. But it isn’t a catch-all solution for every medical issue, insurance plan, or financial situation.

So, when does paying out of pocket make sense? Let’s look at how it can go either way in a game of true or false.

False: Making a Claim Will Increase your Premiums

Some people are afraid of making a claim because they believe it will cause their premiums to skyrocket for years afterwards. If you’re living paycheck to paycheck, any changes to these costs can cause your budget to collapse.

This fear isn’t totally unfounded. It can happen when you file a claim through your car or homeowners insurance company, so it’s understandable that people think it applies with health insurance.

But that’s not the case. The Affordable Care Act makes sure your rate stays the same regardless of the medical attention you receive.

While you might see a gradual increase in prices due to inflation, filing a claim won’t trigger an increase in your monthly premiums.

This is good news if you live in Alabama, where the average annual healthcare is $6,948 or roughly 7% higher than the national average. According to the Commonwealth Fund, these costs take up a significant portion of the average paycheck — as much as 13.2% of your annual income.

Luckily, using your insurance won’t bring these prices any higher.

True: Minor Bills Can Fall Below Your Deductible

When signing up for coverage, you sometimes have the option to choose your deductible size. This number affects your premiums — the higher your deductible, the lower your monthly premiums and vice versa. If you have a low deductible, you’ll pay more on your monthly rate.

Following this logic, some people in Alabama accept higher deductibles to try and keep their already expensive premiums low. While this money-saving technique works when you’re healthy, it can cause problems the next time you’re sick.

Depending on your healthcare practitioner, your doctor’s visit, prescription, or lab test may cost less than your deductible. In that case, there’s no point involving your insurance company just to pay a deductible.

But with insurance off the table, how can you handle a medical expense?

If you choose to pay higher deductibles, you should set aside some savings into a medical fund for these scenarios. Emergency savings are the best way to handle out-of-pocket expenses.

Second to an emergency fund, a line of credit can help you get the care you need in an emergency. You can find a line of credit in Alabama online quickly by searching for something like “AL line of credit”. Going local ensures you’re borrowing a line of credit from an accredited financial institution in Alabama. 

If you’re approved, you can put your unexpected medical expense on your AL line of credit and pay it back periodically when you can afford it.

Bottom Line: It’s Personal

This article is here to educate, not prescribe a course of action. In other words, do whatever makes sense for your financial situation. Reviewing your budget and determining your cost of healthcare is the most important thing you can do.