Cut Your Health Care Costs By Understanding Your Insurance Coverage

May 9, 2008

Health insurance coverage can be a complex benefit to understand with the multitude of rules and restrictions that many insurance companies have in place.  If you fail to follow your insurance plan’s guidelines, you may end up getting medical treatment that isn’t covered and having to pay more for health care.

One of the keys to avoiding situations where your doctor’s visits or prescription drugs aren’t covered is to familiarize yourself with your insurance plan’s Summary Plan Description (SPD).  The Department of Labor describes the summary plan description as a

“document that tells participants what the plan provides and how it operates. It provides information on when an employee can begin to participate in the plan, how service and benefits are calculated, when benefits becomes vested, when and in what form benefits are paid, and how to file a claim for benefits.”

Ask your Human Resources department for a copy of your SPD, the Employee Retirement Income Security Act (ERISA) requires plan administrators to provide plan participants with this information. Understanding what your medical plan covers and the medical care options before going for health services will help you get the most out of your insurance.

Insurance Coverage Examples
Of course every plan is different but here are some examples of ways that I can save money by smart use of my insurance plan:

Lab Work and X-Rays
There are actually two ways lab work and/or an x-ray claim can be processed.  Lab work and X-rays may be part of an office visit exam or performed in a hospital setting and billed as out-patient services. If it’s part of an office visit exam, they’re paid at 100%, subject to $25 co-pay.  On the other hand, if it’s an outpatient services at an in-network hospital I may be subject to the $400 annual deductible first, and then responsible for a 10% coinsurance for any remaining balance due.

In this case, using independent in-network labs, such as Lab Corp, will help save me money.  Independent lab charges are covered at 100%, subject to the provider’s office visit co-pay. Whereas labs affiliated with a hospital are covered under outpatient services which will cost me more.

Quitting Smoking
 I’m not a smoker but I walk past co-workers every day out on their smoke breaks.   Smoking is an expensive habit, not only because of the cost of cigarettes but also due to the associated health issues. I’ve never been through the process of trying to kick the habit but I know it’s not an easy task, and it’s not cheap.

What many people don’t know is that our medical plan provides for one prescribed full course of treatment for employees or a covered dependent.   An example of a full course of treatment might be 12 weeks of the Patch along with Chantix and possibly an anti-depressant medication.   All of these drugs are covered at 100% by our insurance plan when prescribed by a healthcare provider and submitted to a local in-network retail pharmacy. 

$4 Generic Drugs
In some cases it may be cheaper to buy prescriptions directly rather than through our insurance plan. At some stores you can buy a 30-day supply of more than 300 generic drugs for $4 per prescription fill or refill.  These can offer cost savings when comparing against the cost of the medical plan co-pay.   Examples of stores offering discounted generic drugs are Wal-Mart, Sam’s Club, Target, Kroger, and HyVee.

For instance, in our plan a prescription for the diabetes drug called Metformin, a 30-day supply requires a $10.00 co-pay (Tier 1).  However, using one of the pharmacies listed above, the co-pay for this generic drug would be $4.00, a cost savings of $6.00.

Not only that, even if a pharmacy doesn’t participate in a formal program some stores, such as CVS Pharmacy, might match the $4 price if you request it. K-Mart also offers a 90-day fill for $15.00 on specific drugs. 

Health Care Cost Summary
If you familiarize yourself with the ins and outs of your insurance plan, you can save money on your medical costs by making sure your health care is covered.  Planning ahead takes time but it can definitely save you money.  Here are some more tips on planning ahead to help avoid huge medical bills.


Will this article help you save or earn more money? Get others like it simply by entering your email address below. Your email is used only for delivering daily money tips and you can opt out of delivery at any time. Click here to see all your free subscription options.


Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

All posts by


6 Responses to Cut Your Health Care Costs By Understanding Your Insurance Coverage

  • Rena

    Lab work associated with a doctors visit is not always covered under insurance. It really depends on what coding the billers at the hosptial attach to it. I recently had a doctors visit, and ended up with a $800 lab bill because it was seen billed in a different code. If it would have been a physical or something of that nature then the insurance would have covered it.

    Since then i have learned to arm myself with as much information about how my insurance works and the providers that i go to as possible. I have recently started using this site called . It shows the average prices for different things like chiropractic and dental based off of your zip. That way you can find out if you’re being charged a fair amount

  • Lily

    Three cheers for Wal-Mart. And now they’ve started selling 3 months of those generics for $10. Wow! For my other meds that aren’t generic I use the prescription discount card that I found at Low membership fee. Drug prices posted to check before you join.

  • Ben

    Ed, thanks for the Costco tip!

  • Ed

    P.S. The Costco comment is backed up by Consumer Reports in this months issue.

  • Ed

    Remember that the $4 rx price is based on their definition of a 30 day supply. So while you may be taking metformin 2 tabs 2 x day a 30 day supply is #120, but Wal-Mart’s 30 day supply is #30 pills. Which means $16 for the above example.

    My advise is to check prices and go routinely to the pharmacy that offers the lowest prices consistently (Costco).

  • william

    the subject text is aligned toward the bottom
    very inconvinient