As politicians continue to debate health-care reform, Americans continue to face rising health insurance costs and shrinking coverage. The Kaiser Family Foundation and the Health Research & Educational Trust notes that from 2005 to 2010, employees’ contributions to premiums have gone up 47 percent while workers’ wages have increased just 18 percent and inflation rose 12 percent.
While it’s unclear what impact the President’s new Patient Protection and Affordable Care Act will have on our personal insurance premiums and out-of-pocket medical expenses when certain provisions take effect in 2014, there are some definite measures each of us can take to save money on health care in the meantime.
Raise Your Deductible
If you’re healthy and don’t anticipate more than a small amount of medical spending in the coming year, choosing a high deductible plan can save you thousands of dollars in annual premiums. For example, a typical family of four in Pennsylvania might pay a monthly premium of $1200 with a $1500 deductible. By raising the deductible to $5000 for an HSA-compatible plan, the monthly premium falls to $650; this results in a savings of $550 a month or $6600 per year. While these are just examples of premiums (costs vary based on age and health of those included in the plan and geographic area), the payback period on the higher deductible is very short and the net savings to the family over longer periods of time could be substantial.
Making a smart decision comes down to running the numbers and reworking them in your family’s favor instead of in the insurance company’s. Let’s take the emotion out of your old health-care plan and just look at the numbers. Many high-deductible plans cover the same checkups and preventive care as lower deductible plans. Though you are responsible for a higher deductible, the risk is manageable because you already know the maximum cash outlay (your annual deductible) associated with an unforeseen medical condition. You can re-adjust the deductible to save the maximum personal outlay, while staying consistent with the coverage your family needs.
Health Savings Accounts
Health Savings Accounts are a very attractive alternative to Flexible Spending Accounts. High deductible plans often qualify you to open a Health Savings Account (HSA), which allows you to use pre-tax dollars to meet your deductible and cover your out-of-pocket costs. Unlike Flexible Spending Accounts, where you risk putting in too much and forfeiting what’s left over at year-end, HSAs roll over from year to year. If you change employers, you take the money with you, and you can cash in your HSA for any reason once you reach 65. Many employers make contributions to these plans for you, and you can use HSAs to pay for dental, psychiatric and chiropractic services as well.
Prescription drug coverage is a hornet’s nest unto itself. This is an area of health care filled with exceptions, formularies and other mystifying nuances that you need to be wary of. While coverage can be plentiful, the deductibles and co-pays often reduce the net benefit to the consumer.
Consider buying your prescription medication through a mail-order pharmacy, which lets you get a 90-day supply in many cases for the same co-pay you would make for a 30-day supply at a walk-in pharmacy. Talk to your doctor about generic equivalent drugs or generic therapeutic alternatives to produce additional savings.
Ask your doctor for samples or manufacturer discount cards which many pharmaceutical sales reps offer physicians. Go online to see if the drug manufacturer is offering discounts, reimbursements, protection plans or a free trial promotion. With some manufacturers’ offers, qualifying patients can reduce their co-pays to as little as $5 for certain high-cost prescription drugs.
With employers passing on more of their plan costs to employees, you should consider shopping around to make sure your employer-sponsored plan is still your family’s best deal. It pays to know the value of the plan you are getting from your employer. Compare your corporate plan with private plans offered through an independent agent or group insurance plan made available through local clubs or professional organizations. If you have a child in college, he or she may be covered by a plan offered through the university and you may even be able to join their plan.
Look at all the options available to your family and how best to cover your health-care needs. In some situations you could save money by covering family members under two or more separate health insurance plans. If you are on Medicare, supplemental plans can vary significantly in price and coverage. It pays to shop around.
The prices of health services vary widely from provider to provider. Whenever possible, choose doctors from your plan’s preferred provider network to take advantage of lower co-pays. Find out what doctors charge before you go in for an office visit. Some charge different rates depending on the type of insurance a patient has. I’ve heard many stories of physicians and other medical service providers who make special accommodations to the fee charged to patients who offer to pay with a personal check at the time services are rendered or who mention that they have only catastrophic coverage.
You can do an online search to help you determine fair pricing when it comes to medical services in your area.
Take advantage of lower-priced services that may be available to you, whether it be discounted office visits at the local university hospital, free or discounted vaccines through a county or community health clinic or a free hearing aid at the VA clinic. National pharmacies have begun to offer vaccine shots including flu and shingles at a reduced cost. Check out local community health fairs, which often offer on-the-spot health screenings and special discounts.
Take Your Tax Breaks
Individuals who are self-employed may be able to deduct part of their health insurance costs from their gross income. For additional information, visit www.IRS.gov. If you are insured through your employer, make sure the company deducts your health insurance premiums from your gross pay before calculating taxes. Take advantage of HSAs and Flexible Spending Accounts, which let you pay for your deductible and out-of-pocket costs on a pre-tax basis.
Often, your financial advisor can help you sort through the vast number of plans and considerations that you must evaluate to choose the right plan. In short, being a more educated healthcare consumer and learning about the resources available to you will not only save you money, but can enhance the quality of care you receive as well.
This information in this article is general in nature and may not apply to your own financial situation. Please consult your own professional tax, insurance and/or financial advisor regarding this information and your own personal financial, insurance and health-care needs. For a complete disclosure statement, please see my biography.