30 sec brief
Deciding which healthcare plan is right for you is like trying to get a jumbo jet to land on a railroad track. Premiums. Out-of-pocket costs. Coverage. Blah! They all seem more complicated than the next. Healthcare is a moving target that changes from year to year, plan to plan, and is further complicated as you…
How Much Healthcare Can You Afford?
Before we get to some of the trade-offs of health insurance options, the most obvious issue with healthcare is increasing monthly health insurance premiums. This affects individuals, employees and employers alike. Health is more expensive this year than it was last. We expect this trend to continue. Some of this is simple math, so figure out what you can afford.
Required Health Coverage
The benefits of health insurance vary greatly from plan to plan and plan type offering (PPO, HMO, and HDHP). You need to understand how out-of-pocket or out of network requirements will affect your costs. On top of that, based on your lifestyle or healthcare requirements, you might have additional needs. Do your research for the health services and costs you expect to arise and the ones you don’t. Benefits coverage could mean a simple co-pay for a health procedure or exam or paying 100% of it out-of-pocket. The devil is in the details.
Expected Yearly Health Costs
Trying to predict your expected yearly health costs might as well be done with a crystal ball. One unexpected major health event can totally change your cost equation. Still, we must try. This requires details and maybe even a spreadsheet or two. Look at your costs from the last few years. Understand what made your out-of-pocket costs increase and decrease. Try as best as you can to model future costs. It might change how you approach your health coverage. It might mean higher monthly premiums if you expect higher costs. It could also mean lower premiums if you expect lower costs next year.
Expected Long-Term Health Costs
You might be thinking, I am healthy, I don’t have any expected long-term health costs! You should know that in retirement couples are expected to pay $275,000 in out of pocket medical expenses. Even if you are well below the average here, that translates to real dollars. Even with Medicare, that will affect your bottom line. Start planning for future health costs today so you don’t get stuck under a mountain of health cost debt.
Finding an existing benefit that can balance expected and unexpected health costs can help reduce your financial risk. FSA, HSA, and HRA all can help do this. However, the HSA is the only dedicated health savigns account that you can use this year or save for years to come. It might help you understand and manage the fluctuations in both predicted and unpredicted health costs.
Deciding what health plan is right for you (and then adding an HSA if qualified) is based on many different factors, like the ones noted above. It might change over the course of your life based on age, family, lifestyle and of course, expected health needs.
No matter where that decision lands, one thing is clear, if you open and contribute to an HSA today, you have access that money to pay for qualified-out-of-pocket medical expenses for years to come. And just in case you don’t need your HSA money, you can invest it and it for anything, after your turn 65, just like a 401k or IRA.
It turns out, healthcare plans are no longer the only factor in this equation. When deciding which healthcare plan you want, you also need to remember it will affect the ability to save pre-tax dollars in an HSA for years to come. Healthcare plans need to be selected and renewed each year. Once you open and contribute to an HSA, you can use that money anytime you want for qualified expenses. Does that mean you should select an HSA-qualified health plan this year? You decide!
If you need more help with health account decisions, check out our blog. We will make you a healthcare benefits expert in no time, without any extra work or effort on your end.