How to Lower Your Health Care Costs
Choosing the right insurance policy is key to managing higher deductibles and co-pays.
As the cost of health care continues its upward march, insurers continue to raise premiums and shift a larger share of the bill to consumers. Mounting costs have fueled the national conversation, and health care is shaping up to be a key issue in the 2020 presidential election.
Even with employer-provided insurance, your expenses—including premiums and out-of-pocket costs—will likely go up this year. But selecting the right plan for you and your family can help save money. For example, if you don’t anticipate having hefty medical expenses, you may come out ahead with a high-deductible health insurance plan paired with a health savings account. For Andy Hill, a corporate event sales director who lives in a suburb of Detroit with his wife, Nicole, and their two children, Zoey and Calvin, switching to a high-deductible plan has saved the family $200 to $300 a month in premiums and allowed them to save about $10,000 in their HSA for future medical expenses.
Regardless of which health insurance plan you choose or whether you get coverage from your employer, through Medicare or on your own, some key strategies for smart shopping can save you hundreds or even thousands of dollars a year on out-of-pocket health care expenses.
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Understand your coverage. Most plans are still required to provide several kinds of preventive care without any cost-sharing, regardless of your deductible. However, short-term health plans, which typically come with lower premiums than Affordable Care Act policies, aren’t required to provide ACA-mandated benefits, such as no-cost preventive care. Depending on your age, this might apply to blood-pressure, diabetes and cholesterol tests; mammograms and colonoscopies; and flu shots and routine vaccines. For a full list of preventive care benefits, visit www.healthcare.gov/coverage/preventive-care-benefits.
While you’re reviewing the plan, look for other features, such as access to a flexible spending or health savings account. Many employers offer savings and incentive programs that reward you for using high-quality, cost-effective providers. Such programs may reduce your out-of-pocket expenses or waive your deductible for that visit or procedure.
Pick the right provider. Before you schedule a doctor’s visit or a medical procedure, use the tools on your insurer’s website, and ask the provider to confirm that they’re included in your plan’s network. If you’re scheduling a procedure, check whether everyone involved—from the doctor to the facility to the anesthesiologist—will be covered in-network. If you’re unlikely to hit your plan’s deductible for the year, or you’re going to a doctor who is out of network, see if you can get a discount for paying cash. You may pay less out of pocket than if you use insurance, and you may still be able to file a claim with your insurer afterward so that the cost can count toward your deductible, says Bill Kampine, senior vice president of HealthcareBluebook.com.
Prices for medical tests and procedures can vary widely, even within the same city. And your doctor may practice at several hospitals or outpatient facilities. To see how costs for a specific procedure in your area vary, visit HealthcareBluebook.com. Most insurers also have tools to help you compare costs at in-network facilities.
Before scheduling a test or medical procedure, ask your doctor how much it will cost and where he or she will perform it. If the total charge is higher than the fair price, ask about less-expensive alternative facilities that will provide the same quality of care. The surgical fee will be the same, but the facility’s charge can vary by thousands of dollars.
Where you go for lab work matters, too. Check to see if your health plan has a preferred lab with lower costs. Most doctors work with multiple lab companies, but you need to request that your blood or other test materials be sent to your insurer’s preferred lab.
Research in advance nearby hospitals and urgent care centers that are in your plan’s network, and check to see whether there are any special requirements for emergency care. For minor burns, cuts and sprains, flu symptoms, and minor infections, you’ll probably save by avoiding the emergency room and going to an urgent care facility or convenience care clinic.
Many plans offer telemedicine services that can save you time and money if you need advice about a non-emergency complaint. You’ll talk with a doctor or nurse via phone or video chat, and you can typically e-mail photos of a rash or other ailment. Doctors can prescribe medication if necessary. Costs for a telehealth consultation range from $10 to $40.
Save on drugs. Employers and insurers are offering more online tools and apps to help you look up drug costs, suggest generics and therapeutic alternatives, and show you how much you’ll pay under your plan. Generic drugs cost up to 85% less than brand-name counterparts, according to the Food and Drug Administration. The co-insurance rates are usually lower, too.
You might save money by ordering your drugs through the mail or using a preferred pharmacy. Mail-order pharmacies often provide a three-month supply of drugs for the same price as a one- or two- month supply at a traditional pharmacy. And many plans, especially Medicare Part D prescription-drug plans, have preferred pharmacies that are less expensive than regular in-network pharmacies for members.
Coupons and patient assistance programs that offer free or low-cost medicine for eligible individuals can also help. To find out about drug manufacturers’ co-pay assistance programs and private foundations’ patient assistance programs, go to NeedyMeds.org. Or visit GoodRx.com (or download the mobile app) for coupons for thousands of drugs, as well as information about lower-cost alternatives.
Save on taxes, too. If your boss doesn’t offer a high-deductible health plan that allows you to contribute to a health savings account, ask your employer if it offers a flexible spending account. As is the case with HSAs, you won’t pay federal, Social Security and Medicare taxes on the money in an FSA, and in most cases, it will escape state and local taxes, too.
In 2019, you could contribute up to $2,700 to an FSA. You can use the funds to pay out-of-pocket medical expenses, including your deductible, co-payments, medical and prescription drug costs, and a wide variety of other items not covered by insurance, ranging from contact lenses to sunscreen.
Plan for Future Health Costs
As you review your health insurance options for the upcoming year, you’ll likely find a high-deductible health plan among the offerings. High-deductible plans come with two advantages: They can lower monthly health insurance premiums, and they provide access to a health savings account, which offers a tax-friendly way to manage your deductible and save for future health care expenses.
To qualify for a health savings account, you must have an HSA-eligible health insurance policy with an annual deductible of at least $1,400 for individual coverage or $2,800 for family coverage in 2020. You can contribute up to $3,500 to an HSA if you have individual coverage and up to $7,100 if you have family coverage, plus an extra $1,000 if you’re 55 or older in 2020.
You can fund the account with pretax (or tax-deductible) dollars, and the money grows tax-deferred. You can take tax-free withdrawals to pay for qualified medical expenses, including deductibles, co-payments, prescription drug costs, and out-of-pocket dental and vision costs. If you withdraw the funds for non-qualified expenses before age 65, you’ll pay a 20% penalty, plus income taxes on the amount you take out.
If you have access to an HSA through your employer, that plan is likely your best bet. Most employers who offer access to an HSA cover the administrative fees. Many also seed the account. If your employer doesn’t offer an HSA, you don’t like the HSA provider your employer uses or you’re buying health insurance on your own, most banks and brokerage firms offer HSAs to anyone with an eligible policy. You can compare offerings at HSASearch.com.
Maximizing the benefits. You’ll get the biggest bang from an HSA by using other cash for current medical expenses and leaving money in the account to grow tax-free. Unlike flexible spending accounts, which typically must be depleted by year-end (or March 15, depending on your employer), HSA funds don’t have a use-it-or-lose-it rule. That means you can build up a stash of tax-free money for major medical expenses.
Andy Hill, a corporate event sales director who lives in a suburb of Detroit with his wife, Nicole, and their two children, Zoey and Calvin, switched to a high-deductible health plan with a health savings account two years ago. Andy and Nicole were maxing out their tax-advantaged retirement savings accounts and looking for other ways to lower the family’s monthly expenses and save for retirement. “With two little kids at home, accidents and unexpected health expenses happen,” Andy says. The Hills keep enough cash in an emergency fund and in the HSA’s cash savings account to cover the deductible, he says. The family invests the rest of their HSA dollars for long-term expenses in a portfolio of exchange-traded funds.