Personal Finance

Expect your health insurance costs to rise in 2017

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You'll pay a little more for your workplace health insurance plan next year.

Health insurance premiums will increase by 5 percent in 2017 for employees, according to a recent study from the National Business Group on Health, a Washington, D.C.-based organization that represents large employers.

That's about on par with employers' predicted expenses. The 133 companies polled expect their own health-care expenses would rise by an average of 5 percent in 2017, once they have put through plan design updates for the new year.

Without those plan changes, employers' expenses would rise by 6 percent in 2017.

Specialty pharmacy costs, high-cost claimants and overall medical inflation are among the top drivers for rising health insurance premiums.

"This increase is consistent with the last several years, but stable doesn't necessarily mean 'good,'" said Brian Marcotte, CEO of the National Business Group on Health. "That's three times general inflation and double the projected growth for wage increases [in 2017]."

The proliferation of HSAs

More than half of the employers surveyed said that offering high-deductible plans as an option or fully replacing their coverage with a high-deductible plan was one of their most effective cost-control measures.

Under a high-deductible plan, employees have access to a tax-advantaged health savings account (HSA) that they can use to pay for qualified health-care costs.

For high-deductible plans, the Internal Revenue Service set a minimum deductible of $1,300 for individual plans and $2,600 for family coverage in 2016. Maximum out-of-pocket costs are $6,550 for individuals and $13,100 for families this year.

You and your employer can contribute up to $3,350 to your HSA in 2016 if you have individual coverage, or $6,750 for family plans. If you're at least 55, you can kick in a catch-up contribution of $1,000.

You do not need to use up all of the funds in your HSA by the end of the year.

HSAs have a triple tax benefit: Your contributions are tax-deductible, your account grows free of taxes and your withdrawals are tax-free as long as the money covers qualified medical expenses.

Chances are you already have a high-deductible plan at work. Eighty-four percent of the large employers polled expect to offer them next year. More than one-third of them will them will make these plans the only choice for coverage.

Often, employers kick off a major educational initiative when they introduce workers to the high-deductible plans, said Marcotte. Many employers seed HSAs with contributions. The median employer contribution to an HSA is $600 for individual coverage and $1,100 for family plans, according to the survey.

Don't touch the money

To get the biggest bang for your buck, contribute to an HSA, but don't use the money. Younger people tend to have low health-care costs and can watch their balances grow year over year, said Cristina Guglielmetti, owner of Future Perfect Planning.

"If you put the money in and take it back out for medical expenses, you're not really getting the full benefit of the HSA," she said.

To manage ongoing health-care costs without tapping the account balance, work your predictable health-care costs — including copayments and prescriptions — into your budget, said Guglielmetti.

You can use those funds for surprise medical emergencies, she said. In the best of scenarios, once you retire, use the money to cover qualified medical expenses, including long-term-care insurance premiums.

"I approach HSAs as more of a long-term savings product," Guglielmetti said.