Personal Finance

As health-care debate rages, here's how to trim your costs

Insurance checkup

There no need to wait on the outcome of the debate in Washington over health care. You can cut your medical costs right now.

Last year, employers predicted that health-care expenses would grow by an average of 5 percent in 2017, according to a survey by the National Business Group on Health, a Washington-based organization that represents large employers. The group polled 133 employers.

These higher costs are passed on to you in the form of premium increases and rising deductibles at work-based plans.

In 2016, annual premiums for families with workplace insurance hit $18,142, a 3 percent increase from 2015, according to the Kaiser Family Foundation.

Expenses aside, you can get the most out of your coverage if you use it wisely. This means taking advantage of wellness visits, participating in workplace programs that encourage healthy habits and creating a strategy for using services as you reach your deductible.

"We advise clients to treat health care like any other part of their planning," said Debbie J. Freeman, director of tax and financial planning at Peak Financial Advisors in Denver. "The details are important, from the basics of deductibles to understanding which covered benefits go unused."

Know your plan

Before you can maximize the benefits of your health-care plan, dive into the fine print, including what your deductibles and out-of-pocket costs will be.

This matters because high-deductible health-care plans are becoming increasingly popular at work. Fifty-four percent of the 1,204 employee benefits professionals polled last year by The Guardian Life Insurance Co. of America said they would implement these plans.

The IRS defines a high-deductible plan as one with an annual deductible of at least $1,300 for individual coverage or $2,600 for family plans. Annual out-of-pocket costs, which include deductibles and copays, must not exceed $6,550 for single coverage or $13,100 for families.

"If a procedure counts toward your deductible and it's covered, you have to plan for that and make sure you have cash for the deductible," said H. Jude Boudreaux, founder of Upperline Financial Planning in New Orleans.

Save cash

If you have a high-deductible plan, it's probably paired with a health savings account that you can use to pay for medical expenses.

HSAs come with a triple tax advantage: Contributions are tax deductible (or pretax if done through payroll); earnings grow on a tax-free basis; and you can use the funds free of taxes as long as it's for qualified health-care expenses.

This year, you can contribute up to $3,400 to an HSA if you have single coverage or $6,750 for families.

You can either tap the HSA for copays or deductibles, or you can let your cash accumulate for the future — and pay current expenses out of pocket.

Freeman encourages clients with traditional health-care plans to budget for additional health-care costs by socking away money up to their deductible in an online savings account. This approach doesn't have any of the tax benefits of an HSA, but clients do benefit from budgeting.

"We have clients carve it out from their regular bank accounts, so they don't dip into it," she said.

Leverage deductibles

Complete your annual wellness visits in the first month of the new year.

Not only does this help you discover any unforeseen medical conditions, you'll get closer to your annual out-of-pocket spending maximums if there are any issues.

Once you have crossed your out-of-pocket limit for a given year, your health-care plan generally covers 100 percent of your expenses.

"If something happens and you hit the deductible or you get close to it, get everything done that you ever thought of getting," said Carolyn McClanahan, director of financial planning at Life Planning Partners in Jacksonville, Florida.

That's because once you've crossed that threshold, you're usually paying only the copayment or coinsurance for subsequent services.

Snag a good deal

Insurance companies have introduced wellness programs as a way to tamp down expenses.

Don't turn your nose up at these offerings. They often include smoking cessation programs, fitness incentives, biometric screenings and more.

"If you get a free gym membership, use it," said Dan McGrath, co-founder of Jester Financial Technologies, a small health-care data company in Beverly, Massachusetts.

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