Vows to be healthier or better at budgeting have probably crept onto your list of New Year’s resolutions before. However, these days, with many people becoming more responsible for their health care costs, it might be time to combine the two.
Over the next year, you may be called on to spend more money out of pocket for doctor’s office visits, medications and treatment, either through coinsurance or annual deductibles.
A survey of employers by the Kaiser Family Foundation and Health Research and Educational Trust released in September found that 45% are likely to increase office visit cost sharing in the next year, and 41% are likely to increase deductible amounts.
One option that seems to be growing in popularity with companies is the so-called consumer-directed health plan, which combines high deductibles – $1,100 or more for individuals and at least $2,200 for a family – with tax-free health savings accounts. Employees usually pay less in monthly premiums under these plans, and are expected to seek out lower-cost options.
While preparing for a year of possible illnesses or injuries may give you a headache, here are some tips to help you budget.
Take advantage of tax-deferred options
Health Savings Accounts, or HSAs, were created as part of the Medicare reform legislation passed in 2003, and are designed to help people with high-deductible health plans save, tax-free, for medical expenses. Unlike the more familiar flexible spending accounts, HSAs don’t have a “use it or lose it” clause, and can move with you from job to job. You also can use money in an HSA to pay COBRA premiums if you lose your job, or to supplement Medicare costs after you retire. Think of it as an IRA for health care.
With flexible spending accounts (the tax-free option for people in other kinds of health plans), now is the time of year to start digging up old receipts for aspirin and cough medicine so you can get reimbursed before the money is lost.
Experts are hesitant to come up with a fixed amount to contribute annually to tax-free accounts. Joe Mondy, a spokesman for insurance provider Cigna (CI), said with an HSA, you should contribute annually at least what you have to pay for your high deductible.
“If you put in too much money, you’re going to wind up exercising it in future years,” says Mondy.
You also should look back at previous medical bills and the explanation of benefits forms you get from your insurance company when a claim is filed to see what you’ve paid.
Be more cost conscious
While it may seem difficult to compare costs of health care like you would groceries, that’s just what you need to do if you’re forced to pay for more of it yourself, says Steve Weisbart, vice president and chief economist for the Insurance Information Institute, a New York, N.Y.-based trade group.
“If you have some need perhaps for cardiac care, for example, you may want to see where the best doctors and hospitals are,” Weisbart adds.
While price information might not seem readily available, some states are making it more transparent. The Texas Department of State Health Services, for example, has a consumer guide to health care online, including the link to a site that lists prices for hospital procedures.
Aside from making sure the doctors you see are in your insurer’s network to maximize cost savings, get a sense of how much urgent care costs.
According to Mondy, the average cost of going to a retail clinic, such as those offered at some CVS pharmacies (CVS), is $45, compared to about $75 for a doctor’s office visit, $160 at an urgent care clinic and upwards of $1,000 for the emergency room.
You also can try talking to your doctor about different treatment options, or your doctor’s office manager about costs.
Use generic medications when possible
You’ve probably heard it before, but generics can save you money. The average retail price for a monthly supply of the prescription antidepressant Prozac (LLY) is $150, according to Mondy, while the generic fluoxetine costs about $4.