January 9, 2020
High-deductible health plans can leave you with painfully expensive out-of-pocket costs. But that’s not always the case. With the right handling, these plans bring advantages that you might not expect. If you’re willing to do some smart planning and research, financial remedies are available. Here’s your prescription for savings.
If you currently have a high-deductible health plan (HDHP) or are considering one for next year, you’re probably going to become a very savvy health care consumer. With an HDHP, you pay out of your own pocket for many of your medical expenses.
The silver lining of an HDHP is this: If you carefully shop for health care services and monitor costs, you could end up spending less than you would with a traditional health plan. Here’s what you need to know.
What Qualifies as an HDHP?
HDHP health plans require you to pay a significant chunk of your medical costs upfront, before your insurance company starts paying part of your bills. The trade-off is lower monthly premiums.
However, those upfront costs, or deductibles, can be quite hefty. In 2020, the minimum annual deductible you pay for an HDHP is $1,400 (up from $1,350 in 2019) for an individual or $2,800 for family coverage (up from $2,700 in 2019). Again, those are only minimums. Many people with HDHPs pay up to $6,900 per year toward an individual deductible and up to $13,800 for a family (up from $6,750 and $13,500 in 2019).
Open an HSA
To help reduce upfront expenses, consider opening a Health Savings Account (HSA). HSAs are special, tax-advantaged accounts you can use to set aside money for health costs if you’re enrolled in an HDHP. If you do nothing else to save money with an HDHP, open an HSA.
Your health insurer or employer may require you to open an HSA with a specific bank or financial company. However, in some cases you can choose your own HSA. Many banks offer them.
In 2020, you can deposit up to $3,550 (for individuals) and up to $7,100 (for families) into an HSA (up from $3,500 and $7,000 in 2019). Money that you deposit into an HSA isn’t taxed — a significant financial advantage. In addition, the money is tax-free when you withdraw it, so long as you use it to pay for qualified medical expenses. You can get a full list of HSA-qualified health care expenses at IRS.gov. Search for “Publication 502: Medical & Dental Expenses.”
Bonus points: You don’t have to withdraw money from your HSA the same year you deposit it as you would with a flexible spending account. If you don’t spend all your HSA funds, they roll over year to year. Switch jobs? You get to keep your HSA.
You can also leave money in an HSA account and invest it (tax-free) for growth. You’re allowed to wait until age 65 or older and withdraw HSA funds to reimburse yourself for medical costs and even Medicare premium payments. However, if you withdraw HSA funds for something other than medical costs, you’ll owe ordinary taxes on them and, if you’re under age 65, a 20% penalty.
Use Your Freebies
Like other medical plans, HDHPs are required to include many routine, screening services at no cost. These services include mammograms, annual well-person exams, colonoscopies and vaccinations.
If you rarely visit your primary care provider, be sure to ask the medical staff to code your first office visit of each year as your well-person exam. That way, it’s free.
Carefully Compare Medical Costs
The full cost of many health care procedures can vary significantly, depending on where you live and where you get your care. If you’re not in an emergency, it can pay to compare costs.
For instance, if your doctor refers you to a lab for routine blood tests or a non-urgent X-ray, get a list of the actual medical codes (called CPT codes) for these procedures. With CPT codes in hand, compare prices at your doctor’s recommended lab and a few other nearby facilities. Your health insurance company’s customer service team can give you a list of nearby labs that are considered in-network providers for your plan.
Compare Prescription Costs, Too
Apps and websites like lowestmed.com and goodrx.com can help you quickly compare drug costs at dozens of local and mail-order pharmacies. You can even pull up cost comparisons on your smartphone while you’re in your doctor’s office.
If your doctor feels a generic (and less expensive) version of a prescribed drug would work well for you, ask him or her to note “generic preferred” on your prescription. Also let health care providers know if you’re paying full price — not just a copay — for prescriptions and routine tests and treatments. They may be able to suggest less expensive options.
Don’t Put Off Health Issues Because of Price
Knowing that a single doctor visit could cost you more than $200 (before you meet your high deductible) might tempt you to take chances with your health. Don’t do that. Ignoring a serious medical problem could cost you much more in the long run than just a doctor’s office bill. Without proper medical care, you could get sick enough that you end up needing emergency services, surgery or an extended hospital stay.
As with all health issues, you should never make decisions about your care based solely on cost. However, if you have an HDHP, it pays to be an informed and strategic health care shopper.