Healthcare costs are constantly on the rise. Here are some tips for reducing medical costs for those who consider themselves healthcare consumers.
Are you a healthcare consumer? The term has become popular in recent years as more and more American workers participate in a tax-advantaged benefit account offered through their employer, such as an FSA, HRA, or HSA. Basically, people have changed from being passive patients to taking a more active role in their day-to-day healthcare decisions. As a healthcare consumer, it’s likely that you’ve become more aware of the cost of healthcare.
When you have a Flexible Spending Account (FSA), Health Reimbursement Arrangement (HRA), or Health Savings Account (HSA), it’s crucial that you manage those funds appropriately so you can maximize those benefits. If you use up all your tax-advantaged dollars too early, then you’ll have to pay completely out of pocket for other expenses and you don’t enjoy the tax relief. Or you could also hang on too long to your funds and risk losing them (see FSA Management below).
With that in mind, here are some tips for reducing medical costs.
If you’re enrolled in a qualified high deductible health plan (HDHP), you’re eligible for an HSA. Once you enroll in an HSA, you can enjoy triple tax savings:
If you can afford it, maximize your contributions each year. The more you contribute, the more you save in taxes. You can change your annual contribution at any time; you don’t have to wait for the beginning of the plan year to make adjustments.
Best of all, you own the HSA, and can use it even if you aren’t enrolled in an HDHP or your employment status changes. Any unspent funds roll over each year, so you can build up the account and save it for later use.
The key to FSA management is two-fold. First, FSAs are not portable, like an HSA; this means if you leave your employer for any reason – change jobs, retirement, etc. – you leave the FSA behind. Second, the end of year spending options are:
Therefore, you have to plan carefully because no matter which option your plan has, you may have to forfeit some unspent dollars.
The best part of an HRA is that is funded 100% by the employer. That’s basically free money for you, especially since it does not count as part of your pay. However, to maximize your HRA benefit, you have to know which expenses are covered and which are not. You can find this information in your Summary Plan Description (SPD). Otherwise, you may not get reimbursed for something you thought was a plan-eligible expense.
Prescription medication can be costly, especially for name brand drugs. One way to save is to use generic drugs, which are significantly cheaper and usually just as effective than their brand name counterparts. Be sure to ask your doctor if there is a more affordable option than the one prescribed.
Another prescription tip for reducing medical costs is to use mail order pharmacies whenever possible. You can order in bulk which can save you some money over using a traditional pharmacy. If you have a benefits debit card for your FSA or HSA, you can use it to pay for prescription medications ordered online through a pharmacy.
Whether you have an HSA or FSA, you can cover the cost of copays and deductibles from these accounts (some HRAs pay for this too). If you stay in your healthcare plan’s network, rather than using an out-of-network physician, this will save you a tremendous amount of money and help you stretch those benefit dollars further.
Eight out of ten people do not read their medical bills, according to the Medical Billing Advocates of America. You should always read your bills and your Explanation of Benefits (EOBs) to know how much you were charged for a procedure and to know how much your insurance covers.
These are just a handful of tips for reducing medical costs and helping you become a smarter healthcare consumer. With a tax-advantaged healthcare benefit account and effective planning, you can greatly reduce your expenses and maximize your savings.