Healthcare costs have been on the forefront of discussion among many Americans. With the recent changes in the healthcare law, many are wondering whether their individual healthcare cost will remain the same or rise. Few Americans expect costs to decrease.
With 74% of Americans living paycheck-to-paycheck, most are ill equipped to face a medical emergency. With high consumer debt and other financial obligations, health is often ignored when it comes to our month-to-month budget.
Regardless of your financial situation, there are certain things you can do, or at least become informed about, in order to prepare for the road ahead. Here are 6 things that will help ready you and your family, no matter what your plans are for your specific health care and insurance needs.
1. Begin with a budget
Budgeting for healthcare begins with an honest look at your expenses over a 12-month period. While this may seem or sound daunting, you'll want to take the time to cover all four seasons, so it is worth the effort. Be sure to include things like prescription drugs, over the counter medications, and trips to the ER.
Once you have come up with an annualized number for your out-of-pocket costs, the key is to break it down into the monthly average amount. For example, even though you might only spend $30 in June, and $100 in December, find that monthly average number and build it into your budget. By following this "envelope budgeting" approach, you'll have put away the money in the less expensive months in order to make sure you have enough for the more expensive months. Knowing you have the cash on hand will help keep your costs down from borrowing money or charging it, not to mention the stress relief that you'll enjoy!
2. Take advantage of a Healthcare FSA account
An FSA is a pre-tax “flexible spending arrangement” for qualified healthcare expenses where funds are deducted from your paycheck each pay period based on the annual amount you decide to set aside. So once you estimate your health expenses for the year, especially if you know you may have some procedures done like eye surgery, dental work, etc., your employer will start setting those funds aside each pay period so you can use them as you incur medical expenditures. Three things to remember about FSA accounts:
1. You can use the entire amount of your FSA election at once without having to wait for it to accumulate into your FSA account.
2. If you don't use those funds you'll lose them, so it's better to underestimate your needs a bit rather than overestimate and have money left over.
3. FSA is a great way to fund your healthcare on the front end. It’s an “out of sight out of mind” approach that allows you to put away a certain amount of money before your paycheck hits your bank account.
3. Better safe than sorry – be proactive
With current changes to the healthcare system, even though we can't tell you how you premiums will change, it's safer to assume an increase than be caught by surprise. So whatever your premium is right now, add an additional 10-20% and include that increase in your budget. You may have to look for ways to cut back on another budget category in order to save for potential healthcare increases, but think, if your premiums stay as they are, you just saved additional funds to allocate to debt payoff!
4. Talk to your employer & local church about a benevolence fund
Many employers have a benevolence fund set aside to help employees with needs like unexpected medical bills. Ask your employer about the way the benevolence fund operates and if you can afford to do so, contribute to it as well. You never know when you may need a “hand up” with a large medical bill. Your local church should have a benevolence fund as well. Learn about qualifications and what’s needed to receive help. Understanding the help available to you ahead of time is a great way to be proactive and be prepared for life’s unexpected turns.
5. An ounce of prevention...
One way to avoid healthcare costs is to stay healthy! Even though there are things beyond our control, there are certain preventative measures we can take to maintain good health. First, don't skip your annual check-ups! These are usually 100% covered by your health insurance and can detect issues in timely manner. Second, some health plans offer decreased premiums for those who are actively exercising, or even offer discounts for your local health clubs. Spending $20 per month on a gym membership may be one of the best healthcare investments you ever make! So pick up a phone and talk to your insurance provider about things you can do to impact your premium. Oftentimes we could pay less, but don't because we simply never asked! You don’t get 100% of things you don’t ask for.
6. Discount digging
Always check with your doctor or pharmacist about medication that's on the heavy discounted list. Wal-Mart and other pharmacies have a $4.00 prescription list, so ask your doctor to prescribe, if at all possible, medicine that's found on that list. Before you leave your doctor’s office, always ask for “generic” medication. How about shopping for a different pharmacy? Pharmacies will often offer special savings and discounts for giving them your business. Shop around; ask about benefits of using one pharmacy over another and then make the best financial decision.
BONUS: One more thing…
There is an option to purchase a supplemental insurance to cover certain medical needs. Depending on your personal situation this may be a good option to ensure additional substantial coverage for a small monthly amount.
Insurance co-ops are also available as an alternative to your standard, traditional healthcare coverage. Read up on it. Talk to those who may be using it and ask about their level of satisfaction.
Regardless of where you find yourself today, these 6 tips are things we can all do try and keep costs down, and prepare our families and ourselves for the days ahead.
Megan Pacheco is one of the new additions to the Finicity (provider of Mvelopes and Money4Life Coaching) team. She comes with over 13 years of experience in the Biblical Finances area. Her content has been published by Money Matters, Do Well and Lifeway's More than Living. She is a mom of two young boys, and lives with her husband David in the Atlanta area.
Publication date: October 18, 2013