Healthcare plans are changing. As insurers seek to limit the increases in their premiums and employers seek to lower their costs for providing this important benefit, those who need healthcare are left holding more of the bag. There are a few things you can do to prepare and limit your costs.
Thanks to the Affordable Care Act, many typical medical expenses are required to be covered by both individual and group healthcare plans. And the summary of benefits has been standardized so you can more easily understand your coverage, copayments, deductibles and out-of-pocket maximum costs.
Unfortunately these seem to be on an unending march upward. Regardless of the plan, your share of the cost of healthcare, on top of your premiums, is growing. The increasing use of Consumer Driven Healthcare Plans (CDHPs), also known as high deductible plans, and the elimination of out-of-network coverage in many cases are two developments that can lower your premium but still drive up what you pay for healthcare.
The number of companies offering CDHPs, or high deductible plans, has grown sharply in the last ten years. An annual survey by the National Business Group on Health found that 90 percent of large employers are offering at least one CDHP, and 40 percent will offer only a CDHP in 2018. Almost one third of all covered employees are now enrolled in a CDHP according to a Mercer study.
While wellness exams are fully covered under all healthcare plans now, in CDHPs you must pay for services beyond wellness exams out of your pocket until the high deductible is met. Often the savings on the premium can at least partially offset the expenses, making the lower coverage worthwhile. But there are a couple of things you can do to further limit your costs.
Take advantage of the Health Savings Account (HSA). The HSA is a tax advantaged way to save for your out-of-pocket medical expenses. Your contributions to the HSA are pre-tax, saving you the equivalent of your tax rate on medical expenses paid out of the account. Your contributions to your HSA are yours to keep, with no requirement to spend them by the end of the year. Your goal should be to accumulate at least enough to cover your deductible in the HSA.
Shop around for your prescription medications. Before you spend your deductible you will pay the cash price for your medications. There can be a shocking difference among the cash prices charged by different pharmacies. So it pays to shop around.
Try goodrx.com to see where your prescriptions are cheapest. One prescription I checked ranged in price from $38 at Costco to $341 at Rite Aid.
There can be substantial savings for name brand, non-narcotic drugs purchased through Canadian pharmacies. One name brand prescription can be bought for $78 for a three months supply vs $497 at the lowest cost U.S. pharmacy. Check out eDrugSearch.com to find the lowest prices for your medications. If the pharmacy is certified, you can be assured they get the medications from the same manufacturers as U.S. pharmacies.
These pharmacies will be out-of-network, so the cost of your medication may not apply to your deductible or out of pocket maximum, but the savings can make that sacrifice well worth while.
Finally, many pharmaceutical companies offer coupons on your name brand medications to make them more affordable. Check your medication’s manufacturer’s web site for offers.
Loss of Out-of-Network Coverage
Whether your plan is a CDHP or not, increasingly, health insurers are cutting out-of-network coverage. Out-of-network coverage pays providers even if they haven’t negotiated pricing with the insurer. Your share of the cost is higher, but your out-of-pocket costs are still limited by the plan maximums. If there is no out-of-network coverage, you will fully pay for services, and the expenses will not go toward your annual maximum out-of-pocket expenses.
This is a big issue with emergency room services. The ACA requires insurers to cover “reasonable” expenses for emergency care regardless of the hospital you use. However the hospital and the service providers working there, are free to bill you for their fees above what the insurer pays them if they are out-of-network.
Even if you seek care at an in-network hospital, the doctor who attends you may not be an in-network doctor. Hospitals often contract their emergency room physicians from outside doctor groups. If you are attended by an out-of-network doctor in the ER, you could be billed for their service separately, and your insurance would not cover the cost. The practice is called balance billing.
The Commonwealth Fund, a private foundation funding healthcare research, reported that 14 percent of those who had visited the ER received an unexpected bill from an out-of-network doctor. Of those who were subsequently admitted to the hospital, 20 percent received an unexpected balance bill. Seven in ten who had unaffordable healthcare bills did not know their provider was out-of-network, according to the Kaiser Family Foundation.
Consumer Reports offers some advice to help you protect yourself. If a family member or friend accompanies you to the hospital, during registration, they should request you be treated only by an in-network doctor if you arrive at an in-network hospital. At discharge, your companion should request a print-out of all charges in case you must fight the bill later.
Carefully validate your bills against the list of charges. If you receive an out-of-network balance bill, check with your insurer to see if you can get them to pay it as part of the emergency coverage. If not, negotiate with the doctor. If that doesn’t get your bill within reach, file an appeal with your insurer. The Patient Advocate Foundation can provide advice on filing an appeal for free. If all else fails, file an appeal with your state insurance commissioner.
Healthcare has become a consumer nightmare. To avoid bills beyond what you can afford make sure you have savings to cover your share of the costs. Take charge of your medical bills by shopping around for the best prices on medications, and be willing to go to bat for yourself if necessary.
Image courtesy of Serge Bertasius Photography at FreeDigitalPhotos.net
6 thoughts on “Tips for Dealing With the High Cost of Healthcare”
Hi Julie, my question is why do so many “financial gurus” recommend investing in IRAs first, then HSAs? Age for non-penalty withdrawal?
Hi Thomas. That is a good question. My advice, if you have an HSA available, you should save the deductible at least and have a goal of covering the out of pocket maximum eventually. In terms of using it as a retirement savings vehicle, they are not very easy to deal with, and the investment options can be limited. But if you can swing the extra savings it’s worthwhile. You can use your HSA for anything once you reach age 65. At that point your withdrawals for non medical purposes are taxed like a traditional IRA without any additional penalty. Withdrawals for healthcare expenses, including premiums, are always tax exempt.
hmm..interesting take…are there any specific advantages traditional or roth ira have over hsa?
Hi Henrietta. Roth and Traditional IRAs have higher contribution limits. They are also easy to set up and maintain, with all the investment options in the world (almost literally). After age 65, the HSA resembles the Traditional IRA for non medical expenses, but without the required minimum distributions after age 72. Roth IRAs are completely tax exempt after age 59 1/2. And you can withdraw your contributions without taxes up until that age. Roth withdrawals also don’t count as income for determining if your social security benefits are taxable.
Hi Ms. Grandstaff, can you discuss why HSA accounts are “not easy to deal with”? Is it with all the receipts that you have to keep, or are there other common pitfalls? Thank you, JH
The HSA providers are set up to pay out money for medical expenses, so in that respect they are not too difficult to deal with. However, for long-term investments, they are not ideal. The interfaces with the investment side is clunky and can be hard to find. The investment options are limited as well.