Financial must: Navigating health care costs in 2013
SheKnows continues our chat with personal finance expert Carmen Wong Ulrich, and this week she lets us know how to save on out-of-pocket health care costs in 2013.
Health care is expensive. While the U.S. enjoys some of the best medical care in the world, there is no doubt it can be a daunting system to navigate. Celebrity finance expert Carmen Wong Ulrich sits down with SheKnows and talks us through two of the biggest challenges we face when it comes to paying for health care (with insurance): how to save money on out-of-pocket health care costs and what you can do when your employer increases your premiums.
Should you really go for an HSA or FSA?
SheKnows: Let's start first with out-of-pocket health care costs. These include things like deductibles, co-pays and co-insurance. Many employers offer a health savings account (HSA) or a flexible spending account (FSA) to help employees save on out-of-pocket health care costs. Which do you recommend and why?
Carmen Wong Ulrich: They're very different. An HSA is portable — you can take it from employer to employer, and you don't have a "use it or lose it" provision at the end of the year like an FSA, which is tied to your employer. Both accounts allow you to save funds, pretax (in effect giving you an instant 30 percent discount/savings), for health care costs. HSAs are for high-deductible plan members only and FSAs need to be offered by your employer. For more information on both/either, head to IRS.gov and search for "publication 969."
SK: Okay, so it sounds like both have advantages and disadvantages depending on an individual or family's specific health care situation. What additional tips do you have to help individuals and/or families reduce their overall health care costs?
CWU: Be mindful of the benefits provided to you and review them every year. [A recent] MetLife Benefits survey found that if you reviewed your benefits packet during open enrollment, you not only were more likely to make good changes, but you'll feel more confident about your choices overall.
Employers make some good changes to benefits that can help you such as adding access to an FSA or adding a new, less pricey, more comprehensive dental plan. But, it's up to you to find out more and sign up to save!
Open enrollment season may bring a nasty shock
SK: Speaking of open enrollment, one unfortunate side effect of benefit election season is the chance an employer raises premiums for its employees. This financial decision can be the result of a variety of business factors but nevertheless it undoubtedly creates a financial consequence for affected individuals and families.
So, let's imagine the scenario: Uh oh, an employee opens their open enrollment packet for the upcoming year and finds premiums have jumped. They are now nearly unaffordable for him or her. What is the first step you recommend?
CWU: Don't panic. Review your lower-priced options. Many employers offer less expensive plans in terms of monthly premiums but higher deductibles. Insurance is a necessity so treat it as such. Do your research and make sure to make an appointment (or two) to speak with your benefits administrator about all your options.
SK: Individual insurance plans can often be extremely expensive — often both premium-wise and deductible-wise — and typically offer less coverage than employer-sponsored group plans. For an individual who needs to opt out of their employer's coverage, what are the top two or three things to keep in mind when searching for individual insurance?
CWU: Individual insurance will rarely, if ever, be less expensive than an employer-based plan. Remember, employers get group rates which means a discount. Never drop an employer-based plan without doing all your research and getting another kind of coverage.
If you are self-employed or don't have access to benefits, look for group discounts through your trade organizations or unions such as FreelancersUnion.org.
Thank you so much Carmen for this great information on health care costs. Keep an eye out for our next chat with Carmen Wong Ulrich to help keep you informed on all things related to your financial life.