Laura reviews seven ways to stay healthy while cutting the cost of healthcare for you and your family.
Laura reviews seven ways to stay healthy while cutting the cost of healthcare for you and your family.
Money Girl is hosted by Laura Adams. A transcript is available at Simplecast.
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The cost of health care continues to rise. To make it more affordable, you must get the most from your benefits, be strategic, and cut costs wherever possible. This post will review seven ways to reduce healthcare expenses so you and your wallet stay healthy.
Welcome back! I appreciate you joining me for Money Girl episode 882! I'm Laura Adams, an award-winning author, female finance spokesperson, money speaker, founder of The Money Stack, a Substack newsletter, and host of Money Girl with over 43 million downloads.
If you're getting value from the free content we love creating, subscribe and consider submitting a 5-star rating or review on your podcast app of choice! If you have a question about money for the show, leave it on our voicemail at 302-364-0308. You can also send an email and sign up for the free Money Stack newsletter at LauraDAdams.com.
7 Ways to Cut Healthcare Costs
Use the following seven tips to help cut healthcare expenses for you and your family.
1. Use healthcare subsidies.
If you don't get health insurance through an employer or are self-employed, getting coverage through a federal or state exchange, known as the Affordable Care Act (ACA) marketplace, can be an affordable option. Depending on your income and family size, you may be eligible for a healthcare subsidy that reduces your monthly premium.
In most states, open enrollment for ACA plans typically runs from November 1 to January 15. Outside that window, you can sign up or change coverage any time if you experience a life event that qualifies for a special enrollment period (SEP), such as
having a child, getting married, or relocating to another state.
RELATED: How to get benefits and a health plan as a solo business owner
2. Maximize your health plan benefits annually.
Whether you get health insurance through an employer or on your own, its benefits and deductibles get tied to an annual schedule. That means you must pay attention to the calendar to maximize it.
Your deductible is the amount you must pay for covered healthcare expenses before your insurance begins. For instance, if you have a $3,000 deductible, you must pay the first $3,000 of covered services each year.
If you reach your health insurance deductible, your insurance covers additional costs through the end of the year, with you typically only being responsible for a copayment or copay. A copay is a flat fee you pay each time you visit a doctor or fill a prescription.
So, if you have enough healthcare expenses to surpass your deductible by September and need more covered medical services or products, be sure to get them before the end of the year. If you wait until the following year, your deductible resets on January 1, and you'll have out-of-pocket costs until you reach your deductible for that year.
If you only remember one tip from this post, once you reach your annual deductible, your best strategy is to have your insurer cover as much of your necessary medical expenses as possible.
3. Use telehealth when possible.
Telehealth services became essential during the pandemic. Federal and state governments incentivized insurers to expand their telemedicine capabilities, a win-win for health carriers and policyholders. Having a virtual visit with a doctor by video chat or phone can save time and money.
While a telehealth appointment won't be possible for many situations, if you have common ailments, such as a cold, flu, or allergies, it can be more convenient and cost-effective than going to a doctor's office. You can also use telemedicine for mental health counseling, nutrition advice, and medication consultations.
4. Contribute to a flexible savings account (FSA) at work.
If your employer offers an FSA, you can make pre-tax contributions through payroll deductions. For 2024, eligible employees (and their employers) can contribute up to $3,200 to a healthcare FSA. The limit will increase to $3,300 for 2025.
If you spend FSA funds on qualified expenses, they're never taxed. However, there's an annual spending deadline, known as a "use-it-or-lose-it" rule. You must empty the account annually or only carry a small balance (such as up to $640) into the following year.
There's another type of FSA called a dependent care account, with a $5,000 contribution limit. It's exclusively for childcare expenses, such as daycare and after-school care for children under 13. Plus, if you claim an older person, such as a parent, as a dependent on your taxes, the funds can be spent on their care.
5. Contribute to a health savings account (HSA).
If you enroll in an HSA-qualified, high-deductible health plan at work or on your own, you can contribute to an HSA. They're one of the most tax-friendly accounts on the planet. You can make pre-tax contributions and then spend the funds on qualified medical expenses entirely tax-free.
For 2024, you (or anyone else) can contribute up to $4,150 when you have an individual health plan or $8,300 with a family plan. For 2025, the limits will increase to $4,300 or $8,550. After age 55, you can contribute an additional $1,000 each year for either type of health plan. These are the total limits, including amounts contributed by someone else, such as an employer or relative.
A high deductible health plan (HDHP) may be a good choice, depending on your health needs and expected annual medical expenses. You can take distributions from an HSA to pay a long list of medical costs, even if your insurance doesn't cover them. That might include dental care, prescription eyeglasses, chiropractic, or acupuncture.
If you spend HSA funds on qualified medical expenses, they never get taxed. Consider this: if your average income tax rate is 25%, using your HSA gives you a 25% discount on all out-of-pocket medical expenses.
However, if you spend money in an HSA on non-qualified expenses, withdrawn amounts are subject to income tax plus an additional 20% penalty. So, it's not wise to put money in an HSA that you might need for everyday living expenses.
If you change insurance and no longer have an HSA-qualified health plan, you won't be eligible to make new contributions. Still, you can spend your existing balance on qualified medical expenses for you and your family. Unlike an FSA, there's no spending deadline with an HSA–your funds can accumulate indefinitely without penalty.
Here's a quick review of the tax advantages of an HSA.
These terrific benefits cut your tax bill and maximize your healthcare buying power!
Plus, after you reach age 65, funds in your HSA can be spent on non-qualified expenses without the steep 20% penalty. Therefore, maxing out an HSA each year is a
clever way to boost your retirement savings.
READ ALSO: HSA hacks–how to optimize your health savings account
6. Claim medical tax deductions.
You can deduct various unreimbursed healthcare expenses when you itemize deductions instead of taking the standard deduction on your tax return. They include healthcare paid for yourself, your spouse, and dependents, including health insurance premiums—unless an employer already excludes them from your taxable income.
There's a long list of medical expenses you can deduct, including:
You can review the complete list of deductible medical expenses in IRS Publication 502, Medical and Dental Expenses. They don't include costs to improve your general well-being or appearance, such as a gym membership, vitamins, or cosmetic surgery.
But there are many expenses that you might not realize are deductible.
For 2024, the medical deduction applies to allowable expenses exceeding 7.5% of your adjusted gross income (AGI). For example, if your AGI is $50,000 and your unreimbursed medical expenses are $5,000, you could deduct the amount over $3,700 ($50,000 x 7.5%), or $1,250. But if your medical expenses are less than 7.5% of your AGI, you can't deduct them.
Note that you can't double-dip by paying a medical cost using an FSA or HSA and claiming it as a deduction on your taxes. You must choose one tax benefit or the other.
7. Plan your healthcare.
Taking advantage of your health plan's free preventative services, such as annual physicals, mammograms, prostate screenings, dental cleanings, and eye exams, is essential.
Routine health screenings and checkups can catch health problems early when they may be more easily treated and less expensive. If you don't schedule those visits, it's like simultaneously throwing money away and neglecting your health!
Also, you'll save time and money by going to an urgent care clinic instead of an emergency room at a hospital. Of course, if you genuinely need emergency care, go there or call an ambulance.
When you have time to plan your healthcare or need to schedule a procedure, ask your doctor if you can have it in an outpatient clinic, which is often less expensive than having the same treatment in a hospital. Also, choose in-network providers when your insurance covers them because you'll pay less.
The best way to cut your healthcare is to stay as healthy as possible by managing your weight, eating well, exercising regularly, and getting preventive checkups. You'll likely feel your best and pay less for medical care for the rest of your life.
That's all for now. I'll talk to you soon. Until then, here's to living a richer life!
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