This Q&A column addresses questions from real patients about health care costs. Have your own question? Get your answer here.
Question:
My employer is only offering a high deductible health plan next year. In the past, I've always had a standard PPO plan, with a deductible right around $1,000 for individual coverage. Now I will have to prepare for a $2,500 deductible. How should I plan differently for my health care expenses this year?
Answer:
Many employers, like yours, are opting to only offer plans considered high deductible health plans, or HDHPs, to cope with rising costs. You can prepare for this new plan and use it wisely to buffer the high out-of-pocket costs it will carry if you get sick and need care.
Understand your plan.
For most people, HDHPs carry significantly higher out-of-pocket costs in exchange for lower monthly premiums, when compared with traditional plans. Less money will come out of your paycheck (if you share monthly premium costs with your employer), but you'll have greater expenses if you get sick and need to use your insurance.
However, it's important to note that the prices you pay while insured under your HDHP are negotiated rates between your insurance company and medical providers. In other words, you'll pay less for services than someone who visits the same doctor without insurance.
The health care expenses you incur will go toward your deductible, which you can think of as a ceiling on your health care costs. You are responsible for all of your medical expenses until you've reached that ceiling. Then, your insurance will start to pick up a share of the tab.
With a $2,500 deductible, for instance, you'll spend at least $2,500 out of pocket before you see the maximum benefits of your insurance. And after you reach that threshold, you may still be responsible for a portion, known as your coinsurance, until you meet a new ceiling: your out-of-pocket maximum.
Let's say you have several doctor visits and a car accident that results in a short hospital stay. With these costs, you meet your $2,500 deductible by March 15. After that, you're responsible for 20% coinsurance on all health care costs. If you spend $6,550, the out-of-pocket maximum set by the IRS, before the end of the year, your insurer will pay 100% of your qualifying costs until the year is up.
Fortunately, the potential burden of these expenses can be buffered by the tax-free money you've set aside in a health savings account.
Open a Health Savings Account (HSA).
The scenario laid out above can look daunting. But it's important to remember that if you're covered by an HDHP, defined as a plan with a deductible of $1,300 or more for an individual or at least $2,600 for a family, you're allowed to open a health savings account, into which you can deposit pretax dollars to pay for qualified medical expenses.
An HSA, which will most likely be offered by your employer, will help you manage your out-of-pocket costs throughout the year. If you get your HDHP on an exchange, or your employer doesn't offer an HSA to go with this plan, you can open one online or at your bank.
For 2016, the IRS has limited how much an individual can contribute to their HSA to $3,350. Generally, I recommend you contribute at least the amount of your deductible, plus any additional anticipated health care expenses such as coinsurance and copays once the deductible is met.
If you can contribute more, you should. Why? Because your HSA acts as a savings vehicle, and any balance left over at the end of the year will be carried forward to the next year. This is your account and it will follow you even if you leave your employer. Also, HSAs have investment options, allowing you to invest the balance (or portion of it).
Be a savvy health care shopper.
- Compare prices when you have a choice of providers.
- Always choose doctors and facilities that participate in your plan's provider network.
- Opt for generic drugs over brand-name pharmaceuticals.
- Use urgent care facilities instead of emergency rooms when the option is available and appropriate.
- Take advantage of free preventive services, as these visits could detect problems before they become costly emergencies.
- Tell your doctor(s) about your high out-of-pocket costs. They may have insight into how you can save, or be willing to work out payment arrangements for particularly high bills.
Part of being a smart health care consumer is knowing how to identify a medical bill error. Because you're responsible for these bills until your deductible is met, it's even more important that you can spot a problem.
Look for mistakes such as duplicate or incorrect dates of service, treatments and procedures you didn't receive, charges that look disproportionately high, individual charges when a procedure should be "bundled" and charges for providers you never saw.
If you spot an error, call the medical provider's billing office immediately. Make a note of who you talk to and when you spoke, and how the problem was resolved. Ask for resolutions in writing, and if you don't feel you're getting the help you deserve, escalate the call to a supervisor or consider using a medical billing advocate.
With a high deductible health plan, you'll pay more for care -- at least initially. By planning for these expenses and strategically navigating the health care system, you can make the most of the plan and possibly use the opportunity to invest in your future.