In just a few days it will be healthcare open enrollment season again. You may have been blessed to make it through the last twelve months with relatively good health and not too many medical costs. If you did, it always begs the question of why then are your healthcare costs so high and what can be done to reduce your premiums. On the other hand, if you have incurred above-average medical costs in the last two months and have had to come out of pocket to cover your expenses and dip into your retirement and savings; the question then becomes how to reduce your cost. Let’s look at some of the changes and considerations that may impact your bottom line in the next twelve months.
State of Affairs
You can have all the money in the world, but if you are not healthy, it means nothing! Your health is wealth! If you want to reduce your health care costs it begins with exercise, diet, and rest. Before we get into numbers and plans, are you exercising? What are you eating and how much rest are you getting? Clients may come to me to discuss their spending and we can work through budgeting. They may come to me and discuss investing and we will work through all kinds of options. But while officially, I am not a psychologist, what I have discovered is that economic problems are behavioral! If you could change your health habits, then open enrollment, the plans you choose, and premiums paid, can reduce your cost and increase your bottom line. This should be your first economic decision as you consider new healthcare plans. What health behaviors am I going to change?
You are in The Driver’s Seat
When it comes to health care costs this open enrollment season, employees are being valued more. The average healthcare cost for employers is scheduled to rise and is estimated to be 8.5%. Traditionally, most of those costs are passed on to employees. However, because of the tight labor market and conditions, employers are looking for ways to avoid passing on this cost to employees so as to retain valued ones. Employers also recognize that with high inflation employees are struggling to keep up with the cost of living. In a recent report from the Kaiser Family Foundation, employees who were covered under an insurance plan paid an estimated 17% for single coverage, while those covered through a family plan contributed an estimated 28%. Now, this also depends on your industry and the size of your company. That said, you must still do your homework and see what’s out there so that you manage your monthly expenses responsibly.
Points to Consider
If married, compare plans and see whose plan provides the best coverage for both of you. The plan that provides the better coverage for the family should be the one you select. While some employers may not allow both working spouses to be on a single plan, it’s probably worth considering if that option exists. Considering better plan options should also include specific needs for the next twelve months such as surgery, mental health counseling, and prescription drugs to name a few.
Mental health is a crucial element of healthcare today. Some 70% of large employers are providing mental health coverage at low cost or no cost, but these extra care cost benefits are not always known to employees. Approximately 33% percent of employers are offering mental health and wellness counseling on-site, while others are providing the benefit virtually. In 2024 a significant number of employers will be offering mental health counseling from out-of-network providers along with treatment for substance abuse disorders. Employers will be offering wellness programs as well as support programs for those with chronic conditions. You must review your current plan even though you do not change providers, but at least you can compare your current plan to the alternatives which may result in cost savings.
Out Of Pocket Expenses
Perhaps the factors that have the greatest impact on your cost are premiums, deductibles, copayments, and coinsurance. Most people get stuck on premiums, but the truth is that’s only one factor in your analysis. Generally, high premiums translate into low deductibles and vice versa. But while you’re focusing on those low monthly premiums the question I have is, how much is in your emergency fund? Can you afford the out-of-pocket expenses and high bills? Are you disciplined enough to save for out-of-pocket costs or are you better off paying a high premium with a low deductible and low impact on your savings or retirement? If you have a low premium, high deductible plan, then you want to consider a Health Saving Plan ( HSA) to save for your medical out-of-pocket expenses. If you use an HSA, you not only save for medical expenses, but reduce your taxable income and therefore your tax liability significantly by being able to deduct what is known as “above-the-line deductions”.
The last two factors to consider from a cost perspective and plan in 2024 as an employee are your prescription drugs and any special health insurance needs. Because prescription drugs are tied to inflation, considering higher deductible plans or ones covering out-of-pocket cost and copay expenses are important. Some plans have separate deductibles for prescription drugs and copay or coinsurance costs may vary significantly. The other consideration is whether or not your plan covers after-surgery costs in what are known as “ centers of excellence.” Approximately 72% of employers have arrangements with these types of organizations for your aftercare and recovery.
Subsidies for Health Care
Finally, if you have to purchase health care on the open market, the good news is that there may be enhanced subsidies for you from the federal government and through your state. Open enrollment commences on November 1st, 2023, and runs through January 15, 2024. However, if you want your coverage to begin on January 1st, 2024, you will need to enroll by December 15, 2023. What matters most is the after-subsidy cost if you are shopping for health care on the open market.
THAT’S WHAT’S UP!
Today’s What’s Up is about bonds. October 31, 2023, is the last day to purchase I bonds at the current interest rate. Government savings bonds have a fixed and variable rate. The current fixed rate portion of the bond is 0.09% while the variable portion of the bond interest rate is 3.4% for a total interest rate of 4.3%. Now because the inflation rate was high in August, these bonds may pay a higher interest percentage starting in November when the new rates are announced by the Treasury. Therefore you may want to wait until November 1st, to purchase I bonds since the interest rate may be greater than 4.3%. Who knows?
And that’s what’s up!
Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC. Give2Get Rich, LLC 2023. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.
