Whether you have insurance through your employer or buy a policy on your own, you’re probably paying more out of pocket than you did in the past.
The Kaiser Family Foundation reports that 38 percent of covered employees now have a deductible of $1,000 or more for single coverage, and 15 percent have a deductible of $2,000 or more. On the Obamacare exchanges, the deductibles for individuals averaged $4,343 for the lowest-priced, bronze plans, according to a study by Avalere Health. Policies sold off the exchanges follow similar trends. On average, those sold by eHealthInsurance.com during open enrollment that were in compliance with Obamacare rules had a deductible of $4,164 and a monthly premium of $271.
If your policy has a deductible of at least $1,250 for individual coverage or $2,500 for families in 2014, you may be eligible to open a health savings account. An HSA lets you set aside tax-deductible money (or pretax money through an employer) that you can use tax-free in any year to pay your deductible and other out-of-pocket medical expenses. There’s no use-it-or-lose-it rule, and any amount left over grows tax-deferred and can be used tax-free in the future to pay for medical expenses.
In 2014, you can contribute up to $3,300 to an HSA for individual coverage or up to $6,550 for families (plus $1,000 if you are 55 or older at any time during the year).
Most HSA administrators provide debit cards if you want to use the money for medical expenses right away, and some let you invest in mutual funds if you want the money to grow for future expenses.
Compare HSA administrators’ investing options and fees at hsasearch.com.
If you have a high-deductible policy, it’s important to review each explanation of benefits carefully to make sure you’re getting the insurer’s negotiated rate and to check that expenses have been counted toward the deductible.
Keep receipts for all your payments to make sure you get credit from your insurer. The receipts also serve as tax records when you make HSA withdrawals.
Once you’ve maxed out your deductible, cluster your family’s medical procedures near the end of the plan year rather than wait till the following year when you’ll have to pay the deductible again.
When the money is coming out of your pocket, it pays to know that the cost of care can vary a lot. Many insurers offer cost-estimate tools, which use the insurer’s negotiated rates with providers in your area to show how much you’ll pay under your policy.Kimberly Lankford is a contributing editor to Kiplinger’s Personal Finance magazine. Send your questions and comments to firstname.lastname@example.org. For more on this and similar money topics, visit Kiplinger.com.