Wednesday, April 7, 2010

Dissect Your Budget - Part 10 - Medical Expenses And Health Insurance

Tip #247 - Dissect Your Budget - Part 10 - Medical Expenses and Health Insurance. Okay, here comes another collective groan from my readers. And to be honest, I have put off writing this post because there are so many factors that come into play with healthcare costs; it's not the most interesting subject; and obviously things are changing in the US. Having said all that, it's a big expense in most people's budget, and it should be considered carefully.

Healthcare insurance costs are one of those expenses that you'd rather not have, but when you need it, you wish you had the best. Only individuals can evaluate the best healthcare insurance for themselves, taking into account age, risk factors, general health, and cost of premiums. The best place to look for insurance is at your place of employment. Usually, but not always, you will get the best deal from your company because they get discounts for group insurance. Often the company will pay a part of your premiums, too.

Some employers will offer a few different levels of health insurance or even health insurance from different insurance companies. When open season comes around, make sure you evaluate your choices carefully. You don't want to save a few dollars in premiums each month only to find that you are playing a lot out of pocket at the doctor's office or jumping through hoops to get to see a specialist. On the other hand, you don't want to pay for the best insurance and never use it.

In addition to offering health insurance, many companies will also offer a flexible spending account or FLEX plan. For most people, this is a great deal. The FLEX plan basically allows you to set aside money pre-tax to use for medical costs that you will incur for the year. Then when you pay for co-pays, prescriptions, any specialist visits that aren't covered or other qualified medical expense, you use this set-aside money. If you pay about 20 percent in taxes, that means that a $50 co-pay will only cost you $40.

If your company doesn't offer health insurance or other medical benefits, then you should look into a plan on your own. Sometimes organizations you belong to will offer group insurance that might be cheaper than what you can get on your own. Or, you can open a high deductible health plan on your own (or through some companies) by investing in a Health Savings Account or HSA. An HSA operates like an IRA account, in that you can contribute a set amount each year towards the account. You don't pay federal taxes on the money, and the money can stay in it year after year if you don't spend it. The money is only to be used for qualified medical expenses.

If you are lower-income, it would be wise to look into any health insurance or benefits that are offered from your state or other government sources. Health insurance and medical expenses are a topic that could have pages and pages devoted to it and never be exhausted. I am not an expert or even very knowledgeable about it other than to skim the surface. But the point of bringing up this topic is that health insurance and medical costs are expensive and often a significant part of one's budget or sometimes the cause of one's downfall into debt. It is not a topic to be ignored, but studied for your personal best interests. Where healthcare will be in the future in this country is anybody's guess, so by staying on top of your situation and what is available to you will be the best way to keep your costs down in this area.

In Real Life (IRL) - I dreaded writing this topic because I only have experience with employee-sponsored health insurance. I've never gone out and bought insurance on my own nor have I used government available insurance, but I know it's out there. Our family has been blessed to have good health insurance available to us by my husband's company. When my husband accepted his job as a branch manager of a small office for his company, one benefit we got was fully-paid for health insurance! That is almost unheard of except maybe among top executives. We were so fortunate not to have to fork over hundreds of dollars each month to health insurance.

But all good things much come to an end, they say. And when my husband's company got bought out a year ago, he lost this nice perk. Our insurance costs now total about $500 per month, which is still fairly reasonable. Luckily, his new company offers a FLEX plan which his old company did not offer. So all co-pays, prescription costs, and uncovered medical costs come out of this tax-free money that we set aside at the beginning of the year. While not perfect, since it's hard to predict how much we'll use, it does help to have this benefit.

Because we have the funds and since we have a family of five, with three young children, we do opt for the best insurance my husband's company offers. We might be wasting money each month for benefits that we won't use, but it gives us peace of mind that if something big should come up, we will be covered. Having said all that, we don't pay for some extra riders that are offered by his firm. At some point, we just have to play the numbers game and hope it works in our favor.

One last thought, I had a friend who's husband's firm offered health insurance but they company didn't kick in much help on the premiums, so they were fairly expensive. They chose to buy private insurance with a large deductible instead. And while they were living near me, it still ended up to be cheaper for them by doing that than going the company's route.

So look carefully at all of your options. If your company offers good insurance, you are good to go. If not, investigate all of your options. Talk to people who carry the insurance that you are considering. Ask friends or family who are more knowledgeable about healthcare than I, and then decide what works best for you.

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