Things to Consider When You Plan For Next Year's Healthcare Spending

If you're like most Americans, your health insurance covers a percentage of your health care, leaving you responsible for some healthcare costs. Now is an ideal time to start thinking about how you'll meet the financial demands of your family's health needs in the coming year by planning for future healthcare spending.

To prepare a healthcare budget, start by reviewing your current health insurance coverage, and estimate what you expect to pay out of pocket in the coming year. Many employer-sponsored healthcare plans reset your deductible and out-of-pocket maximum to zero every January, so you should plan your healthcare budget accordingly. You may want to look at what your healthcare spending has been in the last year to help you estimate your expected costs. Set aside savings for "just in case" scenarios. Here are some additional tips to help you get a jump on next year's healthcare spending.

Know your healthcare policy

It's a good idea to go over some of the terms insurers use to describe what you may be responsible for paying. Here's a quick refresher of some common terms:

1. Premium – the amount you pay for your health plan. If you get coverage through your employer, they will often deduct your premiums from your paychecks.
2. Deductible – a set amount that you must pay for medical care before your health insurance begins to pay for your care.
3. Copay – a fixed amount you are required to pay for certain healthcare expenses, such as visits with healthcare professionals, diagnostic tests and medication.
4. Out-of-pocket maximum – the total amount you are expected to pay out of your own pocket for covered services in a plan year, not including premiums, before your insurer will pay 100% of the covered costs you incur.

If you get your insurance coverage through work, your human resources department or health plan representative should be able to tell you if any of these variables will change with your new policy.

Special accounts

Many of today's group health insurance plans offer special accounts that can help you pay for qualified healthcare expenses with pre-tax money. For instance, if you have a Health Savings Account (HSA), you can put aside money to pay for certain healthcare expenses, such as deductibles, copayments, coinsurance, and some other expenses without paying tax on the funds. HSA funds generally may not be used to pay premiums. Individuals own the money in these accounts and can take them with them if they leave their jobs. You can also open an HSA through some banks or other financial institutions.

Employers sometimes place funds in a Health Reimbursements Account (HRA) for you to use for certain healthcare expenses which are reimbursed for qualified medical expenses up to a fixed dollar amount per year. Unused amounts may be rolled over to be used in subsequent years. These are employer-owned accounts, so if you leave your job, you often forfeit the money in these accounts.

Another type of special account is the Healthcare Flexible Spending Account (FSA). You or your employer can put pre-tax funds in this account to pay for out-of-pocket medical expenses, including copayments, deductibles, qualified prescription drugs and medical devices. You can also use your FSA to pay for dental and vision expenses, such as contact lenses and eyeglasses. Often, if people do not use these benefits by the end of their coverage year, they forfeit the money in the account.

If toward the end of the year you expect to have leftover FSA funds, look for ways to use them up before January.

Plan how you'll pay for healthcare costs

Ask yourself how you intend to cover healthcare costs that could arise next year, especially if you expect to incur healthcare costs early in the year before you have met your deductible. Look at the last two or three years to see what you've spent on premiums, deductibles, and copays, as well as diagnostic tests, procedures, medications, and treatments. Having a few reliable ways to pay for these healthcare costs, like a dedicated HSA together with your CareCredit credit card, can bring you peace of mind and allow you to get the care you need, when you need it.*

As you're strategizing on how you'll meet your or your family's healthcare costs, remember that CareCredit provides a convenient way to manage planned and unplanned healthcare expenses and may be a good option to help you pay for those costs not covered by insurance.* Use our Acceptance Locator or download the CareCredit Mobile App to find a health care provider near you who accepts the CareCredit credit card.

Our Experts

Patty Caballero and her team of consultants together have more than 35 years of health insurance knowledge working for some of the biggest health insurance companies in the US. She has knowledge in building brands and strategic initiatives to help consumers better understand their health benefits.