Saturday, August 24, 2019

Health Care Spending Plan

Health care is a major costs and can be unpredictable when it will be needed. It is a good idea to become familiar with your health care plans and options.  This is a step in understanding and planning your monthly budget.

The following are five steps to reviewing and becoming familiar with your health care.

Step 1 - Add up your routine health care costs.  You may have regular monthly prescriptions, scheduled routine doctor visits for your family.  After getting the routine items, review your statements to come up with an average of 12 months.  This will give you a starting basis in understanding the amount of health care expenses.

Step 2 - Consider any new health costs.  Is there any new events that should be factored into a yearly cost.  There are calculators on the web to estimate the costs of surgery or childbirth.  Factoring exceptions is critical to your annual planning.

Step 3 - Set aside money for unexpected costs (Emergency Fund).  Even with the most detail planning, "stuff" still happens.  A prudent method is to set aside funds for the unexpected.

Step 4 - Take advantage of money-saving tools.  Now that you have an estimate of costs, plan to start putting money aside.  A high-deductible health plan enables you to open a health savings account (HSA).  HSA has a lot of benefits and firstly, you don't have to pay taxes on the money you put in.  You can open an HSA yourself or if your employees allows the option you can deposit money into an HSA directly from your paycheck.

Step 5 - Get to know your health plan.  Understanding what your health plan is offering is critical to managing expenses.  There are three main parts to health plans.

1.  Deductible - the amount of money you must pay out of pocket before the benefits kick in.  Exceptions are preventative care (i.e. annual physical).

2.  Network - your network consists of doctors, pharmacies, clinics, and hospitals your provider has worked with to negotiate discounts on services.  When you stay in the network, your plan pays more of the bill.

3.  Copay or coinsurance - the amount you must pay doctor visits and medical procedures, whether you met the deductible or not.  Preventative care typically does not have a copy.

In planning your monthly budget, health care can be a major cost.  It is necessary to understand your potential health costs to effectively budget on a monthly and annual basis.

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