Inflation has had a good side for some people – increases to account for rising prices – but there is a catch. Health insurance prices have also increased, so you may have to pay more for a 2023 plan. Average costs per employee will reach $13,800 in 2023, according to Aon, the professional services firm. This is more than double the 3% increase registered by businesses last year, although this is well below the current inflation index.
As open enrollment in many employer-provided health insurance plans begins, take a close look at the offerings. Sticking with the same plan you were using before isn’t always the best choice. In fact, most people find it difficult to choose the health plan that offers them good coverage at the cheapest price, according to several studies. Although it seems counterintuitive, simply choosing the plan with the highest premium and lowest deductible may not be your best bet.
The following strategies challenge some common beliefs about health insurance plans. and they can help you save money on health insurance provided by your employer.
High deductibles may be lower than you think
Employer-sponsored high-deductible plans may actually give you a lower deductible than some plans that aren’t labeled high-deductible. The advantage of high-deductible plans is that they usually qualify for a Health Savings Account (HSA). As long as the plan has a minimum deductible of $1,500 for an individual and $3,000 for a family in 2023, it qualifies for an HSA.
Of course, your employer can increase the deductible in exchange for the lower premiums you usually pay with a high-deductible plan. Run the numbers using a calculator like this one from HSA provider Lively, so you can compare estimated healthcare utilization, premiums and deductibles between different plans.
Consider saving in an HSA
What makes a Health Savings Account (HSA) so magical is that it is the only triple tax advantage investment account. First, the money is credited to your account before tax. The money you invest in this account grows tax-free. Finally, the money is withdrawn tax-free when used for eligible medical expenses. Contributing can help reduce your taxable income and build a valuable medical emergency fund.
How HSA contribution limits work
Your employer can contribute to your HSA, just as they can to a workplace pension plan. As with your pension plan, people over 55 can make catch-up contributions. But unlike a 401(k), your employer contributions are part of the preset limit. If your employer contributes to an HSA, you contribute less to maximize the account.
There is no time limit for using the HSA. This means that you can keep receipts for eligible medical expenses and reimburse yourself several years later, once your HSA investments have increased.
How to compare premiums and deductibles
First, narrow down the choices by filtering out all deal breakers. For example, you might want to see providers that certain networks don’t work with.
Three main numbers are important: the annual premium, the deductible, and any employer contribution to an HSA or FSA.
Many employers will contribute a certain amount per year to a Health Savings Account or Flexible Savings Account in your name if you choose a high-deductible plan.
If you have this option, you must know the actual amount of the contribution that the employer will pay on your behalf and take this into account when using the calculator.
Comparing a Preferred Provider Organization (PPO) plan to a high-deductible plan is not a completely apple-to-apples comparison. For one thing, high deductible plans have lower premiums but higher deductibles. On the other hand, high-deductible plans usually allow you to save pre-tax money in a spending account, and employers often contribute money to this account for you.
Use a calculator, like the one from health savings account provider HSA Bank, to compare different types of health insurance plans. You indicate how much you would pay for premiums, how much deductible you will need to meet, and other factors such as prescriptions, whether you pay them, and any coinsurance.
Depending on how much health care you use, the difference can be stark.
Look at the exterior plans
You may want to consider options other than those offered by your employer. If you have a partner who can cover you, that might offer better coverage for less than your employer’s plan. Depending on employer policies, you may not have to be married.
You’re not eligible for a subsidy on a market plan if your employer’s coverage meets minimum value standards, but even without a subsidy, coverage may be better for less, depending on your state and income . However, your family members can still get a market plan and premium support. You can check your eligibility and compare plans by visiting healthcare.gov.
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