In the fourth quarter of each year, many Americans are faced with a decision about their healthcare options for the following calendar year. This decision often comes at a busy, stressful time, as the holidays are right around the corner. When decisions need to be made quickly, individuals and families default to their previous year’s plan and call it good ― often forgetting the short comings of their current healthcare plan. Therefore, it is a good idea for your clients and their employees to take some time during the summer to evaluate their current healthcare plan
Thinking through how the health plan was used in the first half of the year, your clients can create a summer healthcare checklist of medical needs that should be accomplished for the rest of the year. This is also a good time to see if the current plan is used to its full benefit.
Evaluate Current and Future Medical Costs
When coming up with a summer healthcare checklist, your clients and their employees need to evaluate their past, current, and future medical costs. This information will be used to determine how to proceed for the rest of the year.
They should take the following into consideration:
- Costs associated with prescriptions
- Regular physical therapy or chiropractor appointments
- Chronic disease management
- Annual primary care doctor, dentist, and eye doctor appointments
- Preventive care, like a mammogram or colonoscopy
- Any other medical needs
Once their needs and wants are determined, they can then figure out how much it will cost for the rest of the year by calling the insurance company or their doctor’s office. Then, they can prioritize the checklist and set a budget.
Medical Savings Accounts
Are your clients taking advantage of tax-advantaged savings accounts to help pay for medical bills? If they are eligible for an account, but not using one, your clients are losing a lot of money. The two popular accounts are Health Savings Accounts (HSAs) and Flexible Spending Accounts. Both lower taxable income, allowing individuals and their families to save on healthcare costs, but there are a couple key differences.
Health Savings Accounts (HSA)
Clients with high deductible health plans are eligible for a Health Savings Account (HSA). An HSA always stays with the account owner, and the funds roll over from year to year. Contributions made to these accounts can change throughout the year depending on the medical needs of the account owner.
More than 80% of HSAs were opened in 2011 or later, which isn’t surprising as high deductible health plans are becoming more popular. But many people do not utilize HSAs, and those who do have them often do not contribute enough money to the account and would run out in the case of an emergency.
The balance of the average HSA was $1,844 at the end of 2015. Data show that your age is a good indicator of how much you have in an HSA. Individuals under 25 averaged a balance of $759 and individuals 65 and older averaged a balance of $3,623.
Flexible Spending Account
The amount individuals want to contribute to a Flexible Spending Account (FSA) must be determined during Open Enrollment and cannot be changed during the year. At the end of the year, only $500 can be carried over to the next year and the remainder must be forfeited. It’s estimated that only 20% of individuals eligible for an FSA utilize one.
Based on what type of tax-advantaged account your client has and what their checklist looks like, encourage them to consider the following:
- If they do not have enough funds in their FSA account for this year, is there anything that can wait until the following year?
- If the FSA balance is higher than what they will need for the rest of the year, they can consider purchasing other items with that money, like saline solution, bandages, and sunscreen, for example.
- On a similar note, if your client’s HSA doesn’t have enough money to accommodate all their needs for the rest of the year, can he or she increase their contributions for the rest of the year?
- If the deductible is close to being met or has already been met, encourage clients to make all the appointments they want and need for the rest of the year to save costs.
Another benefit of scheduling the rest of their appointments for the current year is that it can take weeks, or even months, to get in to see a current or new doctor, specialist, dentist, or eye doctor.
After they’ve had the chance to carefully consider their status, it’s time for your clients to consider if they are happy with their current plan.
Think Ahead to Next Year
After evaluating current and future medical costs, it’s time to think about what could be done differently the following year. Encourage your clients and their employees to think about what their family might look like over the next year. Is there a baby on the way? Does a teenager need to have their wisdom teeth removed? Will a child turn 26 and no longer be covered under the current plan?
Whether that includes participating in a company-sponsored FSA, contributing to an HSA, or choosing a different healthcare plan altogether, being prepared for planned and unplanned medical needs is important to the financial health of your clients, their business, and their employees. Thinking ahead and learning from past experiences can help everyone make wise, educated decisions regarding their healthcare.
Chang, E. (2015, May 19). Flexible spending accounts are underutilized by employees. The Street. Retrieved from https://www.thestreet.com/story/13153987/1/flexible-spending-accounts-are-underutilized-by-employees.html
State actions on health savings accounts (HSA) and consumer-directed health plans, 2004-2017. (2017, April 10). National Conference of State Legislatures. Retrieved from http://www.ncsl.org/research/health/hsas-health-savings-accounts.aspx