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No matter who you are or what you do, chances are you’ll end up incurring some type of healthcare expense—or more likely, expenses—in the coming year.
Maybe it’s for something planned, like having a baby or a scheduled surgery. Or maybe it’s for something completely unplanned, like a nagging toothache that turns into an emergency root canal. While we certainly hope you don’t experience the latter—or any unplanned incident for that matter—we do want to make sure you’re armed with the information you need to effectively plan for healthcare expenses as we close out the year and head into a new one.
When it comes to planning for healthcare expenses for the upcoming year, it’s best to put in a little time now to be prepared and avoid the headaches and financial hardships that can accompany a lack of planning. Luckily, healthcare expense planning doesn’t have to be overly complex or time consuming.
Effectively planning for healthcare expenses starts with facing a not-so-pleasant truth—the cost of healthcare only continues to rise. Now more than ever, you need to plan strategically to make your money work smarter for you, especially when it comes to your healthcare dollars. That’s where a high-deductible health plan (HDHP) paired with a health savings account (HSA) comes in.
You can learn all about why to choose an HDHP and HSA in one of our previous blog posts. But for now, let’s focus on knowing the true cost of your insurance coverage. Because the premium dollars you pay directly play into how you plan. If you have a traditional PPO or HMO health insurance plan, you may be paying more than you think when you add up all the money you’re spending in monthly premiums alone. Plus, you’re missing out on all the advantages of being able to use an HSA—something you can only do if you have an HSA-eligible HDHP.
With an HDHP and HSA combination, you can:
So start your planning with a look at your current insurance coverage. And if you don’t currently take advantage of an HDHP with an HSA, consider making the switch at your next available opportunity.
The next step to plan for healthcare expenses in the new year is to revisit your healthcare spending from previous years. Simply put, there’s no better indicator of the level of expenses you may incur than what you’ve typically experienced in the past.
Again, be sure to include premium payments, along with any planned future expenses you know will be hitting in the coming year. And don’t just limit your calculations to major expenses—be sure to also include smaller, recurring expenses like prescriptions, routine vision and dental care and other common costs. Also remember, if you have an HDHP, your HSA can help cover the costs of the almost every expense you’ll incur, as long as it’s an HSA-qualified expense.
HSA-qualified expenses include:
After you’ve reviewed your insurance coverage and calculated past and known upcoming expenses, you should have a solid idea of what your healthcare expenses will look like heading into the new year so you can plan to save accordingly, whether through HSA contributions or setting aside money in other ways if you don’t have an HSA. But even with the best plan in place, circumstances can change quickly. Luckily, if you have an HDHP and HSA, you can take advantage of an HSA’s unique flexibility to adjust your approach whenever needed.
So if you need to change your HSA contribution amount, that’s no problem. You can add a one-time lift to boost your HSA funds, or adjust your recurring contribution whenever you need to, as many times as you need.
With an HSA, there’s also no time limit on reimbursement as long as the expense is HSA-eligible and was incurred while your HSA is open. That means there’s no need to panic even if you come up against a healthcare expense that falls outside of what you’d initially planned for—you can always submit your qualified expenses at any point in the future if you want to be reimbursed through your HSA. Or you can pay with your HSA immediately if that makes the most sense.
With an HSA, the choice is yours.
Another element of healthcare expense planning is looking beyond the immediate future to better plan for your long-term financial health. If you have an HDHP and an HSA, you can implement an “HSA saver” strategy to ensure you maximize your triple tax savings year over year and turn your HSA into the most effective long-term retirement planning vehicle. Because an HSA is so much more than just a 12-month healthcare spending account.
And when you consider that the latest research indicates that a retirement-aged couple in 2020 can expect to spend roughly $295,000 in healthcare expenses throughout retirement, it’s clear to see how your HSA plays a critical role in helping you plan and pay for expenses for not only the coming year, but for years to come. And just in case you happen to need money for other expenses in retirement, an HSA has you covered—once you’re 65, you can use your HSA funds for anything you wish without penalty—not just healthcare expenses.
Planning for healthcare expenses doesn’t have to be difficult. And if you partner with an HSA provider like Bend, you can take advantage of tools and resources like our HSA Contribution Planner to eliminate the guesswork and figure out the best saving strategy for your specific situation, for the coming year and for the future. Because at Bend, everything we do is driven to help you achieve better financial wellness.
From all of us at Bend, we hope you’ve successfully navigated the many challenges of 2020 and that you’re looking to the new year with hope and resolve. We’re here to help you achieve success with your HSA and chart the path to better financial health for years to come, so please don’t hesitate to reach out to learn more about how we can help make your money work smarter for you.
Happy holidays—and stay tuned for a fresh year of blogs beginning in January 2021!