Reduce Healthcare Costs

Healthcare takes a big bite out of just about every family’s budget, with research showing that the average employee spends $11,685 each year on insurance premiums and out-of-pocket expenses.

While many of those expenses are necessary (I would never recommend going without insurance or medical care), there are some ways to save money while still getting the care you need.

And with open enrollment coming up, this is the perfect time to put those strategies in place. Here are five ideas to keep in mind as you consider your options for the coming year.

1. Enroll in a High-Deductible Plan

While the instinct is often to run from high-deductible health insurance plans, they can, in some cases, save you significant money.

Think about it this way:

Your premium is a guaranteed cost. You will definitely have to spend this money on healthcare.

Your deductible is a potential cost. You may or may not have to spend this money on healthcare.

If you’re relatively healthy, you might end up saving hundreds, or even thousands, of dollars by switching to a high-deductible plan.

And no matter what, you should compare plans by adding the annual premium to the deductible and out-of-pocket max to see what your maximum possible cost could be.

In some cases there isn’t much difference between the high-deductible plan and the low-deductible plan, and the low-deductible plan at least gives you the possibility of spending less.

2. Self-Insure for Your Deductible and Other Out-Of-Pocket Costs

Whatever your deductible is, keeping that amount of money available in a savings account ensures that you can pay your medical bills without resorting to a credit card.

The last thing you want to do is compound the cost of your healthcare with interest. Self-insuring your out-of-pocket costs will prevent that from happening.

3. Contribute to a Health Savings Account (HSA)

If you’re eligible, contributions to a health savings account (HSA) offer a triple tax break:

Your contributions are tax-deductible

The money grows tax-free inside the account

You can withdraw the money tax-free for qualified medical expenses

In other words, an HSA allows you to pay for your healthcare completely tax-free. This can lead to significant savings, especially if you live in a high tax state like California.

On a side note, those same tax benefits can make HSAs fantastic retirement accounts.