Healthcare is a major burden for working Americans across a wide range of income levels -- so much so that the typical U.S. employee spends a whopping $7,685 on it per year, according to Bank of America's 2019 Workplace Benefits Report. That figure breaks down as $2,138 on out-of-pocket expenses (think copays and deductibles) and $5,547 on health insurance premiums.
Clearly, these figures can put a huge strain on the typical American's budget. If you're struggling to keep up with your medical costs, here are a few ways to ease that burden.
1. Choose the right health insurance plan
Chances are, your employer offers more than one health insurance plan for you to pick from. It's important to not only assess your options year after year, but make sure you fully understand what each one entails.
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One thing you'll need to decide on is your deductible. The higher it is, the lower your monthly premiums are likely to be. If you don't expect to use your health insurance all that much, then a high-deductible health plan could be a solid choice for you. But if you have a preexisting condition that requires lots of monitoring, or you simply tend to get sick a lot, then a low-deductible plan with higher premiums could make more sense.
You'll also want to look at the specific coverage each plan you're offered provides, and see what its policy is with regard to going out of network. Also, pay attention to things like referrals -- some plans don't require them for specialists, whereas others do. These are the details that will help you determine which plan is the most cost-effective.
2. Take advantage of healthcare savings tools
Tax-advantaged tools like flexible spending accounts (FSAs) and health savings accounts (HSAs) can lower your healthcare expenses by virtue of giving you a tax break on the money you use to pay for them. With an FSA, you allocate money to cover near-term medical expenses, and you must deplete your account balance by the time your plan year comes to an end. With an HSA, your funds don't expire; you can invest the money you're not using in a given year for added growth, and then take withdrawals later on as the need arises. In fact, HSAs are considered an effective retirement savings tool for this reason.
Most employees are able to fund an FSA if they so choose, but to contribute to an HSA, you must be on a high-deductible health insurance plan. The definition of that can change from year to year. In 2019, it's $1,350 or more for individual coverage, or $2,700 or more for family coverage. For 2020, these limits are increasing to $1,400 for individual coverage, or $2,800 for family coverage. The money you put into an FSA or HSA is earnings the IRS can't tax you on, so while participating in these plans won't lower your medical costs directly, they'll put more cash in your pocket nonetheless.
3. Get ahead of health issues before they escalate
Delaying medical care can result in costlier bills down the line. Unfortunately, it's a common practice -- 32% of workers have skipped medical appointments to avoid paying for them, while 21% have skipped tests or procedures. But if you allow medical issues to escalate, you could wind up costing yourself more money than necessary, not to mention harming your health.
Imagine you cut yourself but avoid an ER visit for stitches because you don't want to fork over the copay. If that cut gets infected and you wind up in the hospital for days, you'll not only lose out on income by virtue of missing work, but you'll likely rack up a much higher tab. The takeaway? Don't delay medical care. It's just a bad idea.
If healthcare expenses are eating up too large a chunk of your income for comfort, make an effort to get them under control. That means finding the most cost-effective insurance plan, funding an FSA or HSA to lower your tax burden, and staying on top of your health. At the same time, make sure you're budgeting appropriately for medical expenses so you're not forced to rack up debt in the course of taking care of yourself.
