Health Care Cost Planning

It is difficult, and nearly impossible, to predict precisely how much you’ll need for health care costs next year or even next month.

This is especially the true if you have health concerns or need treatments, and is also dependent on rising prices and unclear billing practices, which make planning even harder.

However, if you have health insurance, you can map out potential best — and worst — case scenarios, then budget accordingly. Follow these guidelines for getting a plan in place for your health care costs.

Start by examining health care insurance premiums.

Premiums are the easiest expense to budget for because they are locked in for the year and provided when you enroll.

However, they could skyrocket if you’re covered through work and get laid off. If your normal premium is $500 a month but your employer pays 80% of the true cost, your COBRA premiums could be $2,500 a month.

Know your health insurance deductible.

Deductibles for health insurance can vary widely between plans, so knowing yours is paramount to your pocketbook.

For example, if your deductible is $5,000, you’ll be paying out-of-pocket for almost everything before your coverage kicks in. If it’s $1,000, your cost-sharing benefits will apply sooner.

Review last year’s health care spending.

If your plan doesn’t provide a year-end summary, go through your explanation of benefit (EOB) statements for medical and prescription coverage to see what your out-of-pocket costs were last year.

Then, add 5% to the costs you expect to incur this year to account for inflation.

Know your out-of-pocket maximum.

Health insurance typically pays 100% of covered costs for the rest of the year after your deductible and cost-sharing payments reach your out-of-pocket maximum.

Your out-of-pocket maximum could be a savings goal in case you need more care than expected. Just keep in mind that premiums and prescriptions don’t count toward this amount.

Take stock of miscellaneous expenses.

When planning your health care costs, be sure you don’t forget about eye exams and glasses, dental work, nonprescription medications, vitamins and other routine items.

If you expect to get services out of network, remember that you’ll pay much more out of pocket.