Healthcare costs borne by patients are increasing. Here’s how to handle them

A doctor sitting next to a patient in an exam room and reviewing test results on a clipboard.

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Even consumers with health insurance spend a small fortune on medical care.


Key points

  • In these uncertain economic times, employers are increasingly looking for ways to save money.
  • Forcing workers to pay more for health care is an option companies are currently considering.
  • Consider opening an HSA or FSA if you plan to cover more of your own healthcare costs, as these are tax-free ways to save.

Those who are self-employed or who don’t have access to a health insurance plan through an employer often find themselves paying a small fortune to set up coverage. And when we factor in the cost of not just health insurance premiums, but also copayments, coinsurance, and deductibles, things can really get out of hand.

But it’s not just those who buy their own health insurance who are facing higher costs these days. Workers who obtain insurance through their work could soon see their out-of-pocket expenses skyrocket.

Employers try to save money – at the expense of employees

For months, financial experts have been warning of a potential recession. And that scared off a lot of companies.

As such, many are trying to find ways to cut costs. And cutting health benefits or passing on higher costs to employees is something many employers are considering.

A recent McKinsey & Company Report found that 49% of employers are considering increasing the cost share of employee premiums, while 47% are considering switching to high-deductible health insurance plans. And 44% plan to increase the share of employee personal expenses.

All told, that’s not good news for employees given that many people’s paychecks aren’t going that far now, due to the hit from inflation. But that doesn’t mean all is lost. And workers still have options to deal with a slight increase in out-of-pocket healthcare costs.

The right savings plans can make a difference

It is clearly not a good thing for companies to seek to cut their own expenses by forcing workers to pay more for health care. But the good news is that a good tax-efficient savings plan can make these expenses more manageable.

Individuals enrolled in a high-deductible health insurance plan may consider opening a health savings account, or HSA. HSAs allow for tax-free contributions, and any funds not needed immediately can be invested and grown tax-free, like a Roth IRA. Additionally, HSA withdrawals are not taxed as long as they are used to cover eligible healthcare expenses.

Plus, HSA funds can be carried forward indefinitely, so savers don’t have to worry about using the money left in their accounts. Now the same can’t be said of flexible spending accounts, or FSA. These plans force savers to use their funds every year or risk losing them.

Also, FSAs do not have an investment option. Funds that remain untapped cannot grow. But for workers whose health plans aren’t compatible with HSA, FSAs are a good option because they allow tax-free contributions.

It is unfortunate that employers seek to cut their own costs in a way that hurts workers financially. But taking advantage of good medical savings plans could make it easier to manage higher healthcare costs.

Equally important, funding an HSA or FSA could mean avoiding a scenario where healthcare spending leads to credit card debt. And also, those with money in an HSA or FSA may be less likely to skip medical appointments and skimp on healthcare expenses, meaning they won’t put their well-being at risk. danger.

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