Create your healthcare budget to choose the right health plan.

Your budget will reveal the right health plan.

Healthcare spending is continuing to increase. Understanding how you spend your money usually helps to understand how to save money and get more of what you really want. Healthcare is no different.

Three categories of expenses to consider in your budget

1/Insurance Premiums

People often think more is better because there is a co-relation between the amount you spend on premiums versus healthcare services.

The more you spend on premiums the less you spend on healthcare services. Richer plan benefits reduce the co-insurance, co-pay, deductible and out of pocket maximum amounts so that you pay less out-of-pocket. Conversely, the less you spend on health insurance, the more you on healthcare services.

2/ Healthcare Services

Spend a few minutes thinking about how you used the healthcare system last year and what you could do differently this year to reduce your costs.

For instance: Online visits are cheaper than primary care visits. Primary care visit are cheaper than urgent care visit. Urgent care visits and home visits are cheaper than Emergency Room [ER] visits. Ambulatory Surgery Centers [ASCs] are cheaper than hospitals.

The amount you pay for these types of healthcare expenses are considered qualifying medical expenses for Healthcare Savings Accounts[HSA] and Medical Savings Accounts. HSA accounts enable you to save for and pay these expenses prior to tax.

3/ Complimentary Care + Self-Care

Compile a list of complimentary care services and self-care expenses not covered by your insurance last year. Many complimentary care services delivered by a Chiropractor, Acupuncturist,  Naturopathic Doctor and therapists are considered qualifying medical expenditures for HSA and MSA accounts.

Gym membership dues may be paid at least in part by your insurance plan now. However, the amount you pay is not a qualifying medical expenditure.

Cosmetic services and health enhancement expenses [aka: vitamins] that improve your appearance and supplement your diet are not qualifying medical expenses. However, you should still include them in your healthcare budget to get the full picture.

Total each category

The total of each category should give you some insight into the right health plan. Keep in mind that accidents happen to everyone regardless of health risk and lifestyle behavior. Choose your health plan carefully.

• HMO or EPO might be the right option if you frequently use healthcare services and struggle to pay out-of-pocket expenses. 
• PPO might be the right option if rarely use healthcare services but like choice and control when you do. Be sure that you can afford to pay out-of-pocket to meet the higher co-pays, deductibles and satisfy the higher out-of-pocket maximum.
• HDHP might be the right option if you spend a lot on self-care and can afford to fund a HSA account to cover the out-of-pocket costs when you need healthcare services. Review the co-pays, deductibles and out-of-pocket maximums to ensure you can pay or finance the cost of service.