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Even consumers with health insurance are spending a small fortune on medical care.
Workers 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 of money to put coverage in place. And when we factor in the cost of not just health insurance premiums, but also copays, 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 get insurance through their jobs might soon see their out-of-pocket costs skyrocket.
Employers are trying to save money — at the expense of employees
For months on end, financial experts have been sounding warnings about a potential recession. And that has spooked a lot of companies.
As such, many are trying to find ways to trim their costs. And cutting back on health benefits or passing higher costs onto employees is one solution many employers are looking at.
A recent McKinsey & Company report found that 49% of employers are considering increasing employees’ share of premium costs, while 47% are thinking of shifting to high-deductible health insurance plans. And 44% are looking at increasing employees’ share of out-of-pocket costs.
All told, that’s not great news for employees given that many people’s paychecks aren’t going as far now, due to the blow inflation has dealt. But that doesn’t mean all is lost. And workers still have options for coping with an uptick in out-of-pocket healthcare expenses.
The right savings plans can make a difference
It’s clearly not a great thing that companies are looking to lower their own expenses by making workers pay more for healthcare. But the good news is that the right tax-advantaged savings plan can make those expenses more manageable.
Those enrolled in a high-deductible health insurance plan can look at opening a health savings account, or HSA. HSAs allow for tax-free contributions, and any funds not needed immediately can be invested and grown in a tax-free manner, similar to a Roth IRA. Plus, HSA withdrawals are not taxed as long as they’re used to cover qualified healthcare expenses.
Also, HSA funds can be carried forward indefinitely, so savers don’t have to stress about using up leftover money in their accounts. Now the same cannot be said for flexible spending accounts, or FSAs. Those plans require savers to use up their funds annually or risk forfeiting them.
Also, FSAs don’t have an investment option. Funds that remain untapped can’t grow. But for workers whose health plans aren’t HSA-compatible, FSAs are a good option, because they do allow for tax-free contributions.
It’s unfortunate that employers are looking to slash their own costs in a way that hurts workers financially. But taking advantage of the right medical savings plans could make higher out-of-pocket healthcare costs easier to manage.
Just as importantly, funding an HSA or FSA could mean avoiding a scenario where healthcare expenses lead to credit card debt And also, those with money in an HSA or FSA may be less likely to skip out on medical appointments and skimp on healthcare expenses, meaning they won’t be putting their well-being at risk.
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