What If My Health Costs More Than I Planned For?

Healthcare expenses aren’t always predictable. A little planning can help keep an unexpected bill from disrupting everything else you’re working toward.

You open a medical bill and see $1,500 due.

Could you pay it without putting it on a credit card, dipping into money earmarked for something else, or changing your plans for the next few months?

That’s a useful question to answer before the bill arrives.

Even with good health insurance, healthcare costs can be difficult to predict. A new prescription, an unexpected test, a specialist visit, or a procedure can quickly turn into an expense you didn’t build into the monthly budget.

You can’t anticipate every bill. You can get a much clearer picture of what you might be responsible for and where the money would come from.

Know what you could owe

Most of us know whether we have health insurance. Far fewer of us could explain exactly what happens financially when we need to use it.

Pull up your current plan documents, such as your Summary of Benefits and Coverage, and find a few numbers: your premium, deductible, copays or coinsurance, and out-of-pocket maximum.

Your deductible tells you how much you may need to pay for certain covered services before your plan begins sharing those costs.

Your out-of-pocket maximum can help you understand what you might pay for covered, in-network care in a particularly expensive healthcare year. Keep in mind that premiums, non-covered services, and some out-of-network costs generally do not count toward that limit.

Check your provider network, too, especially if you anticipate needing specialized care. Knowing how your coverage works now can eliminate some surprises when you actually need it.

Add up the expenses you already know are coming

Some healthcare costs are fairly predictable.

If someone in your household takes regular prescriptions, calculate what those medications typically cost over the course of a year. Include recurring appointments, therapy, dental or vision care, and other ongoing needs.

Then think about what may be coming in the next 12 months. Maybe there’s a procedure you’ve been putting off, a baby on the way, orthodontic work on the horizon, or a series of specialist visits you already know you’ll need.

Those expenses give you a starting point for deciding how much room healthcare needs in your budget.

See what an HSA or FSA could do for you

Depending on your health coverage and employer benefits, you may be eligible to contribute to a Health Savings Account (HSA) or participate in a Flexible Spending Account (FSA). Eligibility and contribution rules differ.

Both can provide tax advantages for qualified healthcare expenses, although eligibility, contribution, reimbursement, and carryover rules differ.

Consider what you already expect to spend on healthcare in the coming year when deciding how much to contribute. Money intentionally set aside for prescriptions, copays, and planned procedures is money you won’t have to find elsewhere when those expenses come due.

If you have an FSA, review your plan’s rules for unused funds, including any applicable carryover or grace period.

Put your emergency savings to the test

An emergency fund isn’t only for a job loss or broken furnace. It can also give you somewhere to turn when a healthcare expense is larger than expected.

Compare what you currently have set aside with your health plan’s deductible and out-of-pocket maximum, while remembering that some healthcare expenses may fall outside those limits. Then come back to that $1,500 bill.

Where would the money come from today?

Your answer can tell you quite a bit. If you’d need to use a credit card, pull from savings intended for another goal, or squeeze the expense into an already-tight monthly budget, increasing your cash reserves may deserve more attention.

How much you need will depend on your income, regular expenses, insurance coverage, other available resources, and family situation. But knowing how you’d handle an unexpected bill is a good place to start.

Check whether your family’s needs have changed

The health plan that worked for your household last year may not be the best fit this year.

Think about how frequently everyone uses healthcare and whether anything has changed. New prescriptions, specialists, planned procedures, or another dependent on your coverage could affect which plan makes the most sense.

This is especially useful during open enrollment. A lower monthly premium can be appealing, but the premium is only one part of what you could spend on healthcare over the course of the year.

Your health cost planning checklist

Before your next open enrollment period, or anytime your healthcare needs change, review:

Plan options: Does your current coverage make sense for how you and your family use healthcare?

Deductible and out-of-pocket maximum: How much could you be responsible for in a higher-cost year, including expenses that may fall outside those limits?

Prescriptions: What do recurring medications cost under your plan?

Expected procedures: What appointments, tests, treatments, or procedures can you begin planning for now?

HSA or FSA: Are you eligible, and does your current contribution reflect what you expect to spend?

Emergency savings: Where would the money come from if you received an unexpected medical bill?

Family coverage: Have your household’s healthcare needs changed since you selected your current benefits?

Make healthcare part of the financial conversation

A medical bill can feel especially disruptive when there was never a place for it in the plan.

Understanding your coverage, setting aside money for the costs you know are coming, and building a cushion for the ones you don’t can make those expenses easier to absorb.

If healthcare costs are one of the things that make you wonder whether your financial plan could hold up when life gets expensive, talk with your intellicents financial professional. Together, you can look at your cash flow, savings, benefits, and other priorities and decide whether you have enough room for the unexpected.

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summary

An unexpected medical bill can put pressure on your budget and other financial goals. Reviewing your insurance coverage, expected healthcare expenses, HSA or FSA contributions, emergency savings, and changing family needs can help you understand what you could owe and how you’d pay for it before the bill arrives.