Understanding the cost of care
Being prepared and partnering with the right provider is the best way to budget for your health.
By WP BrandStudio
Oftentimes, we don’t think about—or even understand—healthcare costs like deductibles, copays and out-of-pocket maximums. In fact, a recent survey showed that only 4 percent of respondents could accurately define those terms.[1]Millennials especially—many of whom are in the midst of budgeting for families or homes—have the lowest overall confidence in their understanding of healthcare.
Having the right insurance and planning for medical expenses in advance plays a huge role in an overall financial plan that can help you get on the path to a healthy future—both financially and physically.
There is no easy formula for calculating the portion of income you should earmark for health care expenses. Age, medical history, lifestyle, location and a host of other considerations factor into an individual’s plan. But by arming yourself with the right knowledge and partnering with the right provider, you can build healthcare into a budget that works for you.
First, speak the language
The first and most important step in understanding your healthcare budget is to familiarize yourself with key terminology. Building this foundational understanding will empower you with the right knowledge to make financial choices.
Here are the most important figures to understand:
Premium: This is the amount you have to pay (or have taken out of your paycheck) each pay period or each month for health insurance. When calculating your premium, be sure to note whether you should multiply by 26 if you are being paid bi-weekly or by 12 if your paycheck comes monthly.
Deductible: The amount you have to pay towards health expenses before your health insurance begins to cover your care. Generally, the lower the deductible, the more expensive the premium, but to estimate the actual cost of an insurance plan, you must take other aspects of the policy into consideration.
Copay: A fixed amount patients must pay for certain doctor’s visits and prescription medications. A typical copay for a doctor’s visit ranges anywhere from $10 to $50. The Affordable Care Act requires insurance companies to cover some services completely, without copays, deductibles or coinsurance. This includes your annual checkup, certain immunizations and some other preventive services.
Coinsurance: Coinsurance is the percentage a patient pays towards medical costs after hitting the deductible. This percentage varies by plan—it might be 20 percent, or it might be much more than that. It may also differ based on the service, such as specialty care or in-network or out-of-network providers.
Out-of-pocket maximum: This is the most a patient will have to pay before health insurance pays 100 percent of covered benefits.
Next, build a budget
Once you have a firm understanding of the terminology in your healthcare plan, you can begin to calculate the budget that fits into your needs and lifestyle.
The mistake that most people make when considering their budget is just looking at premium and deductible costs. But that doesn’t offer a complete financial picture—there are a lot of additional costs that are in flux. Look at your medical history to estimate future expenses. For example, someone who regularly takes a certain medication or has frequent appointments with a particular provider will need to consider those costs. Known upcoming expenses—such as orthopedic surgery or planned pregnancy—should also be taken into consideration.
Remember that a perfectly accurate estimate isn’t easy, so your budget needs to have some wiggle room built in. For example, the cost of a knee surgery could vary between facilities. Some insurance providers, like the Blue Cross and Blue Shield Federal Employee Program (FEP), offer prescription and procedure cost estimators on their websites, which can be invaluable tools in building a budget. Tools like this can help you get a handle on these expenses early on, putting the power to make the right financial decision in your hands.
BCBS health care plans, including the FEP Blue Focus plan for federal employees, also offer the option to speak with representatives to answer any questions about costs. This is particularly important to take advantage of during Open Season, when many people are parsing through the numbers, signing up for or changing their FEP Blue Focus plan and preparing a budget for the upcoming year.
Also remember that health insurance covers more than physical health—plans must also address mental health and behavioral healthcare, like therapy, counseling and substance abuse treatment. Even if using those services seem unlikely, it may be wise to have money set aside as a precaution.
Lastly, find efficiencies
Healthcare is an important expense, but it’s not the only one. Think about the ways you measure success and consider what you want to accomplish in the years to come. Expenses like education, family or a home are major financial commitments, and it is important to consider how healthcare fits into a bigger picture. Fortunately, there are some ways to find savings within your healthcare budget to ensure that you are making progress towards all of your goals in life.
Choosing a preferred provider organization (PPO) like FEP Blue Focus can help to mitigate costs. This means that there is a network of doctors, pharmacies and facilities that are contracted to offer care at a discounted rate. Seeing someone within that network will mean lower out-of-pocket expenses. FEP Blue Focus also offers other benefits like free preventive care services, which will pay off in the long run by keeping your health in check and thus, lowering the possibility of unexpected medical expenses. FEP Blue Focus also offers two free telehealth services per year and a flat rate of $10 per visit for each of the first ten primary or specialty care visits.
Transparent records and easy-to-read explanations of benefits go a long way in tracking your spending. A financial dashboard on the provider’s website or app can also help to keep track of spending in real-time. This type of tool can help organize each type of spending—like which expense went towards your deductible and which was covered—as well as a year-to-date summary for a bigger picture.
Ultimately, it’s important to choose a provider like BCBS FEP that offers a partnership in not just your health, but your financial future. The first step in planning any healthcare budget should be ensuring that you have the tools to understand every cost that comes your way. With this approach, you can ensure that you have the care you need while finding personal fulfillment moving into the future.
[1] Policygenius, 2018.
—
This content is paid for by an advertiser and published by WP BrandStudio. The Washington Post newsroom was not involved in the creation of this content. Learn more about WP BrandStudio.