Saving for health care purchases can be difficult, especially if you don’t have health insurance. That’s why it’s crucial to lay the right financial groundwork before an emergency comes. After all, right after you’ve broken your leg isn’t the best time to realize the importance of being able to pay for medical services.
Here are five ways to make sure you’re financially prepared for your next run-in with a doctor.
1. Understand Your Potential Health Care Costs
If you have health insurance, start by double-checking that you understand your policy. Along with learning what types of procedures your insurance does and doesn’t cover, study up on terms like copay, coinsurance and out-of-pocket maximum. This will help you find the line between your financial responsibility and your insurer’s.
2. Develop a Long-Term Savings Plan
You’ll have to pay out of pocket for elective procedures that aren’t medically necessary. So, if you’d like to get laser eye surgery, identify the date you’d like to do the procedure, research the cost and determine from there how much you’ll need to save every month to meet that deadline.
For example, the average cost of LASIK surgery is roughly $2,100 per eye. That means that getting your vision corrected in both eyes would cost about $4,200. If you’d like to undergo surgery a year from now, you’ll need to save $350 a month.
3. Create a Medical Emergency Fund
Of course, not all procedures can be planned ahead of time. Just like you need a “rainy day” fund in the event of an unplanned car repair or a job loss, you should build up a financial cushion for medical emergencies.
How much should you save? Your out-of-pocket maximum is a good place to identify your savings goal. If your annual out-of-pocket maximum is $3,500, for example, having at least this much set aside will allow you to cover your health care costs and give you peace of mind.
4. Consider an FSA or HSA
If you want to offset some of your health care expenses, consider enrolling in a flexible spending account (FSA) or a health savings account (HSA). These accounts allow you to save pretax dollars for qualified health care costs like deductibles, coinsurance and prescriptions, among many others. This helps you dedicate a specific portion of your savings for health care expenses, meaning you won’t end up using that money on other things.
Keep in mind that FSAs and HSAs each have their own unique guidelines and limitations. To get an FSA, your employer has to make one available to you, while you only qualify for an HSA if you have a high-deductible health plan. Both FSAs and HSAs have contribution limits. For 2019, the most you can contribute to an FSA is $2,700. For HSAs, the limit is $3,500 for individuals and $7,000 for families. In general, FSA funds don’t roll over from year to year, while your HSA contributions are yours to keep.
5. Consider a Supplemental Policy
Saving for medical expenses is always a smart move — but that doesn’t mean you shouldn’t consider additional ways to offset some of your health care expenses. Supplemental insurance plans can add an extra layer of protection and take some of the sting out of big medical bills.
Critical illness insurance provides benefits if you need to treat certain serious illnesses, for example, while accident insurance comes into play if you have a qualified accident or injury. Hospital indemnity plans kick in to cover qualified hospital services, like if you have to stay in the hospital overnight or need surgery. Supplemental insurance plans only cover certain conditions and services, so make sure you understand what’s included before you sign up for a policy.
The best-laid plans still go awry, and even people who are completely healthy could end up in the emergency room. That’s not to say that you should start wearing a layer of Bubble Wrap outside of your clothes every time you leave the house — it just means that it makes sense to be prepared. Saving for health care purchases can get costly, but don’t worry: You now have a solid game plan to make sure that, when you see your next medical bill, you’ll have everything you need already in your back pocket.