How will the US Supreme Court rule on Obamacare? If it upholds the part of the law that mandates all Americans must buy healthcare insurance, then we will have to wait until the next election to see what happens with Obamacare, depending on which party captures the Senate and the presidency. On the other hand, if the Supreme Court finds the mandate unconstitutional, you need to be thinking about how you can save money on your health insurance.
Times are tough
The cost of healthcare insurance has increased so dramatically over the past 10 years that many families have had to make some hard choices. The Employee Benefit Research Institute (EBRI) released a study recently showing that 25% of insured adults had reduced contributions to their retirement plans to help pay for higher medical expenses. Even more surprisingly, a Kaiser Family Foundation study found that 15% of the people who had health insurance had postponed medical treatment because of its cost.
The advantages of a Flexible Spending Account
One way you can help manage healthcare costs is with a Flexible Spending Account–assuming that your employer offers one. This is a plan whereby you put money into the account pretax and then use it to pay some or your entire medical costs. You save money because you don’t pay ordinary taxes on that portion of your income, yet you can use the money to pay your healthcare expenses.
A Flexible Spending Account (FSA) has become even more attractive as the list of things you can use the money for has been expanded and now covers most over-the-counter drugs and many non-prescription drugs such as aspirin, antihistamines and cough syrup. You can even use money from your FSA account to pay your insurance deductibles and co-pays, and for unreimbursed expenses such as contact lenses, flu shots, acupuncture and even LASIC surgery.
Ask your employer
Your employer will be able to tell you how much you can contribute to your FSA each year. It might be as much as $5000. In this case, you would probably save about 30% on your federal income tax–depending, of course, on your tax bracket.
The one catch to an FSA is that you must spend the money the year that you deposited it to your account. So it’s important that you monitor how much is accumulating in your account and make plans for using it throughout the year so you don’t end up with $3000 or $4000 in the account in December.
Choose a plan with a high deductible
Another way that you might be able to save money on your health insurance is by choosing a high deductible plan. This can work especially well with a Flexible Spending Account. This is an insurance plan with a deductible of $1,000 or more. If you use one of these plans in association with Flexible Spending Account, you can use the money from that account to reimburse whatever medical costs you pay out-of-pocket until you reach the $1000 level.