You can’t predict precisely how much you’ll need for health care costs next year or even next month. Rising prices and obtuse billing make planning even harder.
However, if you have health insurance, you can map out potential best — and worst — case scenarios, then budget accordingly. Follow these guidelines for keeping your medical budget current.
Start with premiums.
Premiums are the easiest expense to budget for. They’re locked in for the year and provided when you enroll. However, they could skyrocket if you’re covered through work and get laid off. If your normal premium is $500 a month but your employer pays 80% of the true cost, your COBRA premiums could be $2,500 a month.
Know your deductible.
Deductibles can vary widely between plans, so knowing what you’re dealing with is paramount to your pocketbook. For example, if your deductible is $5,000, you’ll be paying out-of-pocket for almost everything before your coverage kicks in. If it’s $1,000, your cost-sharing benefits will apply sooner.
Review last year’s spending.
If your plan doesn’t provide a year-end summary, go through your explanation of benefit (EOB) statements for medical and prescription coverage to see what your out-of-pocket costs were last year. Add 5% to the costs you expect to incur this year to account for inflation.
Know your out-of-pocket maximum.
Insurance pays 100% of covered costs for the rest of the year after your deductible and cost-sharing payments reach your out-of-pocket maximum. Your out-of-pocket maximum could be a savings goal in case you need more care than expected. Premiums and prescriptions don’t count toward this amount.
Take stock of miscellaneous expenses.
Don’t forget about eye and dental exams, glasses, nonprescription medications, vitamins and other routine items.
If you expect to go out of network, remember that you’ll pay much more out of pocket.
If you need help understanding your plan — and who doesn’t? — call or email with questions anytime.