Health is wealth: how to pay for healthcare 🩺
Today, we dive into preventative care, HSAs / FSAs and our favorite resources.
Happy Last Week of August! 😎😭
Anna is returning to New York after over five months! She’s been living with her parents in the suburbs and appreciating the slower lifestyle, but excited to return to her home / favorite place on Earth, Chinatown.
Our intern Jess is also road-tripping to NY for school (partly remote still) and stopped at not one but two IKEAs on her drive back.
What’s on Our Mind: Healthcare Costs & HSAs 👩🏽⚕️
Last week, we laid out our thoughts on broader health insurance. We feel we’ve laid enough groundwork to dig into the money side of U.S. healthcare.
The average American spends over $11,000 each year on healthcare. But healthcare spending isn’t something you can cut budget or predict, because our health can take a turn at anytime. We’re proponents of saving early to buy ourselves more health later on.
(1) First principle: healthcare is cheapest when it is preventative.
This seems obvious but needs to be said before we dive into HSA logistics. Health insurance and the healthcare system is built to encourage preventative checkups, because it reduces the entire country’s healthcare costs on expensive dental work, surgeries or later stage disease treatments.
Daily routines matter. Brush your teeth, exercise, sleep and practice mental health to reduce future pain and healthcare costs.
Look into your telehealth options. We’re all busy, especially during COVID-19. But most insurance plans have added virtual / online options for free or reduced cost telehealth check-ups. Check with your company or ask HR!
Schedule checkup reminders in your calendar. We’ve been there — being so busy with your life that you go a year or two without a dentist or doctor check up. But issues don’t go away; they get worse (applies to most of our other problems too tbh).
(2) Set up an HSA if you have an high-deductible health plan
If you have a high-deductible plan, you quality for a Health Savings Account (HSA). HSAs serve as both a healthcare-specific emergency fund and a long-term tax-advantaged investment vehicle.
HSAs can be frustrating to understand, but once you do, you’ll love them too! Let’s get started.
You set amount into a pre-tax savings account (similar to a Roth IRA) through your health plan. From the get-go, the HSA tax deduction saves you tax dollars.
Invest that money with gains tax-free! Log into your insurance website and set up your HSA portfolio allocation based on the fund options. Invest for a long-term horizon, because day-trading your HSA fund is probably a waste of time.
You can tap into your HSA as an emergency health fund, especially if you can’t afford the bill with cash! However, if you’re young and relatively healthy, we prefer to invest that money for compounded returns that will pay for more in healthcare costs later in life. Per Rule #1 though, preventative healthcare > saving a few copay dollars. Use your HSA if you need to.
As you age and learn about your healthcare needs, you can use your HSA on yourself or your spouse / dependents. After age 65, you can spend HSA money on other non-healthcare expenses too, without penalty. We recommend using it on necessary healthcare expenses first to optimize tax benefits first. Even if you don’t use your HSA in your lifetime, the funds will be passed down to either to a surviving spouse (tax-free) or passed down to others and taxed as income.
We encourage you to max out HSA contributions every year that you can.
* Although CA and NJ do not deduct HSA contributions from state taxes, you still get the federal tax deduction and all the other benefits of HSAs!
(3) Check if your health plan offers an FSA
Flexible Spending Accounts (FSAs) are often offered by employers but depend on your plan. FSAs let you set aside pre-tax income on qualified healthcare expenses, but they expire each year (commonly called “use it or lose it”).
Dependent Care FSAs: For our readers with dependents (children or aging parents), look specifically for this from your employer. You can allocate your income tax-free to be spent on childcare and senior care each year.
Qualified expenses include any medical, dental or vision checkups or products, but also includes band-aids, eyeglasses, and Advil. Check the full list for medical FSAs and dependent FSAs before you commit a dollar amount.
Healthcare Resources 📖
(1) We love GoodRx as both a health resource and an innovative startup. You can use their website to check if you’re paying the lowest amount possible for the same subscription medicine or find a generic (unbranded) alternative. Generic alternative medicines are like that Walmart version of Advil that will do the same job for less $$$, but check with your doctor before making the switch.
(2) Zocdoc helps you find a doctor within your health plan’s network, without calling a never-ending list from Google. You want to always make sure you follow your health plan’s network because it will reduce your costs and potential risk of much higher charges.
(3) Visit your health plan’s website! The US healthcare system is largely private, meaning that every health plan sets their own rules. Your telehealth coverage, HSA investment options and all the other benefits will often be on your health insurer’s website. Our favorite benefit that some companies provide is a negotiation service that calls your insurance provider on incorrect or high bills for you. You can avoid the hour-long holds on the customer service line while negotiating a more affordable cost for major expenses.
Lastly, thank you to all the healthcare workers and innovators in our lives!
Disclaimer: Anna is a healthcare investor and daughter of two doctors, so she has a lot to say on this topic! But she is NOT a licensed financial advisor or medical expert herself. She recommends taking all advice ever with a grain of salt and further research.
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