A little preparation today can help protect your finances from tomorrow’s medical surprises. Healthcare can get very expensive, particularly when unexpected ailments arise. If you are not ready, sicknesses and injuries can take a major toll on your bank account in addition to your body. Following are six tips for planning for unexpected health expenses.
1. Build an Emergency Fund
If you don't already have an emergency fund, start one right away. Open a savings account and add to it regularly so you have money when you need it. This can be used for other emergencies, such as home or car repairs, appliance replacements, etc., but it can certainly be used for unexpected health expenses. It's not a bad idea to set up multiple emergency funds, with one specifically dedicated to health. You can use your insurance deductible and out-of-pocket maximum as a starting point for how much to save. Contribute consistently—$25 or $50 a month, for example. This will add up significantly over time as long as you remain healthy enough to avoid having to dip into it. When something major occurs, you'll have the money to cover what your insurance won't.
2. Use a Health Savings Account
Another option is to use a Health Savings Account (HSA) if you are eligible. These are generally available to those with high-deductible health plans. You can contribute tax-deductible funds, and withdrawals for qualified expenses are also tax-free. An HSA might be offered by your employer, but if not, your health insurance agent can help you sign up independently during open enrollment. The money in the account can be used to pay for medical costs until the annual deductible of the insurance plan is met. Then, medical bills are paid by insurance, while money left in the savings account earns interest.
Automatic deductions can be set up to go from your paycheck to the account. Your employer may make a contribution to your HSA paycheck as part of your benefits plan. Money can also be accepted as a gift by individuals who wish to help you with medical expenses.
3. Choose a Good Insurance Plan
Having a good insurance plan is obviously a great benefit to being prepared for any unexpected health expenses.
"When it comes to managing medical expenses, one of the most important decisions you can make is choosing your health insurance plan," says Beth Braverman at US News.* "Be sure to evaluate all of your options during open enrollment season (including those available through a spouse if you’re married) to find a plan that best meets the needs of your family. Factors to consider include the total potential out-of-pocket costs, including premiums and deductibles; whether your preferred doctors are in-network; and your family's medical needs."
4. Stay on Top of Preventive Care
You can avoid a lot of unexpected health issues and expenses if you stay on top of your preventive care. This will help you catch things before they become bigger (and more costly) problems. Get routine screenings, vaccinations, and check-ups to detect health issues early and prevent others. If they become emergencies later, they will almost definitely cost you more and perhaps become a more serious risk. Most insurance plans will completely cover preventive care because it's also in their own best interest to prevent higher costs later. Get annual physicals, blood pressure and cholesterol checks, and cancer screenings.
5. Don't Put off Care to Save Money
If you encounter health issues, be ready to pay for them. Don't delay procedures or medications that can help in order to save money. Not only is this putting your health at risk, it may lead to more serious problems that will also be more costly later on.
"When faced with unexpected costs, it’s natural to want to cut back — but it’s important not to delay or skip essential care because of financial concerns," says Sarah Mitchell at Equities.com.** "Ignoring necessary treatment can lead to
bigger, more expensive problems later. If you need to prioritize spending, focus first on treatments and medications that directly impact your recovery or prevent complications. Then, work with your providers to find more cost-effective options for less urgent services if needed."
6. Maintain a Healthy Lifestyle
Maintain a healthy lifestyle. While some ailments may affect otherwise healthy people, you're putting yourself in a better position by doing everything you can to take care of your body. That means eating well, exercising regularly, and taking care of your mental health. Manage stress, get enough sleep, and avoid tobacco and excessive alcohol use.
In some ways, most sicknesses and injuries are unexpected. Nobody is planning on having them, but they happen all the time—and it's possible they will happen to you. Be prepared for unexpected health issues and the expenses that come with them. Take care of yourself the best you can and do everything you can to be prepared financially so you're better able to deal with the situation when the time comes.
** https://www.equities.com/impact-investing/the-smartest-way-to-manage-unexpected-health-costs/