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How to Choose Your Health Care Plan for 2018

It is open enrollment next week, and we must evaluate and choose the best health care plan for our household for the coming year. If you get health insurance through an exchange, open enrollment for 2018 runs from November 1 to December 15 (instead of January 31).

Shopping is fun, but it doesn’t apply for health care plan shopping. If you get your plan through a large employer, expect an increase of about 4.3% in your premium contribution. You should be happy with that increase. In Maryland, the state approved average rate increases of 23 percent to nearly 50 percent, depending on the plan and carrier. Ouch.

With a variety of options to choose from, select according to what’s most important to you. Is it:

1)  Flexibility?

Choose a PPO or Open Access plan. You willl have the flexibility of going directly to a specialist, and other doctors outside the provider’s network. I personally like this option, since it saves me time. If I sprained my ankle, I know I need to see an orthopedist, and will save me a trip to my primary care physician. However, expect the premium to be higher.

One way to lower PPO premiums is to increase the deductible. But choosing too high of a deductible may end up being more costly down the road, if you expect frequent visits to the doctor.

2)  Low Premium?

I imagine this is important to practically everyone. Consider an HMO plan. But you’ll have to be okay with having access to just the doctors within your health provider’s network. If you don’t have a particular physician you’d like to see, then this may work.

3)  Lower Medical Payments?

Perhaps you or your spouse expect to make frequent visits to the doctor in 2018, and would like to keep your payments down the entire year. You are looking for a plan with a low deductible and low co-pays. A PPO or HMO plan may fit this description.

I have a client who is due to give birth early next year, and would need to make frequent visits to have their child undergo assessments and immunizations. After debating between a PPO (to keep her gynecologist) and an HMO, they chose the latter for this reason.

4)  Tax-Deductible and Tax-Free Investment Growth?

Wait, what? Are we still talking about health care plans? We are! If:

  • You don’t mind having a deductible of at least $1,350 per year ($2,700 for a family), and
  • You are looking for the most tax efficient way to grow your money,

Then consider a high deductible plan, so you can be eligible for a Health Savings Account (HSA). You can contribute as much as $3,450 in 2018 to an HSA account, and get this: 1) It is tax-deductible, 2) You can invest your contributions in stock and bond funds, 3) Your earnings are tax-free, if you use it for qualified medical expenses in the future.

HSAs are perhaps the most underutilized tax-advantaged way to grow our money. It’s even better than a Roth IRA. While earnings are tax-free in both, you also get tax-deductibility in HSAs. You get the most out of a Health Savings Account if you don’t touch your contributions, invest them in stock and bond funds, and just let it grow.

I have my HSA account with Health Savings Administrators. I like them because I can invest my contributions in low-cost Vanguard stock and bond funds.

Good luck! If you need assistance in choosing your health care plans, especially in relation to your overall finances, schedule a free discovery call with our firm, and we can explore how we can be of help.

 

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Alvin Carlos, CFA, CFP®

About Alvin Carlos, CFA, CFP®

Alvin Carlos, CFA, CFP® is passionate about helping middle class professionals make smarter financial decisions. He is the CEO of District Capital Management, a financial planning and investment management firm for the everyday people. Alvin is a CERTIFIED FINANCIAL PLANNER™ practitioner and has a Masters degree in International Relations from SAIS-Johns Hopkins. In his spare time, Alvin enjoys swing dancing and Ultimate Frisbee. He also volunteers for Catholic Charities’ new Financial Stability Network, which helps low-income folks with their finances.

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