{"id":103060,"date":"2019-10-08T09:00:48","date_gmt":"2019-10-08T15:00:48","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=103060"},"modified":"2024-02-24T13:04:56","modified_gmt":"2024-02-24T20:04:56","slug":"imple-hacks-healthcare-childcare-costs","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/imple-hacks-healthcare-childcare-costs","title":{"rendered":"13 Simple Hacks to Dramatically Lower Your Healthcare & Childcare Costs"},"content":{"rendered":"

It\u2019s no wonder why the middle-class American family has such a hard time getting ahead in today\u2019s economic climate!<\/span><\/p>\n

Outside of housing and transportation costs, the costs of healthcare and childcare are the next largest expenses that a household faces.<\/span><\/p>\n

In the United States, for a family of four, healthcare costs alone could top $25,000+ annually, or on average 31% of the household income.\u00a0<\/span><\/p>\n

On the childcare front, in a <\/span>2018 survey on Care.com<\/span>, 63% of parents stated that childcare costs impacted their career decisions, with 28% of parents seeking a higher paying job to help with costs, 27% asking for a more flexible schedule, and 27% switching from full-time to part-time status\u2014a trend that most families cannot sustain and expect to save for their futures. \u00a0<\/span><\/p>\n

How is one supposed to get ahead?!<\/p>\n

I want to offer a few obvious (and not so obvious) ways to impact your healthcare and childcare costs that are easy to implement, legal, and will help save thousands at tax time.<\/span><\/p>\n

Healthcare Options<\/h2>\n

Healthcare is such a personal topic as everyone\u2019s situation is different due to a myriad of factors. Below, I\u2019ll define a few healthcare concepts and explain how either I or others have leveraged them. As always, seek professional advice from your benefits manager, CPA, or lawyer should you have additional questions. \u00a0<\/span><\/p>\n

1. Participate in group health insurance.<\/h3>\n

Also known as employer-sponsored health insurance or job-based health insurance, group health insurance is a type of group health plan that provides<\/span> actual health insurance coverage (not to be confused with a \u201chealth plan\u201d). A group health insurance policy is purchased by an employer (or employee organization) and is offered to eligible participants and to eligible dependents of participants. With group health insurance, the risk is spread over the company\u2014the number of participants covered.\u00a0<\/span><\/p>\n

There are several <\/span>types of group health insurance plans<\/span>\u2014including HMO, PPO, etc.\u2014each offering varying levels of deductibles, coverage, and copays. Although many people feel drawn to top-<\/span>tier insurance with the lowest deductible,\u00a0if you are relatively healthy, it may be worth exploring getting a high-deductible plan (HDHP), which could save hundreds each year in premiums, copays, and may even qualify you for an HSA account (more on that in a bit!). \u00a0<\/span><\/p>\n

Our family of three noticed in 2016 we could save $2,814 in healthcare premiums by switching from a Platinum-tiered plan to an HDHP (same benefits and copays, only our deductible went up from $1,500 to $3,000 for the family\u2014which we weren\u2019t hitting anyway!). Making this switc<\/span>h also qualified us for an HSA account where we could stuff away $6,700 more pretax each year to cover our deductibles and copays. Or if we didn\u2019t use it, we had the option to save it for future medical expense\u2014and even retirement!<\/span><\/p>\n

Depending on which type of group insurance you choose, you may also be able to combine your group plan with an FSA, HRA, and HSA, supercharging your savings and health coverage!<\/span><\/p>\n

2. Check out the Affordable Care Act (aka Patient Protection and Affordable Care Act of 2010, aka \u201cObamacare\u201d).<\/h3>\n

Better known as \u201cObamacare,\u201d the ACA is the alternative for people who do not have a group health insurance plan available to them (or want to see if their state offers something cheaper). The premise is it makes healthcare more affordable for everyone by lowering costs for those who can’t afford them.<\/span><\/p>\n

In order to participate, you will have to visit a health insurance exchange. Health insurance exchanges are online shopping sites that allow you to compare and buy health insurance plans. Some states run their own exchanges, though most allow their residents to use the one run by the federal government. People who don’t purchase a plan by the open enrollment cut-off date can’t get insurance through the exchanges; they can get short-term plans with fewer benefits.\u00a0<\/span><\/p>\n

\"Woman<\/p>\n

3. Explore private health insurance.<\/h3>\n

Private health insurance is just health insurance that isn\u2019t marketed by government-run agencies. These health insurance plans can be bought through private health insurance companies, health insurance agents, or online brokers. \u00a0<\/span><\/p>\n

Prices and coverage on private health insurance policies can vary greatly, so take care to review all fine print. My favorite use of a private health insurance policy is to cover the gaps of time between employers. <\/span>
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\nRelated:<\/strong> 6 Different Ways to Hack Your Housing (Find One That Works for You!)<\/a><\/em><\/p>\n

For those of you who are self-employed, it\u2019s worth speaking with your CPA on the advantages or disadvantages of setting up your own group healthcare plan, participating in the healthcare exchange, or purchasing a private health insurance plan. <\/span><\/p>\n

4. Research medical share programs.<\/h3>\n

Medical share programs are not insurances, but rather groups of people who all agree to share in each others health expenses. Before researching this article, I hadn\u2019t heard of such a thing! However, here are the two that I found: <\/span><\/p>\n

    \n
  1. Medi<\/b>–<\/span>Share<\/b> is a non-profit, medical expens<\/span>e sharing program for Christians. Members share in each other’s health expenses. Essentially, each month, they place their monthly share (like a premium) into one big pot (technically a credit union account), and those with expenses use that money to pay their bills.<\/span><\/li>\n
  2. Liberty HealthShare<\/b> is a community of health-conscious people who practice longstanding Christian principles in sharing healthcare costs. Liberty HealthShare exists for everyone who purchases healthcare for themselves or their family or who wants to control their own healthcare. Please note, Liberty HealthShare is not insurance. It simply unites like-minded people to share medical costs together.<\/span><\/li>\n<\/ol>\n

    And then, there are the <\/span>unique ways to get the U.S. government to b<\/span>e a partner in your healthcare savings.<\/span><\/p>\n

    5. Open a flexible spending account (FSA)<\/h3>\n

    A flexible spending account (FSA) is a type of <\/span>savings account<\/span>\u00a0that provides the account holder with specific tax advantages. Set up by an employer for an employee, the account allows employees to contribute a portion of their regular <\/span>ea<\/span>r<\/span>nings<\/span> to pay for qualified expenses, such as <\/span>medical expenses<\/span> or dependent care expenses (more on this in a bit!). \u00a0<\/span><\/p>\n

    There are limits to how much participants can contribute to an FSA account per year. For medical expense FSA accounts, the limit is set by the employer. As of 2018, each FSA was limited to $2,650 per year per employee. If an individual is married, they may put up to that same limit of $2,650 in an FSA through their employer, as well. <\/span><\/p>\n

    The funds from an FSA can be used toward payment of certain <\/span>authorized dental and medical expenses<\/span><\/a>, including for dependents and spouses (some expenses may require a physician prescription). <\/span><\/p>\n

    Now for the <\/span>very cool part: Contributions go into the account BEFORE taxes are calculated, effectively reducing your adjusted gross income up to $5,300 for a family in 2018. Beware, though: Anything you put in is use-it-or-lose-it monies within the calendar year. The best way to utilize this account is to track\/estimate your qualified medical spending for a year and sock that much away the following year. \u00a0<\/span><\/p>\n

    Should you reach the end of the year with a little left in the account, remember you can purchase certain drug-store items, bulk up your first aid kit, or sneak in some last-minute medical care to spend the rest, as long as it is a qualified medical or dental expense (massage, anyone?).<\/span><\/p>\n

    6. See if your employer offers a health reimbursement account (HRA).<\/h3>\n

    A health reimbursement account (HRA) is an employer-funded plan that reimburses employees for medical expenses not covered by company-sponsored insurance. <\/span><\/p>\n

    Because the employer funds the plan, any distributions are considered tax-deductible to the employer. Reimbursement dollars received by the employee are generally <\/span>tax-free<\/span>. <\/span><\/p>\n

    According to the IRS, an<\/span> HRA only covers qualified medical and dental expenses<\/span><\/a>, premiums for qualified health insurance policies, transportation costs incurred to get medical care, and any amount paid for qualified <\/span>long-term care<\/span> (LTC). Employees can also use the money in their HRAs to cover the medical costs of their spouses and dependents. An employer\u2019s list of qualified medical expenses will be outlined in its HRA plan document for employees.<\/span><\/p>\n

    At a previous employer, we had access to a wellness program (aka HRA) that allowed employees to offset copays, gym memberships, and arguably an annual ski pass! Many employers offer wellness classes, cooking classes, FitBits, even Apple Watches through their programs, so they’re worth checking out.<\/span><\/p>\n

    7. Contribute to a health savings account (HSA).<\/h3>\n

    This is my favorite type of \u201chealth account\u201d after having great quality health insurance! \u00a0<\/span><\/p>\n

    An HSA is a tax-advantaged savings account available for people who are enrolled in a high-deductible health insurance plan.<\/span><\/p>\n

    Since people with high-deductible health plans could face more out-of-pocket costs due to the higher deductibles, the government provides tax incentives to motivate people to save for those expenses (in 2018, up to $6,900 for a family or $3,450 for an individual).<\/span><\/p>\n

    HSA account holders can contribute pre-tax dollars to the account and can then withdraw money from the account, tax-free, when paying for qualified medical expenses.<\/span><\/p>\n

    An HSA is the best (pardon my bias) retirement account there is! In a nutshell, the contributions go in tax-free, grow tax-free, and can come out tax-free before retirement age as long as they are used for qualified medical expenses. After retirement age, the account can be used much like a traditional IRA, except <\/span>it can always be used for a qualified medical expense.<\/span><\/i><\/p>\n

    If you want to learn more about the Ultimate Retirement Account, check out the <\/span>Mad Fientist Ultimate Retirement blog post<\/span><\/a>.<\/span><\/p>\n

    8.\u00a0 Find out what additional health insurance benefits you have.<\/h3>\n

    I put this as its own healthcare category because the benefits here can be significant. When you enroll in your health insurance provider, be it in a group or exchange, review their additional benefits section to understand what types of free or low-cost benefits they provide.<\/p>\n

    On my husband\u2019s plan, we have access to:<\/span><\/p>\n