Controlling health care costs is critical for you to achieve your personal and financial goals. Group health-care plans are usually more desirable than individual plans for three reasons. First, participants can generally get group coverage at lower rates. Second, employers often provide group coverage as an employee benefit. And third, people with existing health problems may find it easier to obtain group coverage because this type of coverage is offered based on the group as a whole rather than on the individual.

There are four important things you can do to control your health-care costs:

1. Live a healthy lifestyle.
2. Use a medical reimbursement account or health savings account.
3. Consider COBRA when changing jobs.
4. Opt out of a company insurance plan if you are already covered through a spouse’s plan.

1. Live a Healthy Lifestyle

Living a healthy lifestyle is the most important part of controlling health-care costs. Take care of your body. Both modern and ancient prophets have taught us that our bodies are temples (1 Corinthians 3:17). We must therefore learn to treat our bodies as temples.

Learn to live in “healthy” mode. Get adequate exercise and adequate sleep. Going to bed early and rising early is wise counsel that dates back to Moses’ time. Live the Word of Wisdom (D&C 89); don’t put anything into your body that would harm it.

Finally, maintain good relationships with family and friends. In times of trouble, family and friends can help. Family and friends truly make a difference in our lives.

2. Use a Medical Reimbursement Account or Health Savings Account

A medical reimbursement account (sometimes called a flexible spending account or a medical savings account) is an optional employer-established savings plan that allows you to save pre-tax dollars for non-reimbursable medical expenses. Each year, you set aside a specific amount of money in this account on a before-tax basis; as you pay for medical bills out-of-pocket, you are reimbursed from this account.

An advantage of a medical reimbursement account is that it provides a way for you to pay for non-reimbursable medical expenses with pre-tax dollars. This savings plan is very flexible and covers many items that may not be covered by insurance plans, such as braces, contact lenses, glasses, and miscellaneous medical expenses. Disadvantages of this type of account include a lot of paperwork and some expenses that are not eligible for coverage. There is also a chance that you may lose the money you set aside in this account; if you do not use all the money you set aside by the end of the year, you lose it.

A health savings account (HSA) is a new option to help people pay medical expenses. For 2008, almost anyone with a qualified high-deductible health plan (which is a plan with a minimum deductible of $1,100 for self and $2,200 for a family) can also have an HSA. Contributions can be made by an individual or an employer ($2,900 self, $5,800 family, with catch-up limits for those over fifty-five of $900). Individuals contribute each year into an account that grows tax-free to pay for future qualified medical and retiree health expenses.

 

Table 1

High Deductible Health Plan Limits

                   Deductibles               Self                 Family            

                        2007                $1,100             $2,200

                        2008                $1,100             $2,200

                        2009                $1,150             $2,300

            Maximum Out of Pocket Expenses:

                        2007                $5,500             $11,000

                        2008                $5,600             $11,200

                        2009                $1,150             $11,600

            Maximum Contributions:                                        Catch Up *

                        2007                $2,850             $5,650             $800

                        2008                $2,900             $5,800             $900

                        2009                $1,150             $2,300             $1,000

* If you turn 55 before the close of the tax year, you may also contribute an additional amount

 

One advantage of HSAs is that you are paying for “qualified medical expenses” on a tax-free basis. It can be used to pay for medical expenses before you reach your deductible limits. Earnings grow tax-free and carry over from year to year, and distributions may be used for medical expenses for your spouse or children.

One of its disadvantages is that deductible amounts are high. Moreover, if a distribution is not for qualified expenses, then the distribution is included in income and is subject to a 10% penalty (no penalty if taken after age 65).

3. Consider COBRA when Changing Jobs

If you use COBRA in between jobs, you are still able to have health insurance without getting individual coverage. However, a disadvantage of using COBRA is that you must pay the full cost of the insurance, and the cost may be substantially higher than it was before you left the company. Another disadvantage is that you must notify the company within sixty days of leaving that you are going to use COBRA.

4. Opt Out of a Company Insurance Plan if You Are Already Covered through a Spouse’s Plan

Companies will sometimes offer you a cash incentive for refusing insurance coverage for yourself and your family. If you already have insurance through a spouse’s (or parent’s) company insurance, and you are sure you will not lose coverage, opting out is an option.

If you opt out of insurance just to save money and you do not have other insurance, you may be giving up future financial security for additional cash now. This is a very dangerous situation; it is never recommended that you opt out unless you already have another form of insurance.