ON THE MONEY: The new health insurance paradigm part II
In last week's column, we found that one of the realities of the Affordable Care Act is higher health insurance deductibles.
However, the use of a Health Savings Account, coupled with a high deductible health plan, can provide some tax-advantaged relief.
One of the benefits of an HSA is that the contributions that you make to it are tax-deductible, whether or not you itemize your deductions.
Now that health insurers must cover pre-existing conditions (among other required policy characteristics), insurers have instituted many other limiting changes to help control their costs.
These changes include smaller networks of health care providers, and you may have already discovered that your physician is not included in your network.
Depending on whether you are covered through a Preferred Provider Organization or Health Maintenance Organizations, you also may not have out-of- network coverage.
If you don't have such coverage, sadly, you will pay through the nose for such care. Worse, these out-of-network expenses do not count against your total out-of-pocket maximum.
The way out of this morass is to make certain that your doctor and other providers are covered in your insurer's network.
If you have already purchased a policy directly from an insurer, you may want to determine if a more expensive policy type does include your health care providers, and, if so, switch.
Be careful though if you do purchase a policy that is not part of the Federal Exchange, since in so doing, you will forfeit your eligibility for any federal subsidy.
I did some checking, however, and the subsidy is not significant if your total income, if married, is more than $40,000.
In addition, if you have insurance through your employer, whether you are retired or not, there is no subsidy available from the feds.
The bottom line is that, if you have to purchase health insurance coverage, you will probably do better if you buy a policy directly from an insurer, rather than through the ACA exchange.
Another reality of the Affordable Care Act is higher costs for medicines, particularly if your required medication is not generic.
Drug expenses are now part of your deductible, and even though that specific drug is covered, the higher deductibles will mean that you will pay more than previously.
Also, insurers have now switched from fixed dollar drug co-pays to percentage based coinsurance. This change means that the higher the cost of the medication, the more that you will wind up paying.
There are three defensive techniques you can take advantage of to mitigate the realities of rising prescription drug costs: first, make the switch to a generic, and most insurers provide online tools to help you find a generic that is the equivalent of the drug that you are using.
Also, ask you prescribing physician if the drug company offers any reduced co-pay coupons, or if you might qualify for a subsidy from the drug company.
Secondly, you may be surprised to discover how much you can save in prescription costs by ordering your medications online, and then receiving them through the mail.
My wife and I use Express Scripts, and their costs are less than through a local pharmacy. However, we have discovered that if you do have a reduced co-pay coupon, you may do better by using a local pharmacy.
The third option is to purchase a more expensive version (platinum in the ACA nomenclature) from an insurer, if the plan provides for smaller co-pays.
Even though the premium is higher up front, you could save money overall through more generous drug coverage.
Greg Roberts is a certified financial planner with 35 years of financial and estate planning experience. Got a financial planning question for Greg? You may email him at firstname.lastname@example.org.