Uncle Sam needs your wallet.
Starting in 2012, the federal government will begin charging a new tax on everyone’s health insurance premiums. The tax is meant to be used for medical effectiveness research and was part of President Obama’s health care legislation passed last year. Everyone insured will be charged $1 in 2012 and $2 in 2013. The tax will then adjust for inflation over subsequent years.
While your health insurance premiums are on the rise, there are many practical ways to reduce your health care costs.
Use an FSA or HSA to Pay for Health Care Expenses
Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) allow for individuals to contribute pre-tax dollars to a savings account for health care expenses. Access to tax-free money provides you with a discount equal to your tax rate. However, there are often restrictions to using money in these accounts.
Deduct Medical Expenses on Income Taxes
For those that itemize, medical expenses paid out of pocket are tax deductible. There are of course a few restrictions. Total expenses must exceed 7.5% of adjusted gross income. Also, health care plan premium payments usually don’t count since most employers deduct the premium pre-tax from your paycheck. It helps to use free tax software to put together your return from that stack of records you’ve kept all year.”
Participate in Health Programs
Many insurance companies are now offering health programs in exchange for lower premiums to boost healthy lifestyles for their insured. These programs usually involved getting weighed and measured, then consulting a health coach to set up a plan for a healthier lifestyle. The downside is that often these programs can be intrusive about your physical condition.
Avoid Plans that Offer Co-Pays
As I found out earlier this year, it’s cheaper and more cost effective to avoid the plans with co-pays. Yes, you will have some out-of- pocket expenses when you visit the doctor, but those costs are actually quite small compared to your over all savings. Co-pays are an added cost to those that fear making unusual expenses.
Live a Healthier Lifestyle
Sooner or later, you are likely to get sick and need a lot of health care. However, living a healthy lifestyle will increase the odds that your health care needs will be later instead of sooner. Increase the amount of fruits and vegetables that you eat, exercise regularly and quit unhealthy habits like eating fatty foods or smoking. It won’t stop you from needing to use health care someday, but it might prevent you from needing it early in life.
As the sun rises every morning, so will your health care premiums. However, there are a few ways tricks you can use to lower your costs.