Much of the news about how to save on health care costs focuses on the assets required to cover health care costs in retirement.
HealthView Services 2018 Retirement Healthcare Costs Data Report estimates that a 65-year old couple in good health will need $363,946 to pay for health-care costs for the remainder of their lives, including Medicare and supplemental insurance premiums and out-of-pocket costs. However, people nearing retirement aren’t the only ones concerned with the cost of health care. A new survey from Nationwide Retirement Institute revealed that people of all ages are concerned about costs right now as well as in the future.
According to the survey, 63% of younger adults believe their health today will impact how much they need to save for retirement. Despite these concerns, many young adults avoid important care now in order to avoid the expense.
Almost three in four younger adults have taken “risky” actions to save money on health care costs, including:
- Delaying seeking medical help, hoping the condition will subside (33%)
- Considering not seeking care to avoid high deductibles (27%)
- Skipping a scheduled appointment to avoid a medical bill (22%)
- Taking less than the recommended dosage to extend the length of a prescription (22%)
- Stopping taking medication because it costs too much (21%)
- Not following a treatment plan recommended by their doctor (20%)
I had a chance to meet with Kristi Rodriguez, leader of the Nationwide Retirement Institute, while attending FinCon19 in Washington, D.C. Rodriguez shared the following low cost, high-impact practices young adults can follow to stay healthy today and hopefully save on health care costs in the future.
Prioritize preventative care
Taking advantage of preventative care can help young adults ensure they stay in good health. The Affordable Care Act (ACA) features a provision requiring private insurance plans to cover recommended preventive services without any co-pays. This includes things like:
- Blood pressure and cholesterol screenings
- Immunization vaccines
- Well-woman visits for women under 65
- Tobacco use screening and cessation interventions
You can learn more about free preventative screenings at HealthCare.gov.
“Making preventative care a priority is one of the easiest ways adults can lessen concerns about their own health-related costs,” says Rodriguez. “The benefits of taking advantage of available preventative services can have a positive financial impact for the short- and long-term.”
Contribute to an HSA
A health savings account (HSA) can provide tax advantages and serve as a retirement planning tool, yet only 17% of younger adults use an HSA and of those who have one, 25% use it to pay only for today’s health care expenses rather than saving those funds as a tax-free way to cover health care costs in retirement.
For 2019, you can contribute up to $3,500 to an HSA if you have single coverage or up to $7,000 for family coverage. If you’re age 55 or older, you can contribute an extra $1,000.
To be eligible to contribute to an HSA, you must have a high deductible health plan (HDHP). For 2019, the IRS defines an HDHP as any plan with a deductible of at least $1,350 for an individual or $2,700 for a family. According to the Kaiser Family Foundation’s 2018 Employer Health Benefits Survey, 29% of covered workers are enrolled in an HDHP.
HSA contributions have a triple tax benefit:
- Contributions are tax-deductible (or pre-tax if made through a payroll deduction)
- Earnings within the account are tax-free
- Account owners can make tax-free withdrawals as long as the funds are used to pay for qualified medical expenses
“An HSA is an effective tool for supplementing retirement savings while also offering tax benefits. There is a clear opportunity for further education around and greater adoption of HSAs among younger and older adults,” Rodriguez says.
Participate in employer-sponsored programs
According to the Nationwide Retirement Institute survey, while 29% of younger adults say they have access to a wellness program from their employer. However, only 17% of those participate in such a program.
A case study of Johnson & Johnson Family of Companies’ workplace wellness program, which started in 1979, has evolved and is still in place forty years later, noted that employees who participated in the program saw meaningful reductions in chronic disease risk factors. The average annual savings per employee were $565 (as of 2009).
Of course, not every adult has access to employer-sponsored health insurance coverage and wellness programs. Whether you receive benefits through an employer or pay for them out of your own pocket, taking advantage of preventative care and contributing to an HSA can help you remain healthy and prepare for health costs both now and in the future.
