Six Consumer Tips to Preserve Your Health Savings Account Balances

It may not be easy or intuitive, but you can become a better shopper of medical care. In doing so, you can save yourself some money. Here's how.

Americans are great shoppers. We're always looking for a purchase in which we value what we receive more than the sacrifice in time and money that we must pay to acquire it. When we find a true bargain - the same product at a lower price than what we were about to pay - we experience a sense of satisfaction. In that case, we can buy the good or service that we sought and then purchase something else (whether it's a good or service, or a slightly more comfortable retirement) with the "found" money that we saved.

Usually, though, Americans don't shop for medical care. They tend to accept their doctors' recommendations on next steps and go where their primary-care physician leads them. These recommendations are typically made without the referring doctor's considering (or even knowing) the price that you must pay for care.

If you are eligible to fund a Health Savings Account or have existing balances, you can pay for your services with pre-tax dollars. This saves you roughly $27 (in tax savings) for every $100 you spend. But if you can find appropriate treatment at a lower price, you can enjoy tax savings and preserve more of your Health Savings Account balance for future qualified expenses - including in retirement.

Compounding the Benefit

Imagine using one of the tips below to pay $500 less for an MRI at age 35. That's $500 remaining in your Health Savings Account to grow at 6% annually. At age 65, that savings grows to nearly $2,900. If you save the $500 at age 45, the balance grows to more than $1,600.

Below are six ways that you can become a more prudent consumer.

Note: This article doesn't constitute medical advice. The "right" care may be the most expensive. And a service with a higher unit price may represent lower overall price if patients experience fewer setbacks in their recovery. You can use the strategies below as part of your decision process when choosing the service and site for medical care.

ONE. Know Your Plan and Plan Rules

Your medical plan's design and rules determine how much flexibility you have as a patient to choose care based on price and quality.

If your plan is a traditional HMO, you're locked into your insurer's network if you want to receive coverage for your care. If the HMO requires referrals from your primary-care physician to a specialist (many, but not all, do, so be sure to check), you lose control over your referrals. This rigid structure may cost you money if you can't shop for a specialist based on cost and quality.

If your coverage is a POS plan or a PPO, you can visit any doctor, but you receive a lower level of benefits (you pay more out-of-pocket) when you venture outside the network. These plans often have separate in-network and out-of-network deductibles and out-of-pocket maximums.

Be sure you understand your plan options during open enrollment so that you choose the plan that best balances premiums, out-of-pocket costs, and freedom.

TWO. Understand Your Financial Liability after the Deductible

A growing number of plans apply coinsurance on some or all services after you satisfy the deductible. It's not unusual to see 20% or 30% coinsurance after the deductible (and rates as high as 50% for out-of-network care).

Example: Your deductible is $3,000. Then, the plan applies 20% coinsurance up to an out-of-pocket maximum of $6,000. You end up in the hospital for five days and incur $73,000 of charges. You pay the first $3,000. Then, you pay 20% of the remaining $73,000, or $14,600. Fortunately, your out-of-pocket maximum is $6,000, so that's all you pay. The plan reimburses providers for the $67,000 balance.

When choosing your coverage, be sure to look beyond your deductible to see whether the plan applies coinsurance after you satisfy the deductible. In a year of high claims, coinsurance can increase your out-of-pocket responsibility substantially.

THREE. Talk to Your Doctor

Your doctor can be your ally in managing the cost of care. Many doctors aren't aware of the price that you pay for a prescription or specialty care. Do not be afraid to tell your physician that you're covered by a plan with a large deductible, which means that you're responsible for the cost of care. Together, you can devise a treatment plan that makes sense medically and financially.

This strategy works at the pharmacy as well.

Example: My family satisfied our $6,000 family deductible one year and were in the 30% coinsurance corridor. My ophthalmologist prescribed a single new eye drop to replace two prescriptions that I was taking to control interocular pressure. When I went to pick up the new drug, my 30% coinsurance resulted in a $150 price. I left the prescription at the pharmacy and called my doctor. We agreed to return to the equally effective two-drug regimen in which each drug cost me about $18 (or less than six bucks in the coinsurance corridor) for a three-month supply.

My story isn't uncommon. Physicians rarely know the price range of a prescription, particularly a new-to-market one. They may prescribe a time-release version of the drug so the patient doesn't have to remember to take one pill before each meal. They may prescribe one drug that replaces two prescriptions, or a single pill that combines two over-the-counter medications. These drugs often cost much more than equally effective alternatives. If you're compliant with a multi-prescription regimen, you can save money without negatively affecting your treatment.

FOUR. Use Rules of Thumb for Determining the Site of Care

Some patients don't know how to shop for care (although the topic is discussed below). They can apply some simple rules of thumb that consumers use every day when shopping. For example, store- brand frozen green beans cost less than brand-name. Oil changes at a quick-lube outlet cost less than at a dealership (though be wary of upselling). The wait time at a restaurant is much shorter Monday than Saturday evening.

When you have an injury or illness that requires urgent attention, there are essentially six approaches that you can take, in ascending order of cost to you:

1. Self-treatment (the most popular treatment in the United States).
2. Your insurer's nurse hotline. Many insurers offer 24/7 access to a nurse who can diagnose simple conditions and recommend a self-directed treatment (like an ice cube for a teething baby or the RICE method of treating a twisted ankle) or direct you to in-person care.
3. A retail clinic staffed by a nurse practitioner or physician's assistant, which can diagnose and treat simple conditions during extended hours.
4. An urgent-care center, which usually has a doctor present and often has imaging equipment for diagnosis and durable medical equipment (like splints, walking boots, and crutches) for treatment during extended hours.
5. Your primary-care physician, who knows you and your medical history, but has a full calendar of patients scheduled and usually closes the office by 5:00.
6. The emergency department of a local hospital, which offers the most intensive services but has high prices that reflect maintaining the overhead to deal with gunshot wounds, vehicular accidents, heart attacks, and other acute conditions.

You must use common sense - for example, not visiting a retail clinic when you are short of breath and feel pain radiating down your left arm. That sounds like a heart attack that requires immediate attention in the emergency department. On the other hand, going to the ED for a sprained ankle, a case of the hives, or a simple sore throat will result in your paying far more than necessary.

FIVE. Shop for Care Using Your Insurer's Tool

Your insurer should have a pricing tool that tells you what a service will cost you out-of-pocket at various locations. These data bases are useful for learning the price of discrete services - physician visits, physical-therapy sessions, an MRI of the lower back without contrast dye,

Example: Years ago, I had to undergo an MRI of the lower back. I checked my insurer's pricing tool. A free-standing facility and our local hospital were equidistant from my home (and 0.9 miles from one another). The free-standing facility's contracted rate was $650. The hospital's price was exactly three times higher at $1,950. Same image, probably the same brand of machine, an imaging tech with the same training, perhaps the same (or at least similarly trained) third party reading results from imaging at each site. The results sent electronically by either site to my doctor. Is one radiologist reading the results better than the other? Perhaps. But I wouldn't know, and price is not an indicator of quality in medical care.

These tools don't work for complex care like an inpatient stay in which the length of treatment and the services provided vary by patient depending on medical condition. But for office and outpatient-therapy visits, lab work, imaging, and certain discrete treatments (guided steroid injections into the lower back or a colonoscopy, for example), this tool can help you choose excellent medical care and retain more money in your Health Savings Account.

SIX. Examine Your Explanation of Benefits

Study and retain your explanations of benefits. They usually show the contracted price for each service. You receive this information after the fact, but it may be useful as you seek care in the future. For example, your physical-therapy visits were priced at $85 each. A year later, you receive PT closer to home for another injury at $145 per visit. You now know that you're paying about $60 per visit for convenience or higher quality (perhaps the new PT regimen follows protocol developed by the area's leading orthopedic hospital for rehabilitating that injury, for example). You can evaluate your situation and continue at the new facility or switch to the old PT provider. And you'll probably have learned to do some research before your next referral.

The Bottom Line

Whether you're covered by an HSA-qualifier plan or not, your goal as a consumer of medical services (or shoes, or vacations, or vehicles) should be to realize the greatest value per dollar spent. That doesn't mean choosing the least-expensive option. But unlike in many consumer markets, prices don't correlate with quality in medical care. You can be a prudent consumer and save money so that you purchase the appropriate care and something else - now or in the future - with the savings.

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