Preparing for healthcare costs: a strategy for peace of mind

• Healthcare expenses include insurance premiums, deductibles, co-pays and out-of-pocket maximums. Understanding these components helps you prepare for both routine care and unexpected medical emergencies.
• Selecting a health insurance plan depends on your needs. High-deductible health insurance plans may suit young, healthy individuals, while plans with higher premiums and lower deductibles are better for those with chronic conditions. 
• Pairing a high-deductible insurance plan with a Health Savings Account (HSA) offers significant tax benefits.

"How can I ensure I’m prepared for rising healthcare expenses?"

Healthcare costs are a growing concern, but with thoughtful planning and expert guidance, you can protect yourself from the financial strain that may come with illness or injury. 

The Centers for Medicare and Medicaid Services estimated that the average health spending per capita in the United States was $15,474 in 2024 —including insurance premiums, doctor visits, hospital care, prescription drugs and other expenditures. The average out-of-pocket healthcare cost for individuals in 2024 was $1,632.  

Costs vary widely depending on your health and circumstances, so planning ahead can help you navigate these expenses with confidence. 

Understand your healthcare costs

The first step in managing healthcare expenses is understanding the components that contribute to them.
 
Health insurance premiums: Monthly payments for your insurance coverage. If you’re insured through your employer, they may subsidize part of the cost.

Deductible: The amount you must pay for covered medical expenses before your insurance starts to cover costs. Deductibles can range from hundreds to thousands of dollars, depending on your plan. 

Co-pays/Co-insurance: Fees for medical services after meeting your deductible. Co-pays are fixed amounts, while co-insurance is a percentage of the total bill.

Maximum out-of-pocket: The upper limit of what you’ll pay annually for medical services. Once you reach this amount, your insurance covers all remaining costs for the year.

Choose the right insurance plan

Insurance plans vary widely in cost and coverage. Some offer low premiums and high deductibles, while others have higher premiums but lower deductibles. Additionally, plans may differ in the range of services they cover and the network of providers available. Selecting the right plan depends on your unique needs. For example, If you or a family member has a chronic condition, a plan with a higher premium and lower deductible might save you money in the long run. If you’re young and healthy a high-deductible plan may be a cost-effective option. If you don’t receive insurance through your employer, the Affordable Care Act (ACA) offers an alternative. Visit healthcare.gov to explore your options.

Maximize savings with an HSA

High-deductible plans—defined by the IRS as plans with deductibles of at least $1,400 for individuals or $2,800 for families—can be paired with a Health Savings Account (HSA) to help manage pre-deductible costs. HSAs offer significant tax advantages:

Tax-deductible contributions: In 2026, you can contribute up to $4,400 annually for individual coverage or $8,750 for family coverage, reducing your taxable income.

Tax-deferred growth: Funds in your HSA grow tax-free, whether through interest, dividends or capital gains.

Tax-free withdrawals: Money used for qualified medical expenses, such as doctor visits, prescriptions or vision care, can be spent without incurring taxes.

Unused funds roll over year-to-year, allowing you to build savings for future healthcare needs. Additionally, after age 65, you can withdraw HSA funds for non-medical purposes without penalties—though income tax applies to non-medical withdrawals.

Plan Ahead for Healthcare Costs

Medical expenses can be unpredictable, but with the right preparation, you can face them confidently. A combination of thoughtful insurance selection, savings for uncovered costs, and tax-advantaged tools like HSAs can position you to manage healthcare expenses effectively.

Your financial professional is here to help you navigate these decisions, ensuring you’re ready for both expected and unexpected healthcare needs. Together, you can build a strategy to safeguard your financial well-being while prioritizing your health.