Americans spend a whopping $12,500 per capita on healthcare. This includes employer and state contributions to coverage. For single coverage, Americans contributed $1,299 to employer premiums while employers paid $5,969 per capita. Out of pocket costs averaged $1,223 per capita last year. Employers are spending 11.5% of their income on healthcare in the US.
It is a mindblowing number for many of our international friends who have state-run coverage available at low to no cost. But there are ways that you can use your health expenses to boost your travel fund.
Health and Flexible Spending Accounts
Health Spending Accounts (HSAs) and Flex Spending Accounts (FSAs) are both tax-advantaged accounts for Americans. The key with both of these plans is that you can reimbursed for medication spend. For all the rules, the IRS has a thorough walk through here.
HSAs contributions are tax deductible, grow tax-free, and distributions used for qualified medical expenses are tax-free. HSAs also roll year to year and can be invested. Each plan has its own threshold for investment and investment options. Unless your employer offers an HSA plan, it pays to shop around to make sure you have good investment options along with low maintained fees. We have had two employers use Optum Health which I love, but the fees can be a bit steep when an employer isn't covering them. Lively is a great fee free alternative. If your employer doesn't have a provider, check with your current bank to see if they offer an HSA. Sometimes fees are reduced or waived for established account holders.
The catch with HSAs is that they are only available for high-deductible health plans (HDHPs). The IRS updates these amounts annually. For 2022, individual plans have a minimum deductible of $1,400 (families, $2,800) and a max out of pocket of $7,050 (families $14,100). Ouch. However, HDHPs employee contributions are typically much lower than plans with a low or no deductible plan.
If your plan isn't eligible for an HSA and you are not self-employed, you may be eligible for an FSA. This works in a similar way to the HSA as contributions and distributions are tax-free for qualified medical expenses. The catch with FSAs that it is use it or lose it. For 2020 and 2021, there was a temporary rollover allowance. It has not been extended for 2022 although employers can allow you a grace period into the next calendar year to use it up. The good news is that you can purchase a myriad of everyday items (over the counter medications, lense care, even tampons) and be reimbursed.
Reimbursement
Here is the key: reimbursement. Which means that you can use your healthcare costs to earn miles, points, and cashback through your credit card and then pay yourself back from your tax-advantaged accounts. Most account providers have either an online reimbursement portal or a paper form that must be submitted. Add your receipt and you are done. Check to see how long reimbursement takes to ensure you can float the expense. In our experieince, it has been faster than waiting on an insurance reimbursement. I certainly don't mind filling out a pesky form to get 2% cashback on medical expenses.
This can be a big help towards hitting those big bonuses. Because we don't regularly have enough monthly spend after housing and child-care (neither which are able to be paid for on plastic, more on that here), hitting bonuses can be a challenge. But when we know an event is coming like child-birth or medical imaging, we can plan to put these expenses on a card to earn the bonus. Nocciola's birth let us earn 150,000 American miles when we paid the hospital bill with cards and then reimbursed ourselves from our HSA.
Prescriptions, glasses, and contacts are another great place for reimbursement. There are a plethora of third party discount vendors for these items and many are less than I would pay through my name-brand pharmacy or optometrist. Not to mention that allotments for glasses or lensess are capped so searching for a deal can pay off, both in points and in terms of our of pocket.
Some employers ofter reimbursement programs for self-purchased healthcare expenses. We had a previous employer that provided a dental stipend, but had no program. We paid for a dental plan ourselves and got reimbursed by the employer, all while earning points.
Paying Directly
Roughly 30% of healthcare spend is due to administrative costs in the US. More and more providers are offering a discount for patients who pay upfront or within a certain period. One of our providers offers a steep discount for paying directly and then provides the paperwork for you to file with your insurance or files for you and trues up the account after. Self-pay can save money for those on a HDHP who will have to spend a few thousand before insurance kicks in (beyond preventative care). Plus you get the card benefits and potential reimbursement.
If you are willing to pay up front, negotiate. Hospitals and doctors like to paid, just like the rest of us. Insurance companies are notoriously slow to pay, 30, 45, even 60 days. And it can take longer if something is miscoded or questioned. Meanwhile, medical providers carry that cost. So it is understandable that there are discounts for those willing to self-pay. This is particularly true for diagnostics like bloodwork or imaging.
Before you opt for self-pay, always get an estimate from your insurance provider to make sure you come out on the winning side. Also request all forms needed to complete a reimbursement so that you have them for your appointment.
So Which Card?
You have two options for these sorts of reimbursements - meeting bonus requirements for a new card or maxing our benefits for an existing card.
The best for large expenditures - birth of a child, a diagnostic screening, dental work - is to aim for a new card bonus. Welcome bonuses carry the best bang for their buck. Tens of thousands of points for spending what you would need to anyways.
For ongoing expenditures, a flat cash-back card is likely better. Several banks allow you to downgrade existing cards in lieu of cancelling. Financial institutions want your business; while they would prefer you pay a card with an expensive annual fee, they would rather keep your business on a reduced or no fee card than see it go all together. We've gone this route several times when we have signed up for co-branded airline credit cards. After enjoying the bonus and using it for a year, we downgrade to a free flat cashback card.
Citi has a flat 2% cashback card with no annual fee which translates into 2¢ per dollar spent. Most mileage from airline cards is valued around 1.5¢ or less. Unless you are close to a mileage award, the cashback is likely a better bang for your buck. This can go towards many travel expenses.
Don't forget about transfer portals. For example, the Capital One Venture cards are also 2x miles on all spend. While the miles are just 1¢, less for cash out, they can be transferred to other partners at a higher rate up to 1.7¢. This can also be a great avenue to top up points for a reward ticket!
Bottom Line
Any kind of spend can mean credit card points and rewards for responsible users. For Americans, health care is a huge part of our household spend, especially for young families and those with chronic care expenses. Why not explore how to better use these significant costs to reward you?
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