With Health Insurance Open Enrollment beginning on October 15th every year, fall is the perfect time to sit down and come up with a Budget for Healthcare in 2022. But choosing a health insurance plan isn’t the only factor that comes into play when budgeting for healthcare.

How to Budget for Healthcare

In this HSA for America expert guide, we’ll explain not only how to budget for healthcare, but also explore a number of high-value alternatives that can lower your monthly premiums, like medical cost sharing plans.

RELATED: Open Enrollment is Here: Click Here to Run an Instant Quote on a Health Insurance Plan in Your Area  

2022 Guide: How to Budget for Healthcare: Key Takeaways

  1. Your ongoing health is the most important factor to consider when creating a healthcare budget. It can be tempting to choose the plan with the lowest premium, but if you ignore your actual health needs, you are increasing your financial risk.
  2. Health insurance has three different cost brackets to consider: Monthly premiums, out-of-pocket expenses (copays and prescriptions), and the plan deductible.
  3. A house-wide emergency plan should include potential medical costs. Ideally, you should have enough money in your emergency fund to cover 3 to 6 months of expenses. In addition, you should be able to cover your deductible.
  4. Health Savings Accounts (HSAs) can act as an emergency fund, as well as a long-term investment vehicle. If you have an HSA, make the maximum contribution every year to maximize your returns.
  5. Health Insurance is not the only option when it comes to healthcare. Across the country, Health Care Sharing Ministries (HCSMs) are offering low-cost medical sharing programs. These are particularly well-suited to people who don’t qualify for a subsidy, or who don’t expect to use their coverage that much

Step 1: Know Your Healthcare Cost Key Terms

Health insurance plans in the U.S. are mostly standardized when it comes to key terminology. Here are the terms and definitions you’ll need to create your healthcare budget.

The Four Most Common Healthcare Expenses:

  • Premium: The monthly payment you make for your health insurance plan.
  • Deductible: The total cost you have to pay for healthcare services before your insurance plan “kicks in”.
  • Coinsurance: A per-service fixed percentage that you pay for medical bills
  • Copayment: A flat-rate fee that you pay when you visit the doctor or another medical professional.

Note: Not all health insurance plans have both coinsurance and copays. Depending on the type of care you need, your plan could require one or the other, or both. Be sure to read your Summary of Benefits and Coverage before you commit to a new plan. 

What About Healthshare Definitions?

Later on, this guide will explore the benefits (and potential risks) of a Health Sharing Plan. These are low-cost medical sharing programs, where the community comes together to pay member medical bills.

These plans are not insurance. Because of this, HCSMs do not use the same terms and definitions as health insurance plans. In addition, most HCSMs don’t even use the same terms as each other.

Here are the healthshare definitions you should know if you’re thinking about switching:

  • Member Contribution / Share / Portion: This is the monthly payment that you will make towards your sharing program.
  • Annual Household Portion (AHP) / Initial Unshared Amount (IUA): Similar to a health insurance deductible, this is the dollar amount that the member must pay for before the rest of the bill is eligible for cost sharing.
  • Annual or Lifetime Sharing Limit: Some health sharing plans come with annual or lifetime limits on how much cost sharing a member can get. These HCSMs offer multiple options when it comes to annual and lifetime limits. Many healthshare plans don’t have sharing limits at all.

Step 2: Calculate Your Annual Cost of Healthcare

Once you’re familiar with the different types of healthcare, it’s time to make annual cost estimates for each one.

If you’re already enrolled in a health insurance plan, then you already know your monthly premium. If you don’t have insurance but you will in 2022, you can get a quick health insurance estimate here. And remember: You could qualify for a healthcare subsidy, which would make your plan even more affordable.

Your monthly premium multiplied by 12 is your plan’s actual cost. But this is only the beginning. You will also need to estimate the potential costs of:

  • Copays for doctor appointments: The typical primary care copay is around $20. Specialist copays can be around $50, and ER copays can be as high as $300. Estimating an annual cost of $300 in copays will keep you covered against emergencies. As a bonus, you’ll most likely end up with a leftover healthcare budget at the end of the year.
  • The cost of prescription drugs: If you or a family member has ongoing prescriptions, it’s crucial that you revisit them every year. Take the time to compare prices at different pharmacies, as the difference can be staggering. And remember: You can use your HSA funds to pay for prescriptions if you need to.
  • Over-the-counter (OTC) medications and supplies: From Ibuprofen and cough medicine to band-aids and first aid kits, it’s important to plan for the cost of everyday items. And like prescription drugs, many OTC medications and supplies can be purchased with tax-free HSA funds.
  • Your deductible. If you are both healthy and lucky, then you might make it through the year without having to pay anything towards your deductible. But for emergency services and hospital stays, you may need to meet that deductible right away. This is why it’s a good idea to include your deductible amount into your family’s emergency fund.

Step 3: Take a Cost-Reducing Comb to Your Annual Estimate

All of the healthcare costs that were detailed in the last section have one thing in common: They can all be reduced significantly. The only catch is that they can’t all be reduced at the same time.

Lower Your Premiums

For example, your monthly premium can be reduced simply by switching to a different health insurance plan. But this will also likely lead to an increase in your deductible.

It’s also possible to lower your monthly costs by switching to a Healthshare program. This is especially true for individuals who don’t qualify for a health insurance subsidy, or who are simply fed up with the insurance companies.

Another quick way to lower your health insurance premium: See if your health insurance plan has an incentive program. By completing some easy health-related tasks, it’s possible to get an immediate reduction in your monthly premium.

Lower Your Prescription Drug Costs

There are a few reliable ways to immediately reduce the cost of your prescription drugs:

  • Use your plan’s Rx discount program, if it has one.
  • Shop around to different pharmacies for the best prices. Don’t forget to check online pharmacies as well.
  • Switch from name-brand to generic.
  • Purchase your medications in 90-day supplies instead of 30

Make Your Out-of-Pocket Health Expenses Tax-Free

With a Health Savings Account, it’s possible to set aside tax-free money to use on future health expenses. This is a specialized savings account that can help your funds grow on a tax-deferred basis, and as long as you only use the funds on qualified expenses, they remain totally tax free.

In order to open and operate an HSA, it’s necessary to be enrolled in a High Deductible Health Plan, or HDHP.

Healthshare members can also take advantage of an HSA, but only certain plans are qualified. MPB Health offers an HSA-qualified healthshare option, but you also need to be enrolled in a Minimum Essential Care (MEC) plan.

Compare Pricing on the Best Insurance Plans Available


Step 4: Maintain a Household Emergency Fund

An emergency fund is a savings account that is set aside to pay for unexpected costs and emergencies. The rule of thumb for emergency funds is to try and have between 3 and 6 months of living expenses set aside. This can be difficult for anyone, so don’t be afraid to start small.

While HSAs are an excellent tool for emergency health costs, there is a limit to how much you can contribute each year. For this reason, it might be necessary to open additional savings account for your emergency fund.

Step 5: Work with Your Personal Benefits Manager to Make Any Required Plan Changes

After working through your new 2022 healthcare budget, you might come to the conclusion that you need to re-think your plan strategy. Whether you need more coverage or a lower premium, your Personal Benefits Manager can help ensure that you’re getting the plan you really need.

Similarly, if you’ve decided to switch to a Health Sharing community, it’s critical that you understand all the options that are available. Not all HCSMs are built alike, and just like insurance, comparing plans can be a daunting task if you’re on your own.

Ready for your no-cost appointment? Click here or call 800-913-0172.

How to Budget for Healthcare: Frequently Asked Questions [FAQ]

Q: How Much Should I Budget for Health Insurance?

When making a healthcare budget, the most important thing is that you’re taking into account the different types of medical expenses. These include:

  • Monthly premiums
  • Doctor and specialist copays
  • Your deductible, if you need care
  • Prescription drugs
  • Over-the-counter medications (OTC)

It’s a good idea to budget for the full cost of your deductible, as well as a few doctor appointments and an ER copay. Using an emergency fund is a good way to ensure that your healthcare budget is always protected.

Q: What Health Insurance Plan has the Lowest Premium?

Marketplace health insurance plans are largely standardized, which means that all health insurance companies offer plans with low, medium, and high premiums.

No matter which health insurance company you choose, Bronze-tier plans have the lowest premium. However, they also have higher deductibles than other plans.

Q: Do Health Insurance Plans Cover Prescription Drugs?

Health insurance plans will help pay for the cost of certain, but not all, prescription drugs. All plans have a “formulary”, which is a list of approved medications for that plan.

To find out which prescription costs your plan covers, see your Summary of Benefits and Coverage. This should be easily accessible on your insurer’s website, or through your member portal. Or, you can simply give them a call directly and they’ll tell you what’s covered.

Q: Are Healthshare Plans Cheaper Than Health Insurance?

In general, healthshare plans are more affordable per month than unsubsidized insurance. This is because they are designed to provide protection for large or emergency health costs. They are not required to offer the same level of coverage as marketplace health insurance plans. This is what makes the monthly price lower.

However, this is not a hard and fast rule. If you have ongoing medical needs or you currently use your health insurance plan a lot, then switching to health sharing could actually cost you more money in the long run.

Q: What if I don’t qualify for a health insurance subsidy?

With the passage of the American Rescue Plan in 2021, health insurance subsidies are available to more people than before. But anyone who does not qualify for a health insurance subsidy should look into healthshare programs as a more affordable alternative.

Learn More About How to Budget for Healthcare

Budgeting for healthcare is easy than most people think, and it can go a long way towards creating a healthier and more secure future for you and your family.

If you think that you’re paying too much for your healthcare plan, we can help. Call 800-913-0172 to talk to a Personal Benefits Manager, or click here to schedule a no-cost consultation.

Here are some additional articles on related topics: 9 Savvy Ways to Spend Your Leftover Healthcare Budget | The Top 5 Myths & Misconceptions About Health Insurance

Here are some additional pages related to this article: HSA FAQS Health Savings Account Answers | Learn about Healthshare Plans