Flexible Spending Accounts (FSA’s) are offered by many employers in the United States. The benefits of a flexible spending account (FSA) is that it allows you to use pre-tax money to pay for qualified medical expenses. What is the benefit of that you ask? For simplicity’s sake, let’s assume that you make $1,000 per month and that your tax bracket is 25%, and you have $100 put into your FSA, now you’re only taxed on $900, or $225, meaning that you take home $675. At the end of the year, you’ll have $1,200 in your Flexible Spending Account which you can use for any qualified medical expenses. Now assume the same situiation, however, you don’t have an FSA setup. Each month, you earn $1,000, but you don’t contribute anything to an FSA, so you are taxed 25% and you only take home $750. At the end of the year, you have no money in an FSA account, and you only have an extra $900 (assuming you saved that money). Let’s say that you have an emergency procedure performed that costs $1,100 – In scenerio 1, you’ll be able to pay for the procedure from the Flexible Spending Account, however in option 2, you’ll be left to pay the bill on your own, with your post tax dollars.

Flexible Spending Accounts are great because they give your money more power since you aren’t paying taxes on the money that is contributed.

This one might seem like a no-brainer, but more times than not, people will get caught using out-of-network providers rather than in-network coverage due to the fact accidents happen. Sometimes we just need emergency medical coverage.

HMO health care plans will typically require that you stay entirely within the system and anything out of the system will be entirely out-of-pocket. PPO plans will allow you to go out-of-network, but you’ll typically being paying more: an in-network visit might be a flat rate of $25, where an out-of-network visit might be a 50% copay. FFS health plans will let you go anywhere, but if saving money is what you’re looking to do it will be best to “shop around” to find the best prices for the services that you’re looking for. And make sure you don’t just pick a doctor because the price is the lowest, be sure to check qualifications and references as well.

For the past three years, my business partner and I have had PacifiCare health insurance as our primary health insurance provider. When we started our coverage, our monthly premium was just over $500 per month. At our yearly renewal, our premium jumped up to right about $600 – more than a 10% increase, but it was still manageable so we kept the coverage for another year. At the yearly renewal on our third year, the monthly rate jumped to $800. More than a 30% increase! For the same coverage we had before! At the time, we hadn’t shopped around for any other options (because we are idiots) and our company was doing very well, so we kept the insurance plan for one more year. Then finally, last March, when our plan came up for renewal again, the price was going to jump up to $1,042. Another 30% increase! Now I don’t know too much about insurance, or the way its priced, but I think PacifiCare was price gouging.

Seeing a 20% increase the first year, then a 30% increase in years two and three is just absurd to me. When we started shopping around to find similar plans, we found plenty out there that offered the same, if not better coverage for less than half of what PacifiCare wanted to charge us for the same coverage. Why would PacifiCare want to increase their premiums so much? And why would they want to price small businesses out of the market? Let’s face it, most small business owners are always looking for way to save money, so when the cost of health insurance doubles in 3 years time they will obviously begin to shop for other options. One suggestion I’ve heard is that PacifiCare was trying to adjust their portfolio to large companies, and so they just kept increasing premiums (astronomically) on small businesses and groups of under 50 employees. If the small business would pay the inflated premium, then PacifiCare would keep them, but if they weren’t willing to pay twice what the market rate was at, PacifiCare wouldn’t budge and would let them find insurance elsewhere.

If you ask me, that is a terrible way to run a business and I’ll never be going back to PacifiCare. I started an online search with Health Quote Insider and found a great deal… less than half of what we were paying with Pacificare, and almost 1/3 of what we would have been paying if we would have stuck with them after the rate increase. Another site that offered good deals was 2 Insure 4 Less, but you have to fill out a couple of pages worth of information there… the Health Quote Insider site is much quicker and easier when you are just looking for a healthcare quote.