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Understand Your Options for Paying Medical Bills

medical billing statement

Even if you have health insurance it doesn’t cover everything. Depending on your policy — or if you don’t have any insurance at all — it’s possible to run up large medical bills you’ll have to pay for on your own.

When out-of-pocket medical expenses hit your wallet consider all your options before paying the bill. 

Don't Ignore Bills

Set a file or system for keeping track of all the bills that come in.

Set Up a Payment Plan

When faced with bills you can’t afford to pay at once, contact the billing department of the hospital to request a payment plan. Hospitals often don’t charge you interest. And by making affordable monthly payments over time, you can pay off what you owe without damaging your credit rating.

Tap Into Savings

Rather than putting a big medical bill on a credit card, dip into your rainy-day fund or emergency fund instead. A medical expense is a good reason to tap those savings.

Health Savings Accounts (HSA)

HSAs are tax-advantaged savings accounts that work in conjunction with high-deductible health insurance policies.

  • A high-deductible policy has a lower insurance premium that’s offset with a deductible that’s higher than for standard policies. A deductible is the amount you must pay out of pocket for health care goods and services before insurance kicks in to cover those costs.
  • The money you contribute to an HSA rolls over from year to year. That means if you open an HSA today, money you don’t spend for current medical expenses can be used for costs incurred in the future.
  • Everything from eye exams and contact lenses to lab fees and hospital services can be paid for with money from an HSA. For more information on HSAs, visit this resource center from the U.S. Treasury.

The financial benefits of opening an HSA include:

  • Tax-deductible contributions
  • Tax-free distributions when the money is used to pay for qualified medical expenses
  • Matching contributions from employers

How much cash should you stash in an HSA?

  • If your employer provides a matching contribution, a useful guideline for you is to contribute an amount equal to the dollar amount your employer will match.
  • Another HSA savings guideline is for you to contribute up to the deductible amount of your insurance policy. That way, you can tap your existing HSA money until your deductible is met and insurance starts paying.

[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by the National Endowment for Financial Education.]