Apple’s next big push may be around health insurance, according to Ben Wood, analyst at CCS Insight. I think his idea makes sense, given all the work Apple already does in the space  — and it echoes thoughts we’ve heard before.

The future takes time to bake

Wood’s team of analysts publish annual predictions, several of which relate to what Apple already does. But it’s Woods’ thoughts on health that really resonated with me this year: “By 2030, intelligent wireless body monitoring leads to pervasive and personalized healthcare,” he wrote. “Deeper and smarter insights into the body means that devices can serve as a preventive health tool, flagging up any deviations from the user’s norm, detecting subtle changes and providing lifestyle advice.”

Apple has this space covered. The iPhone, Apple Watch, Health, Activity, and Fitness+ cover the gamut of the human condition. At some level, these existing solutions already turn your habits into actionable data.

What you do, how you do it, when, how often and how to do what you do better and more frequently are all reprised within these systems. The company already has sensors, and is building more, and provides research apps and has already assembled extensive data for numerous situations. It already works with existing health insurance providers to combine its data with their services.

In this part of the big picture, what Wood thinks makes total sense. A lot of this is already happening.

“Apple Watch remains a great way for health conscious customers to track their overall wellness and fitness,” said Apple CEO Tim Cook.

Delivery, data, and results

Apple’s solutions are becoming more widely used across the health sector. You’ll find iPads in patient rooms and in the operating theater. You have the Medications app to help maintain diligent care, and you have Activity, Fitness, and Health apps to provide the kind of valuable insight everybody needs into self-care. You even have Medical ID for emergencies.

You have all of this and more.

With so much data already being created, the company has built a platform from which it can build a connected health ecosystem. It’s completely plausible to imagine a doctor in every Apple Store handling walk-in appointments, supplemented by an online service offering initial consultation and advice.

The work those doctors do would be rendered considerably easier with the addition of the health stats already gathered by the iPhone, Health app, and Apple Watch. In between appointments, a little automation around monitoring and analysis of patient-gathered data should help flag post-care self-treatment and medication errors. Such automation should help deliver better recovery results.

When you travel, you’ll be covered by an international brand with an international presence in most nations. Where such presence does not exist, the company’s other products (such as Apple Pay) enable its customers to access local care at local prices, supported by the credit worthiness of a brand which probably has a better credit rating than the post-Brexit UK under its Truss government.

How it might work

Apple’s strength here is really evidenced around the health-related data its systems already collect. That information, intended to empower end users with insights into their own health and habits, can (once explicit permission is granted by the user) also inform medical professionals about what a patient’s condition might be and which needs are left unmet. The capacity for remote monitoring of patients should empower them with more autonomy, which should help trim treatment costs while also delivering at least as good results.

The company continues to associate its Apple Watch with health and fitness. It makes sense to do so, as it gives the device a clear purpose that does seem to resonate with consumers.

Beyond this, it also provides health services with just enough insight into current health trends to see that possession of a smart fitness tracker has an active and positive impact on people’s self-care.

This is a health promoting act, as it means those who use these devices are in general healthier than those who don’t and are far more likely to at least think about the consequences of what they do on their physical and mental wellbeing. Given that prevention is always better than cure and that so many of the biggest health impacts — diabetes, heart, obesity — can be mitigated against by healthier habits, it makes sense to associate this data and these devices with health insurance.

Apple’s access to financial products (Apple Pay, Apple Card, Apple Savings, Apple Cash) means the company can help promote Apple Health users with discounted costs and a highly flexible set of benefits. Imagine if meeting your fitness goals gave you free access to Apple Music, or $10 you could spend as you wish.

Apple might even consider adding a Single App mode to Apple Watch, so patients suffering from some complex conditions will always be gathering and sharing important health data when undergoing remote post treatment care.

That kind of initiative would reduce the overall cost of health service provision while maintaining highly effective levels of care.

Better health at lower cost?

That’s the nub of why Apple may be able to deliver systems of this kind. Those who use an Apple Watch are already more likely to live slightly more healthy lives. That’s great on an individual basis, but promises even bigger benefits en masse. That patient data can be shared with caregivers opens opportunities for remote delivery of personalized self-care plans, while swift identification of symptoms when they emerge promotes an environment for early treatment of conditions before they become severe.

The effect?

Better general health, more effective treatment, and the capacity to deliver all this at relatively lower cost than possible before.

Early interventions don’t just save lives, they save money in health and recovery costs. Combined with an international network of stores from which care can be delivered, it’s surely a matter of “when,” not “if” the company plans to introduce Apple Health.

I think CCS Insight has got this one more right than it has wrong. While Apple may instead choose to intensify its growing number of partnerships with existing health insurance entities to deliver the same result, I think it already believes it can do a better job alone.

I’ll be interested to learn what Dr. Sumbul Desai, Apple vice president for health, has to say on Apple’s approach to digital health during her keynote speech at Web Summit 2022 in Lisbon, Portugal next month.

“In this session, Sumbul describes how Apple is utilizing the power of tech to revolutionize public health in the 21st century, with innovations in wearables, Apple Watch, iPhone, and iOS,” the event description says.

I don’t expect too much more than what Apple has already said just yet. But it is difficult to ignore the direction of travel.

Health insurance prices reported their highest yearly annual increase since the US Bureau of Labor Statistics (BLS) began posting them in 2005.

According to the latest data, published on Oct. 13 (pdf), the price of health insurance increased 28.2% from September 2021 to September 2022. That is one of the steepest increases of all products tracked by the BLS report—only eggs (30.5% increase), margarine (44%), airfare (42%), food in employee facilities such as canteens (91%), and fuel and gas (58% and 33%, respectively) had higher increases year-over-year.

The increase was steady through the year, with an increase of over 2% month-over-month.

An increase beyond inflation

Health insurance prices increased more in the past year than they did in the entire decade between January 2006 and January 2016. The only comparable increase was registered between September 2018 and September 2020, when insurance prices went up more than 38% in two years—although no one year had a jump as high as the latest.

Beyond inflation, the reasons behind the increase in health insurance costs is to be found in the fallout from covid. The pandemic drove up costs for insurers that had to pay for testing, treatment, and vaccines without out-of-pocket charges and copays for patients. Now, those expenses are being paid by policy holders under the guise of increased premiums. In 2021, for instance, this caused an estimated increase of 8.4% on premiums on the Affordable Care Act marketplace.

This doesn’t mean, however, that the actual cost of policies went up by 28%. Since tracking the cost of insurance is complicated, the BLS does so by measuring the profits of health insurance companies—if those go up, consumer health insurance prices are assumed to go up, too. Yet the trend usually has a sharp correction toward the end of the year, when insurance companies also share information on the costs of services they provided, which lower their profits.

Still, according to the latest predictions by the consulting firm Mercer, health insurance prices are not done rising, and will go up even more significantly in 2023. Employer-based coverage especially, which has so far only had moderate increases (4.4%) is expected to go up by an additional 5% in the coming year.

Despite the implementation of the Affordable Care Act (ACA), healthcare is more expensive in the United States than ever. In 2020, the average health insurance monthly premium was $456 for individuals and $1,152 for families of two or more^[1].

Those numbers increased 68% and 73%, respectively, from what they were during the ACA’s first nationwide enrollment period in 2014. That’s nearly four times the rate of inflation, which has many people in desperate need of a more affordable alternative^[2].

A Health Savings Account or HSA can’t replace your costly insurance policy alone, but it can play a vital role in developing a more affordable healthcare strategy. Here’s what you should know about HSAs, including how they work, how to use them, and when they’re a good idea.

What is an HSA?

An HSA is a tax-advantaged account that essentially subsidizes your medical costs. Your contributions, returns within the account, and withdrawals for qualified medical, dental, or vision expenses are all tax-free.

Unlike many other tax-advantaged accounts, HSAs aren’t designed for retirement. You don’t have to meet a minimum age threshold to take your funds out and spend them, as long as you’re making a withdrawal for eligible healthcare services.

That includes things like deductibles, copays, and prescriptions for your spouse, children, or other qualified dependents. There are limits, though. For example, the expenses only qualify if you incur them after establishing your HSA, and health insurance premiums don’t qualify unless they’re for Medicare or COBRA.

If you take money out of your HSA and spend it on anything other than qualified medical expenses, you’ll pay ordinary income taxes on your withdrawals. If you do so before you turn 65, you’ll also incur a 20% penalty.

📗 For a detailed breakdown of eligible HSA expenses, review IRS Publications 502 and 969 or a list from a health insurance provider like Cigna.

Who Can Open an HSA?

Unfortunately, not everyone is eligible to open an HSA. To qualify, you must have a High Deductible Health Plan (HDHP) that meets specific Internal Revenue Service (IRS) requirements. These include:

• A minimum deductible of $1,400 for self-only plans and $2,800 for a family plan.
• A maximum out-of-pocket amount of $7,050 for self-only plans and $14,100 for family plans.
• The plan can’t provide benefits other than preventive care until you meet your deductible.

In addition, you generally can’t have other health coverage, including Medicare, and no one can be able to claim you as a dependent on their tax return.

⚠️ When you shop for an HDHP on the ACA marketplace, it tells you whether or not it’s eligible for an HSA. Make sure you double-check before committing since you can’t change your mind until the next enrollment period.

How Do HSAs Work?

HSAs work similarly to many other tax-advantaged accounts. You contribute your funds, they grow within your account, and you take them out when you need them. However, some aspects of the process are unique to HSAs. Here’s a more detailed explanation of the mechanics.

Setting Up an Account

If you’re an employee and get an HSA-eligible HDHP through your company, they may offer you an HSA too. If you don’t like its terms or are self-employed, you can also open an HSA independently.

The HSA Search tool lets you compare hundreds of providers. To find the best option for you, review each account’s fees, investment options, and various features. For example, some HSAs don’t let you spend the funds in them directly.

Contributions

If your HDHP has self-only coverage, you can contribute $3,650 per year to your HSA. If your HDHP also covers one or more family members, you can contribute $7,300 per year. In both cases, people over 55 get an additional $1,000 catch-up contribution.

Your employer or spouse can also contribute, but the same annual limits apply. Even if both spouses have HSAs and qualify for family coverage, they can only contribute a combined $7,300 per year between both accounts.

⚠️ These are the limits for the 2022 tax year, but the numbers increase with inflation over time.

To put money in your HSA, you can set up a payroll deduction with your employer (if the account is through them) or transfer funds from a bank account. The former option excludes the contributions from your wages, making them completely tax-free.

If you make the contributions directly, you must deduct them from your gross income when you file your taxes. That lets you avoid paying federal and state taxes on the amount, but you’ll still incur the 7.65% FICA tax for Social Security and Medicare.

Investing Within the Account

Each HSA has its own investment options. Some merely provide a small return like a savings account, while others let you purchase certificates of deposit, stocks, or mutual funds.

Keep your time horizon in mind when you decide how to split your funds. For example, if you think you’ll need the money in a few years, you probably don’t want it all in mutual funds.

Withdrawals

There are also two general ways to take funds out of your account. You can spend them directly with a debit card linked to your HSA, or you can pay for expenses out of pocket and reimburse yourself later.

Fortunately, if you choose the latter, there’s no deadline. You can seek reimbursement years later if you want. That can be a beneficial strategy since it lets your assets grow within the account for longer.

Either way, keep careful records of all your medical expenses. If the IRS audits you, you need to prove that you used the funds for eligible healthcare services to keep your tax benefits.

Tax Savings

HSAs are unique in that you can get a deduction for your contributions and potentially pay no tax on your withdrawals. Other tax-advantaged accounts only allow one or the other. Because the assets inside grow tax-free as well, you can get a triple tax benefit from your HSA.

How to Use an HSA and HDHP for Healthcare

In certain situations, combining an HSA with an HDHP can be a great way to make your healthcare more affordable. Fortunately, using them together is also relatively simple. You can separate the long-term strategy into two distinct phases.

First is the accumulation phase, during which you don’t need much medical care. As a result, a high deductible doesn’t bother you, and you can take advantage of your lower monthly premiums to maximize contributions to your HSA.

💡 It’s a good idea to keep a sizable emergency fund during this period. If you end up needing more medical care than you expected, you want to be able to cover your HDHP’s deductible.

Second is the withdrawal phase. Once you reach an age where your medical needs increase, you can start taking the funds out of your HSA to pay for healthcare as necessary.

You or someone in your family will likely incur medical expenses at some point. However, even if you don’t use all the HSA funds for healthcare, the 20% penalty for spending the money on other expenses goes away at age 65.

If you find yourself in that situation, the account works just as well as any other tax-advantaged retirement account. You’ll pay ordinary income taxes on your withdrawals, but that’s true of a traditional 401(k) and Individual Retirement Account (IRA) too.

When is an HSA a Good Idea?

Leveraging an HSA can be a great way to make your healthcare more affordable, but it’s not the right choice for everyone. Here’s what you should consider before you decide to switch to an HDHP and open an HSA.

Advantages of an HSA

As we’ve discussed, the primary advantage of using an HSA and HDHP combo is that it can mitigate the cost of your medical services by reducing your monthly insurance premiums and overall tax liability.

HSAs are the only accounts that offer a threefold tax benefit. You get an upfront deduction, tax-free growth within them, and tax-free withdrawals for qualified medical expenses.

The second significant advantage of an HSA is its versatility. You, your spouse, and your employer can all contribute. You have the option of using paycheck deductions or direct transfers.

Once your money is in the account, you can often invest in a wide range of assets, including certificates of deposit, stocks, and mutual funds.

Next, you can take the money out at any time without penalty for your family’s medical expenses. Again, you have the choice to spend the funds directly or reimburse yourself with them years after the services occur.

Finally, if it turns out that you have more money in the account than medical expenses, you can use the leftovers as retirement funds without penalty after age 65.

Disadvantages of an HSA

There are few legitimate downsides to an HSA. You have to document your medical expenses, and some people argue HSAs make you more reluctant to spend on healthcare when you need it, but those are relatively easy to overcome.

The real risk is that you have to sign up for an HDHP. If you end up needing significant medical services during the accumulation phase, you’ll be on the hook for an expensive deductible. If that occurs before you have time to build up money in your HSA, you could blow through your cash savings and end up in medical debt.

Who Should Consider an HSA?

Generally, an HSA is best for young, healthy individuals who rarely need to seek out medical care. Ideally, you’d also get an account through your employer so you can contribute via payroll deductions and potentially benefit from a company match.

In these cases, you can drastically reduce your monthly premiums by switching to an HDHP and your tax liability via your contributions to the HSA. As a result, you can save a significant amount of money until you need it for medical expenses later in life.

If you don’t fit that profile, switching to an HDHP to open an HSA could cost you. For example, you’d likely be better off with an insurance plan that has a higher premium and lower deductible if you need to pay for expensive services in the near future.

💡 When in doubt, consider consulting a financial advisor or Certified Public Accountant. They can estimate how much you stand to save in taxes and help you make an informed decision.