Health Savings Accounts – Insurance Plan
Q. My employer just switched to a Health Savings Account plan for our insurance. How does this work? It seems so expensive.
A. The Health Savings Account is a fairly recent concept delivered by Congress. The attempt is to get away from the entitlement mentality to more of an ownership mentality. Under the standard insurance plan concept, you pay the first $500 or so in medical costs as your deductible and then get transferred to a $20 copayment each time you visit the doc. Some plans allow regular medical visits at $20 without any deductible. This type of thinking leads people to go to the doctor for every little ache and pain that they have with little investment on their own part. This also causes steep raises in insurance premiums each year as the cost of covering all the medical expense increases.
Enter the HSA concept. This type of plan has a much higher deductible, often around $2600 for individuals and around $5000 per family. You pay the insurance negotiated rate to your health care provider. Once you hit the deductible, coverage kicks in to 100%. There are always some exceptions so read your plan document. The best part is that the premium for this type of plan is usually much lower than a traditional insurance plan. Therefore, you get to take the premium difference and place it into an interest bearing account to pay for the deductible with fully pre-tax dollars. You have access to these funds through a debit card. You still must keep documentation proving that you only spent this money on “qualified medical expenses”. I will cover what that is next time. To add to the good news, this money does not go away. Unlike an FSA, you keep it in the savings account until you use it!
In theory, you spend less on medical care because you only visit the doctor for what you need and not just hang nails. You also see less increase in medical premiums.
Tags: deductible, health insurance, HSA, medical bills, pre-tax
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