Over the past 21 months, my family has participated in a wild ride with health insurance. The experience has been enlightening, incredibly frustrating, annoying, confusing and intimidating. Can I get an “Amen!” and a witness?!?! In this series on health insurance, I am going to share my experience AND some helpful tips on saving money on health insurance.
Part Two High Deductible Health Plan with Health Savings Account (HSA)
I was first introduced to a high deductible health plan (HDHP) with a health savings account (HSA) when I was an employee. My first reaction was, “My deductible is that HIGH?!!” Upon further review, I found out that it was a terrific deal – for me as an employee as well as my employer. Let me explain how a HDHP with a HSA works.
- High Deductible Health Plan (HDHP) According to IRS publication 969, the minimum deductible eligible for establishing an HSA is $1,200 for an individual and $2,400 for a family. In other words, the insurance policy must require the covered individual or family to pay the deductible before the insurance company pays any health care costs (with some exceptions related to preventive care – see IRS Publication 969)
- Health Savings Account (HSA) This is a savings account that you can establish at a bank that is used solely for paying for health care expenses. I have established my account at a local bank. Each year, I am able to contribute an amount equal to the annual deductible of my insurance. Here is the GREAT NEWS – whatever I contribute to my HSA is tax-deductible! This saves me TONS of money! Additionally, the money I have in my HSA is not a “use-it-or-lose-it” account. If I do not use all of the money I have placed within my HSA, the money remains in my account until I actually need it.
As I have embarked onto this crusade full-time, I have had to obtain my own individual insurance policy. HDHP with HSAs were by far the best option for my family. We checked out the rates at eHealthInsurance and a local insurance agent. The rates were the same, but using eHealthInsurance I was personally able to easily compare policies.
A HDHP is less costly to the insurance company because they substantially decrease their risk by forcing the consumer to shoulder the burden of the initial deductible. For most people, this causes them to avoid running to the emergency room every single time there is a health care need. Because the individual is going to have to pay for the entire ER visit, they become what I call a powerful person – an INFORMED and AWARE consumer! This means that the individual will instead go to an urgent care facility which will charge less than 1/4th of the cost of an ER visit. This is better for the individual AND the insurance company – and results in a lower premium.