Health insurance is important but can be costly. A policy created to help curb the cost of health insurance is the high deductible health plan, or HDHP. This type of policy was created with special tax rules allowing you to have a health savings account, or HSA, to save and spend money on health expenses tax free. HDHPs and HSAs are not for everyone, but are an extra option to take into account when comparing health plans and costs.
A health insurance deductible is the amount you pay before the insurance company begins to pay benefits. The cost of insurance goes down for higher deductibles. The deductible on a health insurance policy is either for the calendar year or policy year and is reset after each year.
The co-insurance on your health policy reflects how benefits are paid after the deductible is paid. If your plan has 100 percent co-insurance then the insurance company pays 100 percent of the medical costs after you have paid the deductible. If you carry a 90/10 co-insurance it means that the insurance company pays 90 percent and you pay 10 percent of the costs after the deductible has been paid. The co-insurance ends after the maximum out-of-pocket expense, or stop-loss, has been reached. The higher co-insurance and stop-loss you carry the lower your insurance premiums will be.
High-Deductible Health Plans
HDHPs are health insurance policies with deductibles that are higher than traditional insurance plans. Traditional plans have doctor's office co-pays and smaller payments for other medical costs like perscription drugs. HDHPs are less expensive because they do not have those added benefits; you pay all of the medical costs until you pay your deductible. Some HDHPs have a small amount of wellness benefits that are offered as a benefit before the deductible is met. The minimum deductible to qualify as an HDHP is established by the government and changes yearly. As of 2010, the minimum for an individual was $1,200 and for a family was $2,400. These policies are the only health policies that feature a health savings account.
Heath Savings Account
HSAs are special accounts you may only have if you have a high-deductible health plan. They allow you to contribute pre-tax dollars to fund the accounts. That money grows on a tax-deferred basis and as long as you spend it on medical expenses you may spend it tax-free. There are, however, severe tax penalties for not spending the money on medical expenses. The eligibility and maximum contribution is limited on these accounts by IRS guidelines. The limit as of 2010 was $3,050 for an individual and $6,150 for a family.
The main benefit to HDHPs is the reduced cost. This savings is meant to go toward the HSA, which has many tax benefits. The goal is to build up your HSA to a level that can pay for the deductible and other medical costs. This plan is not for everyone. If you visit a doctor's office frequently or take several medications, this might not be the best option. Health insurance agents may review your current situation and medical bills and help guide you to the right policy to fit your needs.
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