When looking for the perfect medical plan, you may have run into HSA health insurance and wondered what in the world that meant. On one hand, an HSA can be more complicated than a typical plan such as a PPO. On the other hand, however, an HSA is much simpler than other plans. Lets take a look at what an HSA is.
Features of HSA Health Insurance
HSA stands for Health Savings Account. The HSA is not the actual insurance. It just allows an individual or family to place money in a tax-free account to save for medical expenses. The HSA is used in conjunction with an insurance plan. Here are some other features of a plan with a Health Savings Account.
- The insurance plan must have a high deductible.
- In-network preventive services are covered at 100%. After the Patient Protection and Affordable Care Act (Obamacare) goes into place, this point will be moot since all plans must have preventive services covered at 100%.
- All other services (including prescription drugs) are subject to the deductible. This means there are no copays. But there are ways to pay less for consultations even if you are on an HSA plan.
- Individuals can place money pre-tax into an account where it can grow tax free. Money from this account can be used to pay for medical expenses without penalty.
- HSA health insurance plans are typically cheaper than plans with copays and smaller deductibles. This is because there is less risk to the insurance plan. In addition, one idea of a plan with an HSA is that the large out of pocket expenses will cause people to be better consumers of healthcare and choose providers that provide services at lower costs.
- The savings never expire. They stay with the individual forever, even if the person is no longer on the original medical plan that was used with the HSA.
Features of an HSA Account
As mentioned above, the money that is placed into a health savings account is not taxable. The earnings in the account is also not taxable as long as the money is used to pay for medical expenses.
There are limits to the amount that can be placed in the account annually (2015 and 2016 is here).
Employers that have an HSA as part of their group plan can contribute to the account.
Who Should Use HSA Health Insurance?
Before you choose whether to use an HSA health insurance plan, you must know the cost of the plan, whether it is the total cost if you are purchasing individual insurance or the contribution your employer requires you to pay. Then you can perform a cost-benefit analysis to determine if a high deductible plan with an HSA is for you.
Typically, people with chronic conditions that know about how much they will spend in health care can do this cost-benefit analysis fairly easily. In many cases, these people benefit from using an HSA since they can save the money they will spend. Since the savings is tax-free they can buy more health care services for less money.
People with very low expenses can also benefit from HSA health insurance since the savings account rolls over from year to year. Since the savings can never be lost, the account is a great way for people with a small amount of claims to have a big chunk of money ready for the day that a bad illness or accident hits.
What are the Negatives of HSA Health Insurance?
The only main drawback of using an HSA plan is that there are no copays. Until the deductible is met, the plan participant will pay full price (after network discounts) for medical services. This can be quite expensive. One way to get good physican care is through telemedicine, where you can talk to a Doctor anywhere, anytime, 24/7. You can avoid the high cost of an HSA by enrolling in a telemedicine program.
An HSA is an Attractive Option
HSA health insurance is not something that anyone should be scared of. Yes, there is a large out of pocket exposure, but the premiums are less expensive than other options, and many people can save money in the long run. This type of plan is worth a look.