Is High Deductible Health Insurance Right For You?

Happy New Year! Why not take this opportunity to review your health insurance coverage and see if you can save a few bucks by making more informed choices? One of the best ways to bring down costs is to elect for a high deductible plan, which offers the advantage of lower premiums in exchange for a cap on the amount of medical bills you can rack up during the plan year.  While self-insuring individuals have always had this option, many companies now offer high deductible plans to their employees to make health insurance more affordable. Here’s some high deductible information to help you decide if a high deductible plan is right for you.

High deductible plans are typically coupled with a Health Savings Account (HSA), which under current law allows anyone under age 65 to contribute up to the amount of the deductible, but not to exceed the maximum.  In 2010, the maximum individuals can contribute is $3,050, with $6,150 for families.  In addition, the maximum out-of-pocket employees can be required to pay will be $5,950 for singles and $11,900 for families. The other requirement is minimum deductible for high-deductible health insurance plans linked to HSAs: $1,200 for individual coverage and $2,400 for families. Essentially, the money in your HSA is available to meet your deductible or other qualifying medical expenses. Once the deductible has been met, your plan will kick in and cover a percentage of your medical costs for the rest of the plan year. That percentage will vary, typically 80% to 100%, depending on your plan.

HSAs have a number of advantages in addition to lower premiums. Your HSA contributions tax-deductible, whether or not you itemize your tax return.  They’re also like a tax-free fund whose earnings grow each year. You can even invest the money, if you like.  You won’t pay taxes on any withdrawals you use to pay for your medical bills, either. Lose your job and the HSA goes with you. And the money can be transferred to your heirs in the event of your death.

So what’s the downside of a high deductible health insurance plan with a Health Savings Account?  Because there’s a cap on the medical payout and a finite amount you can contribute, the danger exists that you could max out your benefits, tap out your HSA and end up owing a bundle of money in medical bills. You also need to be prepared to pay all or a portion of for every office visit, prescription medication, test and procedure. Some high deductible health insurance plan providers don’t allow you to invest your funds, while others accrue high maintenance and account fees. Do you have a preexisting condition? Read the fine print for exclusions.

In general, high deductible health insurance plans with Health Savings Accounts are great for young, healthy people and not so great for people with chronic illnesses or conditions that require lots of prescription drugs.


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