Features of High Deductible Insurance Plans and Health Savings Accounts:

At first, when you are learning more about how a health savings account works, the premise of having a higher deductible insurance plan can be daunting. However, there are many benefits to a high deductible plan as well as a health savings account that can actually provide you with more savings than a typical low-deductible health insurance plan can offer.

A high-deductible insurance plan goes hand in hand with a health savings account. Current regulations state that your health insurance plan must have a deductible that is greater than $1000 per year in order for it to be eligible for your HSA.

Let's take a look at some of the typical features of a high-deductible insurance plan, as well as health savings accounts.

Lower Premiums

Although your yearly deductible may be higher, your monthly premiums are much lower. For example, a typical low-deductible HMO may offer a monthly premium of over $200, even though the deductible is $500 per year.

Your premiums are not affected by your deductible, which means that you will still be paying out $200 per month, in addition to any other expenses. In one year, this means that you will be paying at least $2900 for your health insurance policy, after you have met your deductible.

A high-deductible plan may have a deductible that is greater than $1000, but your monthly premiums can help make up this difference. For example, if your deductible is $1000 and your monthly premiums are $100, you would pay at least $2200 per year for your health insurance policy. In addition, the amount of money you are paying for this plan would be tax-free, if you are using your HSA funds to pay for the costs.

No Co-Pays

HSA eligible health plans may not have a co-pay. This is due to the fact that you can actually save more money with a high-deductible insurance policy over the course of a year, than you can with a low-deductible insurance policy that forces you to pay a co-pay for each visit.

Even though a co-pay may only be $20, this amount can add up quickly, particularly if you require a great deal of treatment.

Tax-Free Contributions and Payments

A health savings account offers the ability to make contributions and payment for health care services without taxation. This means that the money you put in to your HSA is non-taxable, and the money you take out to pay for qualified medical expenses is also non-taxable. In addition to avoiding federal tax on this money, most states are now offering state income tax exemption as well.

Over time, the ability to save on your income tax, at the state and federal level can greatly exceed any temporary savings you could experience with a low-deductible health insurance plan.

Greater Freedom and Quality of Care

The saying that you get what you pay for is definitely true when it comes to health care. A high deductible insurance policy typically offers you more freedom of care than the average HMO plan. Since you are initially paying more to meet your deductible, you can have more freedom in the type of health care that you receive.

In addition, the funds in your health savings account can be used to cover expenses that may not be covered by your current health insurance plan, such as dental and vision expenses, mental health treatments and even alternative therapy. As long as it falls under what the IRS deems as a "qualified medical expense" you can use your HSA funds, tax-free, to pay for these procedures. For more information on what is considered a "qualified medical expense," you can visit www.irs.gov to read their publication #502 which provides a list wit more information.

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