A Guide to High Deductible Health Insurance Plans
How can you save money on your monthly health insurance premiums while simultaneously being able to create – and help increase the funds in - a health savings account (referred to as an HSA for short)?
The answer? Acquire a high deductible health plan (also known as an HDHP).
What are all the upsides of having an HDHP? During your lifetime, when exactly will you need a high-deductible health plan, and for what reasons? Which are the best High Deductible Health Insurance Plans for the needs of you and your family?
Knowledge is power. So, let us help you begin learning about easy, yet important, HDHP (knowledge).
First, get a good, solid feel for exactly what an HDHP is. It is vital to learn as much as possible about ANY health insurance options you end up selecting. And learning as much as you can about enrolling in an HDHP is no exception!
Read on to learn about High Deductible Health Insurance plans. We’ll help to guide you through information on the various components of an HDHP plan; the numerous benefits you can take advantage of when becoming a member of one of these health plans; which are the top HDHP health insurance companies; and so much more.
There is an enormous array of health insurance options out there for you to choose from.
However, a High Deductible Health Plan is a uniquely constructed health plan that actually sets you up with a health savings plan account (HSA) as part of your HDHP membership. (HSA benefits come in very handy for tax help and loan necessities. But we’ll get into those specific details a bit later in this post).
A High Deductible Health Plan offers tax advantages designed to offer such tax (greatness) such as tax-free withdrawals, tax-free earnings, pre-tax contributions, and more.
What’s more, your enrollment in an HDHP offers you and your family members special flexibility, including more options for you to decide how you want to use your health care funds today.
HDHP – Health Insurance Options and Facts You’ll Want to Know About
To reiterate some HDHP information we have begun to lay out for you, here’s what Investopedia.com has to say regarding your options and facts:
A Health Savings Account allows individuals to pay for current health expenses and save for future qualified medical expenses on a pre-tax basis. Funds deposited into an HSA are not taxed, the balance in the HSA and interest grows tax-free, and that amount is available on a tax-free basis to pay your qualified medical expenses, including your copays, coinsurance and deductible.
Our explanation of HDHP (plans) is clearly in alignment with other online experts on the topic. But there’s more to inform you about, so let’s continue with information about your options and (important) HDHP facts!
While there are Americans who believe that enrolling in a High Deductible Health Plan is somehow more complicated than signing on to more general, run-of-the-mill health insurance companies, the truth is that becoming part of an HDHP plan – and understanding the plans’ unique benefits – is quite simple.
facts about HDHP health insurance plans:
Aside from usually lower premiums, your HDHP allows (contributions) to a health savings account. And because HSA contributions (come from) pre-tax dollars, you’ll find that you’ll have the ability to save quite a considerable amount of money to use for your medical expenses when those expenses are paid through your HSA.
Sometimes, people come up against catastrophic out-of-pocket payments and expenses for services that are typically insurance-covered. The good news is that HDHPs protect you from these catastrophic expenses. If your yearly out-of-pocket expenses for covered services from in-network providers get to the insurance company’s “catastrophic limit”, your HDSP plan along with your HSA is there to come to your financial rescue. Your Hight Deductible Health Plan will pay 100% of the allowable amount for the remaining calendar year
Here’s an HDHP fact you’ll be grateful for! Should you happen to meet your catastrophic maximum, you won’t incur any additional out-of-pocket medical expenses for in-network care. This includes co-payment as well as medicines and prescriptions which aren’t covered under the catastrophic limits of many traditional medical insurance plans
Why an HSA (Health Savings Account) Will Work Very Well for You at Tax Time – And Beyond!
As a part of your High Deductible Health Plan, you’ll enjoy excellent health insurance options that include the very special benefits of a Health Savings Account (HSA). Your HAS is set up for you as an additional (benefit) of your HDHP enrollment plan.
Here is a list of just some of the terrific benefits you’ll get with your HDHP-related HSA account:
You can consider your HSA to be a type of personal savings account. However, this particular savings account is intended for specially qualified healthcare expenses. For example, your HSA funds can help you to cover any out-of-pocket payment needs.
Use your HSA account dollars for such health care expenses as dental and mental health needs, including, of course, a great variety of medical services
HSA monetary contributions are not subject to federal income tax. That means your HSA funds, along with fund growth and account earnings, have the opportunity to increase tax-free!
When the end of the year hits, every penny of unused money in your HSA rolls over to the next year. No penalties. No dollar amount roll-over limitations. Pretty cool stuff!
Financial contributions to your HSA can certainly come from you, of course. But contributions can ALSO be deposited into your account by your employer, or a family member, or basically, anyone else wishing to help contribute. There are contribution limits for every tax year, so be sure to look up what those maximum contribution limits are
Any contribution added to your HSA is primarily made using pre-tax dollars via your employer’s pre-tax deductions. What does this mean for you? The monetary contributions are not included as part of your gross income; therefore, your HSA monies aren’t subject to your yearly federal income taxation
You have the freedom and the flexibility to make tax-free withdrawals from your HSA account. Withdrawals for any qualified medical expenses are not (subject) to federal taxes, nor state taxed in the majority of cases
You can use your Health Savings Account as a type of investment account if you so choose. In a nutshell, you are allowed to buy stocks and various other kinds of securities for the potential to boost HSA returns. Please note this is not always advisable. There is quite a risk here which can lead to principal loss. We highly recommend that you speak to a financial advisor first if you are planning to take an action such as this one)
All HSA account interest (as well as other types of earnings on your account funds) is completely tax-free
If you should ever change your health insurance company, or in the case of moving on to a new job or retirement, your HSA funds will continue to remain available to you. Consider it additional financial help for any future medical expenses that may pop up
How High Deductible Health Plans Work
If you happen to be looking for the best high deductible health insurance plans or other types of health insurance companies that fit your lifestyle and health care needs, take in some great information about how HDHPs work. And how they’ll work for you and your loved ones!
As we’ve already learned, HDHPs are an opportunity to collect “free” dollars by way of employer (and other) contributions to your HAS. What’s more, you have use of your HSA whenever needed, even if you no longer are enrolled in the HDHP account. All of your HSA contributions carry over from year to year, and the funds continue to accrue interest. If you ever need your HSA to help pay for future medical expenses, the account is always there and ready to help with any unforeseen medical expenses.
The Inner Workings of an HDHP:
An HDHP plan sets up a connected HSA through a fiduciary
Tax-deductible contributions can be contributed to your HAS in several ways, including employer and personal contributions
HSA funds earn interest that is tax-free
Whenever you require preventive care services, your HDHP is there to help provide that care for you. There is no cost to you when you use participating plan providers
Should non-preventive care be needed, you will pay for the full cost of care using the funds from your HAS according to your plan's high deductible
Discounts are negotiated by your health plans providers who participate in the HDHP health plan
HSA distributions are completely tax-free for qualified medical expenses even if the necessary care is not “officially” covered by your HDHP plan
You are permitted to withdraw money from your HSA for necessities other than medical expenses, however, those withdrawals will be subject to income tax plus an additional financial penalty. If you are more than 65 years old, you will not have to pay the penalty, however, your distribution will still be subject to income tax
Just like a savings account, you can opt for your HSA contributions to grow over time. Your HSA is also a portable account; you are allowed to take the HSA with you if you move on to a different job or if you decide to enroll in a different plan
Why is an HDHP Right for You?
If you have funds saved up, enrolling in an HDHP plan works quite well for any enrollee’s different health situations, such as whether the plan participant is in good health or an illness.
If your health is good and you hardly ever require prescription drugs, you should definitely consider enrolling in an HDHP. In order to have the ability to offer their lower premiums, HDHPs ask that you pay your required deductible before receiving coverage for health care treatment besides preventive care.
However, if you are suffering from an illness that needs treatment and medications, HDHPs and HSAs are excellent options to have if you know that you or a covered family member will be requiring serious medical care in the near future. There are major reasons for a benefit like that, including the tax advantages that go hand-in-hand with any HSA.
When someone is experiencing any major medical needs, it’s very likely they’ll quickly meet their plan’s out-of-pocket limit (whether or not that deductible is on the low or high end). Being part of an HDHP helps to reduce a large part of the patient’s out-of-pocket necessities. What’s more, the enrollee’s HSA allows the use of pre-tax funds to help with the needed medical care. As HSA contributions continue to get funneled into the account, an HDHP offers the flexibility to put funds into the HSA, and then withdraw the funds immediately as need so medical bills can get paid.
Thanks to this system, those that need to pay medical bills use pre-tax money rather than after-tax money.
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And there’s more!
One of the finest benefits of joining an HDHP is the ability to make contributions to, and continue to build up, your HSA. And as for itemizing your HSA deductions? Not necessary! During tax filing time, you are allowed to simply deduct the HSA contributions you have made. That’s quite a big “wow!”
The dollars that live in your Health Savings Account roll over from year to year. You don’t have to use the funds in order to keep from losing the funds!
Which Types of Medical Services Will My HDHP Cover?
Since any HDHP plan you enroll in won’t offer any vital medical care coverage until you meet your deductible, having that Health Savings Account (HSA) is an outstanding solution when it comes down to ensuring you have the funds to help cover any potential deductible.
Goalry, a transformative online money experience that helps you reach all of your financial and insurance-related goals, informs us that “as long as the Affordable Care Act remains in effect…many preventative tests and procedures are 100% covered no matter what your deductible is.
HDHPs consists of, and cover, the following until your deductible is fully met:
An HDHP consists of an annual deductible that is higher than traditional health plans
HDHPs all have a maximum limit on the plan’s annual deductible. The plans all require out-of-pocket costs for medical expenses, including copayments
HDHP preventive care benefits include:
Routine prenatal examinations and well-child exams
Yearly routine physicals
Immunizations and boosters for adults and children
Tobacco cessation help
Programs for weight loss and obesity
Routine health screening services for:
Heart and vascular diseases
Cancer
Mental health
Infectious diseases
Substance abuse
Nutritional, metabolic and endocrine issues
OBGYN conditions
Musculoskeletal conditions
Hearing and Vision
Pediatric services and conditions
24/7 virtual visits with board-certified doctor
What are Some of the Best HDHP Companies?
Having investigated the details of many HSA-offering companies throughout the country, insure.com has provided great options to choose from.
Here’s a rundown of among the Best High Deductible Health Insurance Plans out there. Check them out online to see which works best for you:
Do Your Research and Discover Your HDHP Eligibility Status
Here’s a quick, handy list of who may be eligible to enroll in an HDHP with an included HSA:
• Are you a current HDHP enrollee, and NOT insured by any other plan (for example, your spouse’s plan?)
• Are you NOT a Medicare participant?
• Are you enrolled in VA health care services, or Indian Health Service benefits?
• Are you NOT a part of your spouse’s flexible spending account, nor are you a dependent claimed on another person’s tax return?
If you answered “no” to the above queries, you’re most likely an eligible HDHP with an HSA candidate.
In Conclusion
Ultimately, your good health is your most important life blessing. You can be extremely wealthy, for example, but if your health is poor then even money won’t help you enjoy life’s every day beauties.
Stay healthy. Stay happy. And make sure you do as much reading and research about how one of the best high deductible health insurance plans can help keep you and your loved ones continue the road to a healthful and happy life!