As health care costs continue to rise, more employers are offering high deductible health plans: health insurance coverage that offers negotiated service discounts with providers and pharmacies but doesn’t actually offset any costs until after the consumer has paid a hefty amount up front, typically greater than $1300 for an individual or $2600 for a couple/family. In return, the employer may allow planholders to save pre-tax money towards the deductible in a Health Spending Account (HSA), or even contribute funds directly into such an account to be used for eligible health care expenses. Premiums for high deductible plans are lower than those for traditional PPO plans, which makes them a good choice for healthy people who don’t have frequent health care expenses.
What are the best ways to maximize savings with a high deductible plan? First, take advantage of a HSA if your plan is eligible for one. Not only will your contributions be tax-free, but they can be withdrawn (also tax-free) for a wide variety of health-related expenses outside your health plan, like vision and dental costs. These funds, including those contributed by your employer, are yours to keep, even if you leave your job. If you are under 65 and withdraw HSA funds for non-health-related expenses you will pay taxes and a hefty penalty. If you are over 65, you can withdraw funds from your HSA for any purpose without penalty, but you will need to pay taxes on the amount withdrawn.
Secondly, do your homework on costs. Research shows that costs for medical services and procedures vary significantly. Your health plan may have cost data available for you to compare, or you may need to call around to find the best value. These preparations are time-consuming, but they can be worth their weight in gold when it comes to paying the bill.
High deductible health plans are here to stay. If you have any other questions about how they work or how to optimize yours, let us know. We’ll work with you to figure out the best solution for your needs.