High deductible health insurance plans have lower premiums but typically much higher deductibles than a traditional healthcare plan. These plans cover the high cost of catastrophic illnesses and do not provide much in the way of coverage for regular checkups or the cost of prescription medications.
Once the deductible has been fully met, the insurance coverage will kick in but the deductible can run as high as $5,000 or more for a single year.
Like other insurance plans, high deductible health insurance coverage has co-pays that you are responsible for paying after the deductible has been met. In many cases, insurance plans with high deductibles are linked to a health savings (HSA) or flexible spending account. Each payday, a set amount is delivered to your Flex account and a single annual contribution is made to an HSA on a tax deferred basis.
Using Flex Spending Accounts With A High Deductible Plan
Flex spending accounts are a use-it-or-lose it account. If you don’t use all the money during the calendar year that is transferred to your Flex account, then you will lose all of it. There are strict regulations about what you can use the money for so you won’t be able to easily go out for an end-of-the-year spending splurge to use it all up. Most users carefully budget to ensure that they don’t put more money into the account in a single year than they are likely to use.
Using An HSA With High Deductible Health Insurance
Contributions to an HSA are withdrawn on a tax deferred basis. Withdrawals for medical expenses are never taxed. Any interest that accrues is also tax deferred and unused money in the account is not forfeited. It may be rolled over and used for future medical expenses.
HSA’s may be a good choice if you are in good health and can contribute the maximum amount to the account. Your health insurance premium will be substantially lower and if you do not use up the money that is deposited in your HSA, you can keep it for future use. Many retirees use the money for expenses and the money may also be withdrawn to pay insurance premiums during periods of extended unemployment.
Who Should Not Purchase High Deductible Health Insurance Plans
Anyone who cannot afford to reserve a significant amount of money for medical expenses will have difficulty managing their financial situation should a series of non-catastrophic medical events occur in a single year. Consumers who require frequent doctor visits are not considered good candidates for this type of insurance. If regular medication is taken, the cost of the medication on a monthly basis should be considered before committing to an insurance policy with a high deductible plan.
Making the right choice when it comes to health insurance can help you get through difficult times. For many, a high deductible plan is the only way to go. HSAs were created specifically as an option to protect people who only have catastrophic plans for health insurance coverage and have proven to be a great investment for many.
Reducing your medical expenses can be difficult. High deductible health insurance plans can be costly and may not cover initial medical expenses until the deductible has been fulfilled. Look into joining a discount health plan today to save more money.
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