High Deductible Health Savings Plan

As the cost of health care and health insurance continues to increase, consumers are actively looking for ways to lower cost. This increased cost, as well as the current health care reform efforts, have been beneficial for a couple of reasons. First of all, it has caused people to creatively look at ways to reduce premium cost. Secondly, it has caused us to consider what real purpose health insurance serves and evaluate our past coverage choices. Let's take a look at the components of using a Health Savings Account plan:

High-Deductible Health Plan (HDHP)

The Health Savings Account (HSA) coverage option has two components. The first component is a high-deductible health plan (HDHP). This is a major medical health insurance policy that has deductible options that meet guidelines established by law. Plans that meet the deductible criteria are considered to be "qualified" high-deductible health plans. There is an inflation factor whereby the deductible guidelines adjust on a yearly basis. These (HDHP) plans are considered comprehensive in the sense that all medical expenses large or small, even doctor visits and prescription drugs, are considered covered expenses and count towards the deductible.

It is important to note that there can be no benefits paid until the deductible is met on a qualified HDHP. For example, there cn be no doctor office co-pay or prescription drug co-pay. Having an up-front benefit of this type would violate the guidelines and disqualify the HDHP. It is important to note that preventative care or wellness benefits are allowed to be covered before the deductible on a qualified HDHP. For plans that use Preferred Provider Organizations (PPO), you also get the benefit of discounted pricing for all medical visits and procedures by a participating provider.

One unique and well accepted feature of the HDHP is that there is only one deductible for a family. This means that the deductible can be met by a single family member having a large medical expense or by all family members combining medical expenses. Once the deductible has been met, the entire family begins to have expenses covered. The expenses after the deductible can be covered at 100% or by a coinsurance percentage until a family maximum out-of-pocket limit is met.

Health Savings Account (HSA)

The other component is a Health Savings Account (HSA). This is simply a qualified account for making deposits that can later be used for medical care. These accounts may be established with a bank, insurance company, credit union or investment company. The accounts must be "qualified" savings accounts and meet certain criteria established by law, therefore, it is important to verify that the account you are considering meets the qualifications. These accounts are interest bearing accounts and the funds can be accessed by debit card, writing checks or requesting a reimbursement of medical expenses paid. There are limits on the amount that can be contributed to an HSA each year:

2009 contribution limits
-single $3000
-family $5950
*$1,000 catch-up for 55 or older

2010 contribution limits
-single $3050
-family $6150
*1,000 catch-up for 55 or older

Here is the best part. Contributions to the HSA are deductible for tax purposes. This means that routine medical expenses, even things that are not covered under the medial plan such as dental, vision and over-the-counter medicines can be paid for with pre-tax dollars rather than after tax dollars.