Low Cost Medical Insurance with an HSA « Health Insurance Advisory

Low Cost Medical Insurance with an HSA

Health Saving Accounts (HSAs) paired with a high deductible medical insurance plan have significantly gained in popularity over the past several years for self employed individuals, families and employers of all sizes. These consumer driven health plans (CDHPs) offer low cost medical insurance and often lower out of pockets costs than traditional health insurance plans.

In 2005, total HSA enrollment was only 1 million persons, while 11.4 million individuals as of January 2011 were enrolled in an HSA coupled with a high deductible medical insurance plan. The 11.4 million represents 6.6% of the total enrollment in private health insurance (under age 65). More than 10% of all new health plan purchased today are HSAs with high deductible plans. Participation is almost evenly split between females (49%) and males (51%). Of the enrollees in the individual health insurance market, 49% were age 40 or older, while 51% were under age 40.

States with the highest enrollment in HSAs with high deductible medical insurance plans are:

  • Alaska
  • California
  • Colorado
  • Connecticut
  • Delaware
  • Florida
  • Georgia
  • Illinois
  • Indiana
  • Iowa
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Michigan
  • Minnesota
  • Montana
  • Nebraska
  • New Hampshire
  • North Carolina
  • Ohio
  • South Carolina
  • Tennessee
  • Texas
  • Vermont
  • Wisconsin

Why are HSAs so popular? Despite the myth that high deductible medical insurance is more risky than traditional “PPO copayment plans,” HSAs/ high deductible health plans can actually reduce your out of pocket exposure if you require major surgery or hospitalization. Since high deductible plans pay 100% of covered charges after the deductible has been satisfied when using network healthcare providers, there is no additional out of pocket expense. In contrast, traditional “PPO copayment plans” typically pay 80% after the deductible. So, in addition to always having copays, you are also required to satisfy the maximum out-of-pocket before the health plan pays 100% of covered charges when using a network healthcare provider. This can cost you several thousand more dollars out of your pocket.

Other reasons why individual choose HSAs with a high deductible medical insurance plan include:

  • Lower cost of medical insurance, as the health insurance premium is generally 25% to 50% less than a comparable traditional “PPO copayment plan”
  • Greater spendable income since federal and state income tax liability is reduced- even if you do not itemize your deductions
  • Opportunity to grow your savings and accumulate money without paying taxes- HSA monies can be invested and investment earnings accumulate tax free
  • Increased tax deduction for out-of-pocket healthcare expenses, such as vision, dental and prescription drugs- even though they may not be covered under the high deductible medical insurance plan

An HSA paired with high deductible medical insurance plan may not be right for you if:

  • Have minimal healthcare needs and want the convenience and comfort of copayments, rather than a calendar year deductible to satisfy
  • Would rather pay a higher premium and less out of pocket for office visits, lab work and prescription drugs

If you want to learn more about why HSAs are considered affordable medical insurance, the requirements to set one up and how file your tax return, visit the HSA section of our Medical Insurance Research Center. You might be surprised at how relatively easy HSAs and high deductble medical insurance plans are to understand and effective at providing lower cost health insurance for you and your family.

An HSA is simply a bank account that is used in conjunction with a high deductible medical insurance plan. The HSA is designed to help fund the deductible and pay for other qualified out-of-pocket healthcare expenses, such as medical, dental and vision expenses with tax-free money. Monies deposited into an HSA are tax deductible and funds withdrawn to pay for covered healthcare expenses are not taxed. HSA monies can be invested and accumulate tax-free for retirement.

To find and secure an affordable high deductible medical insurance plan, get to healthinsuranceadvisory.org today!

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