Health Savings Account type plans, are made up of a combination of a High Deductible Health Plan, HDHP, and a Health Savings Account, HSA. These type plans are less expensive and the premium rates are more stable. It is the least expensive way to protect yourself and your family.
Each year, insurance companies reevaluate their costs of doing business and raise the premiums on their insured group. They must raise their premiums because their costs are rising with the costs of health care. The premiums on HSA type plans have been rising each year, too, but at a much smaller rate. The fact that you, the insured, are responsible for the "little stuff", means that the costs to insure the "big stuff" for the insurance company is less. It is a win-win situation for the customer and the insurance provider.
As we said, there are two parts to an HSA type plan: the HDHP and the HSA.
Let's examine the HSA portion.
The Health Savings Account is a special account that you open up at your local bank. You can deposit money into this account each year up to specified maximums. For example, an individual can contribute $2,700 into this account. If he doesn't use this money for medical expenses, the money stays in the account and earns interest. It doesn't disappear if it isn't spent. (It is NOT related to the Flexible Spending Account that you may have had at your employer's company -- where money not spent in a FSA is lost!)
Money contributed to the HSA is a tax deductible event. When you do your tax return at the end of the year, there will be a question on the tax form similar to this: How much money did you contribute to your HSA? Depending on your tax bracket, you will get a tax deduction and therefore pay less income taxes as a result of this deposit.
An example: You are in a 28% tax bracket. Your state income tax is 7%. Added together, you have $35%. If you were to deposit $2,700 into your HSA, you would save 35% of this money off your taxes. This would amount to about $945. If you divide this yearly savings by 12, you see that you have cut your cost of insurance by $78.75 per month. That is a significant savings.
What do you use the HSA money for? An example would be going to see the doctor, buying medications, going to visit the acupuncturist, paying for dental care and vision care. As you can see, it is smart to put money into your HSA account because you end up paying for your medical expenses with pre-tax dollars. If you don't use the money, it is there earning interest and to top it all off, you got a tax deduction just for depositing the money into the account.
Let's say that you purchase an HSA type medical plan. If you are like many people, you find it difficult to pay the insurance premium, even if it is a lesser amount. The idea of depositing additional funds into a savings account just isn't possible. OK, would you rather pay for your doctor visit, drugs, dentist, and eye doctor with pre-tax or after-tax dollars?Of course, you would rather pay your expenses before the tax man gets a bite of your income. So, here is how you do it.
Open up the health savings account and put the minimum amount in it -- perhaps $100. When you need to visit the doctor, perhaps he will charge $60 for the visit. (He cannot charge you his customary $150 because you have insurance and he has an agreement with the insurance company that he will charge you that negotiated rate.)
Now, after the fact, you deposit the $60 into your savings account and because you need the money, your write a check to yourself. You have moved the money from one pocket to the other, in a sense, but now your get the tax deduction. I know this sounds too good to be true, but it is totally legal. The tax man paid $15 of the $60 doctor's charge.
In summary, take advantage of the health savings account type plan to save money. In addition, even if you are on a tight budget, open up the health savings account and wash your medical expenses through it if you must.
Richard Day has years of experience finding the exact plan that will fit his client's needs. He adopted the HSA concept early, and will help you to understand how they work. For more information concerning the HSA plans, Blue Options HSA If you would like comparison quotes visit: RichDayHealthPlans.com
