Understanding High Deductible Health Insurance: What You Need to Know

Most consumers will look about for a cheaper policy if they find out their family's health insurance premiums are going up. Having both insurance and a Health Savings Account, which is exempt from taxes, is often the best option.

The Washington-based trade group America's Health Insurance Plans reports that since the program's introduction in late 2003, more than 1 million Americans have made a similar decision by enrolling in high-deductible health insurance policies and associated HSAs.

Despite their complexity, more and more insurance companies are beginning to offer the new policies.

Maximum out-of-pocket costs, such as those for surgical copayments, cannot exceed $5,100 for people and $10,200 for families, and the yearly deductible must be at least $1,000 for individuals and $2,000 for families in order to comply with federal law.

Health insurance is largely a community effort

Meanwhile, policyholders have the option of opening their own HSAs and contributing personally funded funds. 

Companies can put money into their employees' HSAs as well. Health savings account contributions, typically equivalent to the policy deductible, can be used to pay for qualified medical expenses and any leftover funds can be rolled over to the following year's HSA. 

Contrast this with health care savings plans offered by employers, such as Flexible Spending Accounts, where unused funds are lost at the end of the year.

Seeing HSAs as a good method for workers to handle the increased deductibles, several firms are replacing existing catastrophic health coverage plans with the new plans. Some people see them as a way to get employees to be more cost-conscious about their health insurance.

Protection from medical costs for the young and uninsured

Single young adults, those in generally good health, and those with sufficient disposable income to handle increased out-of-pocket expenses will find the new insurance particularly appealing.

Both uninsured people and small businesses can benefit from the new policies. Over a third of those who acquired new plans through eHealthInsurance were previously uninsured, nearly half of the purchasers were families, and over 40% of the purchasers had yearly earnings of less than $50,000.

Low-Cost Medical Protection

The price is quite reasonable. Participants can put the money they would have spent on premiums into a savings account and use that money to pay for routine medical care as needed.

The trend toward shifting more of the cost of health benefits onto the employee is driving more businesses to adopt the plans.

On the other side, those who can put money into their HSAs and don't expect to use the funds for annual medical costs can let them grow tax-free. Long-term care insurance premiums and other retirement-related medical costs can be covered by the surplus funds.

That implies those who are getting close to retirement age and don't have access to company plans are more likely to use them.

There are a variety of health insurance plans available; consumers should carefully consider their specific requirements.

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