HSA-compatible high deductible health plan advantages

by Ray Carlson

With so many health insurance consumers familiar with standard “PPO” or Preferred Provider Organization health plans that feature lower annual deductibles, the HSA-compatible health plan might be getting overlooked.

These same consumers who – because of the downturn in the economy and subsequent job loss – are now shopping for, or considering shopping for, a new individual or family health plan might gravitate towards a PPO that features the lower deductibles they are both familiar and comfortable with from past experience as a member of a group health plan.

The natural instinct of a health insurance consumer – a person who might never have researched health insurance in their life – is to ‘stick with what they think they know’. The natural instinct of a health insurance agent might be to make a potential client happy by finding the best option amongst many that speaks to that agent’s perception of their clients’ preferences. Unfortunately that might mean overlooking one of the health insurance industry’s best practical options for health insurance consumers of all ages: the HSA-compatible high deductible health plan. HSA (Health Savings Account) compatible plans provide three great consumer advantages:

* High deductible health plans typically feature lower, more affordable, monthly premiums.
* Contributions to a HSA are tax deductible, while funds within a HSA accrue tax-free.
* Owning a HSA empowers the health care consumer. There is no ‘use it or lose it’ feature. The HSA owner spends the money (or doesn’t) on the qualified medical expenses they want to spend money on. The consumer selects the HSA trustee and HSA investment vehicle they want.

HSA funds are amazingly versatile: They can be spent on a range of qualified medical expenses per IRS Publication 502. In short, the HSA and its compatible health plan – as a health insurance product – offer an amazing range of positives as opposed to the negatives we’ve all heard about the health insurance scene these days. The HSA’s biggest problem? It’s stuck with a bad name: The moniker ‘high deductible health plan’ doesn’t do this product any favors. Consumers who hear the words high deductible head in the other direction – to the comfort of other PPO plans with their lower annual deductibles and $30 office visit co-pays (But also their higher co-insurance and higher monthly premiums…).

It might be surprising but consider this: the HSA-compatible health plan is unique in that it appeals to a pretty broad spectrum of health insurance shoppers. If you’re 27 and healthy, you can own a HSA-compatible health plan, not fund the HSA, and use the health plan component as a catastrophic health plan strategy – there for a major medical emergency – all the while enjoying the savings benefits of lower monthly premiums. On the other hand, if you’re 57, an empty nester with the ability and willingness to seek out tax advantaged investment vehicles like a HSA and use them to their fullest benefit; you are reaping real savings in your health plan’s monthly premiums while accumulating tax-free savings in a HSA that you can use to pay for health care post-retirement.

Go a bit further and read up on the HSA and don’t let the high deductible part of high deductible health plan scare you off of this very useful health insurance strategy.

Ray Carlson is a California health insurance agent who blogs at the Vitality California Health Insurance Blog.

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