These plans require subscribers to pay for all of the costs of their medical care, including prescription medicine, up to a few thousand dollars (plan deductible.) Subscribers usually pay only the discounted rate that the insurance companies have negotiated with doctors and hospitals for medical services and prescription medicine, but subscribers pay all expenses up to the deductible limit.
Health Insurance Policy
After someone has paid a few thousand dollars for medical care (i.e., the health plan deductible amount), the health insurance begins paying for medical services. These plans are called “High Deductible Health Plans” (HDHP) and are typically less expensive than other health plans because of the high deductible. In exchange for accepting more of the up-front costs of their health care; a subscriber pays a lower monthly premium to the health insurance company.
Additional Information about HSA Compatible Insurance Plans
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Savings Account to Fund the Deductible
One added feature of these new HSA plans is that someone who enrolls in an HSA compatible health plan can open a savings account to fund or finance the up-front medical costs. Like an Individual Retirement Account (IRA), money deposited into a Health Savings Accounts qualifies for a Federal income tax deduction. Better than an IRA, however, money can be withdrawn from an HSA for qualified medical expenses at any time without penalty. Also, interest earned on the money invested into an HSA account is not taxed when withdrawn. Finally, when a person reaches age 65 he can withdraw money in an HSA account for non-medical reasons and pay only ordinary income tax and no penalty.
Additional Information about Health Savings Accounts
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Flattening the Learning Curve
HSAs are a new way to pay for medical expenses. A subscriber takes on more of the first dollar costs for his medical care in exchange for lower monthly health insurance premiums. As with any tax-related matter and the IRS, HSAs can be complicated to understand. People who enroll in HSAs should expect to spend some time learning about them. The information we provide here in and in our HSA articles section is intended to help you learn a lot. We also have references to source material and links to other experts. We hope you find this information helpful.
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