Daily News Updates - Health Insurance News

High-Deductibles, Part 2 – Benefits and Risks

Because this health insurance benefit was fairly new and not well-understood by many, HSA’s had a slow take-off. The UnitedHealth Group found that last year about 40% of those who could, did not take advantage of this generous offer. Not only did they not enjoy immediate tax exemption, but many found themselves strapped with high medical bills beyond what they could pay (having not saved ahead). The public is now catching on and HSAs are gaining popularity quickly. There are limits, of course, to IRS’ generosity. Currently they are $2,900 for individuals and $5,800 for a family. Note that, for those 55 and older, there is an additional "catch-up" allowance for higher amounts. Also, the balances can be rolled over from one year to the next. To use these funds tax-free, they must be used for qualified medical expenses. They need not be only be medically prescribed, but can even be used for over-the-counter drugs. These accounts can even be rolled over from job to job and be used into retirement.

Lastly, some final advice:

If available, feed the HSA as soon as possible. It’s highly advisable to apply anything that has been saved by switching from other plans. Don’t continually drain the account with small stuff. Let it grow to the point you won’t be overwhelmed by that sudden large expense. Hospital financing can be very costly.

Count the cost. Consider how much you might have to pay in a worst-case scenario for the year. Compare this against the premium expense, the deductible and the maximum annual limits. If the cost is too high, consider the lower deductible health insurance instead.

Learn about alternative HSA plans that may be available from the many institutions that also offer HSAs. You’re not limited to only your employer’s health insurance plan. You may benefit from better features like easy on-line access and more friendly medical debit cards from these other institutions.