Most folks I meet don’t know the first thing about a high deductible health care plan with a Health Savings Account. There are a few misconceptions out there too. I’m going to share my experience with this type of health care plan. I’m certain that I’ll gloss over some details and such so please correct me if I’ve misstated a fact.
- This is an individual plan. No more "what if my company does X, Y, or Z. It’s yours. As a self-employed person, you have complete control. That’s good.
- A "high deductible plan" still offers good coverage for the stuff you’d expect (accidents, disease, transplants, etc.)…however you’re responsible for paying more (up to your deductible amount per year) as medical issues arise.
- Premiums for high deductible plans are often very reasonable. I’m actually below $300 for my entire family plan now.
- You can get a deductible as low as $3k for a family.
- The Health Savings Account component of this system is where you stash money to pay for bills that arise…like a visit to the doctor , a physical, a broken arm, a case of the mumps, etc.
- The amount you put into the HSA is counted as PRE-TAX money as far as the IRS is concerned. In other words, you put in $3k and at the end of the year, you take $3k off the top of your income as though it went into an IRA or 401K, etc. Depending on your tax bracket…this can make the cost of this money far cheaper than $3k.
- If you don’t spend the money each year, it remains for you, earning interest and available to pay whatever medical bills you may need to pay. The HSA is NOT like a flexible spending account (FSA) that must be used up annually.
- Your deductible is the upper limit of your responsibility. If you pay out that much, you don’t pay after that threshold is reached.
- When you visit the doctor, you don’t pay a co-pay typically. You receive a bill that is "discounted" according to the insurance rules. Let’s say an $80 doctor visit becomes $48….then you pay $48 with your HSA.
- Your HSA typically has great options like a VISA/DEBIT card to pay on the spot for prescriptions. If your doctor takes VISA as well, then you can send back the bill with the payment information included.
- If you use a company called Health Equity for your HSA account management, you’ll get a whole host of great features and benefits. These guys have really taken the HSA to the next level. Don’t short change yourself by using any old bank’s HSA. Health Equity has gotten is right. You have complete on line management of the account. It really puts you in control.
- If you do the math, a $3k deductible ($250/mo) + my premium ($300)/mo = $550/month. If we don’t visit the doctor for 3 months…my net health care cost during that quarter was $900…and I’ve "pocketed" $750…and that same $750 comes off the top of my income at tax time.
- There are certain rules that apply to these accounts and I’m pretty certain that employers cannot pay the premiums for employees…but there are ways employers can help. Ask your attorney/tax man/financial planner/insurance agent about those. I don’t fit one of those job descriptions (thus people generally like me).
If you’d like to know more about these plans or get specific, I’ll refer you to the good folks that took care of me. If your questions are answerable by me…I’ll do my best.
I highly recommend that you explore this option if you’re self-employed…or looking to become self-employed. There’s NO reason to pay your $800+ per month COBRA bill while you launch your new venture…when you can take a proactive and self-directed path with your family’s health care insurance needs.
This is really the first step we can take towards some kind of re-do on the health care debacle we face now. It puts REAL dollar amounts on services that YOU the insured SEE. You find out that an MRI that took 30 minutes was $700…and you are going to pay $350 of that. These services don’t just magically get done because you have insurance. EVERYONE is paying for them and that’s why premiums are going up at something like 12% per year!
Take control. Ask questions. Do the math.