How Do HSA Plans Work?
I often have clients ask to see plans and prices for HSA eligible health insurance plans. Usually, the idea to shop these plans comes from a friend or colleague that explains that HSA plans are the way to go. Another source is the attractive low deductibles that HSA plans have. Many HSA plans have lower deductibles than even standard gold level copay plans and this can seem like a better option when shopping. While HSA plans are great options when utilizing the tax benefits, they are not so great by themselves. Below is an explanation of how HSA plans work and how to utilize them.
How the Health Plan Works
For a health plan to be HSA eligible, it has to have a certain deductible amount. The lowest those amounts can be in 2020 are $1,400 for an individual and $2,800 for a family. Many traditional health plans have copays for medical services before the deductible. HSA plans require you to meet the deductible first. Let’s take an example of going in and getting lab work done.
On a traditional plan, your copay might be $60. This means on the first day the plan is effective, you can go get lab services and you will only pay that $60. With an HSA plan, you would have to pay your deductible first of $1,400 and then any associating copay after you have met that deductible for the year. If you are enrolled with a spouse or other dependents, you need to at least satisfy a deductible of $2,800 before you can use any copays.
Taking Advantage of These Plans
The best way to use an HSA eligible policy is to get an HSA bank account started, which you can do after you have enrolled in the health plan. The biggest advantage of an HSA is the contributions towards the account. You can make pre-tax contributions from your paycheck or deduct the contributions from your taxable income. You then use this HSA account to pay for eligible medical services which include your deductible or paying copays for services like doctor visits and prescriptions.
This has a double effect for saving your money. The first is paying for medical services using pre-tax dollars. The second is lowering your taxable income at the end of the year. Those that take advantage of these tax benefits can see significant savings on their health expenses as well as their insurance premiums. HSA eligible health plans tend to cost less a month than traditional plans.
If you are interested in a better understanding of how HSA plans work or have any health insurance-related questions, please do not hesitate to give our office a call. As your health insurance broker, we can help guide you through your enrollment. We do this for zero fees or added costs to your premium.
