Should my family consider a high deductible health plan?
Most families are paying anywhere from $6,000 to $12,000 in annual premiums for family health insurance, depending on whether you have employer-sponsored group insurance or a privately purchased individual health plan. If you are considering switching to a high deductible health plan (HDHP) to lower your premiums, make sure you understand the terms before deciding. HDHPs, when used in conjunction with a health savings account, (HSA) can be a good option for families in tune with their health care usage patterns.
For example, a family of five would have had an employer contribute $8,950 toward the family's PPO health insurance premiums. The family would have paid another $6,800 in premiums. This family would then paid $300 in co-pays for office visits throughout the calendar year, plus more than $3,600 in prescription co-pays. This would result in nearly $11,000 in out-of-pocket expenses for health care. Even though the insurance company collected nearly $16,000 in premiums from the employer and the employee, it only paid out a little more than $3,000 in benefits to providers. However, if the family had a HDHP instead of a PPO, the same family would have used an HDHP with a deductible of $5,000 and a HSA. If the employer and employee split the HDHP premiums of $7,000, the family would pay $3,500 in premiums. But there is still the $5,000 deductible to consider, so the family could use payroll deductions to deposit that money in equal chunks into the HSA. The family could then turn around and use the money from the HSA, which by the way gets deposited on a pre-tax basis saving the family in the 28% tax bracket, $1,400 a year. This $1,400 could be used for their own medical expenses. The family's gross out-of-pocket expenses would be a maximum of $8,500 for the year. Factor in the $1,400 tax savings, and the net medical expenses for the year are $7,100 or a savings of nearly $4,000 for the year.
If the family's expenses hit the $5,000 mark, the HDHP benefits would become active. However, if the expenses do not reach the $5,000 mark, any money left in the HSA rolls over to the following year earning interest tax-free. Even if the HDHP does not pay out benefits in the year, the security of knowing that should a major medical event strike the family, a family would be covered worthy of the premiums paid. The benefits of an HDHP when the employer does not contribute may or may not prove worthwhile for everyone, so consider the total costs before you decide.
Health Insurance Frequently Asked Questions
Where do people find health insurance?
What are the different types of health insurance available?
How do I choose a health insurance plan?
What is a fee-for-service health insurance plan?
What is a managed care health insurance plan?
What is a deductible?
Where can I get health insurance quotes?
How do I begin to compare health insurance quotes?
Is it safe to seek health insurance quotes online?
What are some reputable online health insurance quote sites?
Where can I get health insurance quotes for my small business?
What is individual health insurance?
What is a noncancellable policy?
What is a "free look" clause?
What is a waiting period?
What is a single disease insurance plan?
Should I purchase additional health insurance?
What do I do now that I've lost my group health insurance coverage?
What is long term care insurance?
When is the best time to buy long term care insurance?
What questions should I ask when considering long term care insurance?
Does long term care insurance cover home health care?
What qualifies someone for benefits under a long term care insurance policy?
What is a daily benefit?
What is the benefit period?
What is an elimination period?
What is inflation protection?
Are my long term health care premiums tax deductible?
What is a health savings account or HSA?
What is a high deductible health plan or HDHP?
Who is eligible to open a health savings account?
Does the HDHP have to be in my name?
How much can I deposit in my health savings account in one calendar year?
How can I find a high deductible health plan?
How can I get a health savings account?
Can I have both a flexible spending account and a health savings account?
What medical expenses are considered "qualified" medical expenses?
What happens if I have money in my health savings account but I no longer have a high deductible health plan?
What is Medicare?
Where can I get information on Medicare eligibility and plan coverage specifics?
What is the difference between Medicare Part A and Medicare Part B?
What are the Medicare premiums for 2005?
What is Medigap Insurance?
What is My.Medicare.gov?
What is Medicare Part D?
What are the out-of-pocket costs for Medicare prescription drug coverage?
How do I join the Medicare Prescription Drug Plan?
What if I already have prescription drug coverage?
What is an HMO?
What is managed care?
What is a referral?
What is preventive care?
What is an IPA?
What is a PPO?
What is capitation?
What to ask when shopping for a PPO?
What is a primary care physician?
Can I seek treatment from a doctor who does not participate in my PPO's network?
What is short-term health insurance?
Will my pre-existing condition be covered under short-term insurance?
Should I get short-term health insurance if I'm between jobs?
What are the differences between short-term and standard health insurance?
How much does short-term health insurance cost?
Will I have a co-pay with my short-term health insurance?
Where can I find information on short-term health insurance plans?
Where can I find information on picking a quality health care plan?
Where can I find online information on insuring my children?
Where can I find insurance information specifically for my state?
Where can I find help understanding health insurance terms?
What is America's Health Insurance Plans?
What is the Life and Health Insurance Foundation for Education?
Where can I find information on small business health insurance planning?
Does my adult child need student health insurance?
How do I purchase student health insurance?
What should I consider when shopping for student health insurance?
Can I add my spouse and children to my student health insurance plan?
Can I get online student health insurance quotes?
What is supplemental health care insurance?
What types of things are covered by supplemental health insurance?
Who should buy supplemental health insurance?
What doesn't Medicare pay for?
What is Medigap?
What are my rights when purchasing Medigap insurance?
Where can I find low cost health insurance?
How can I lower the cost for my health insurance coverage?
Will quitting smoking lower my health insurance costs?
Are two single-person health insurance policies cheaper than one two-person policy?
Where can I find online quotes for affordable health insurance?
How can I control my family health insurance costs?
What is an FSA?
How do I calculate my FSA contribution?
What is COBRA?
Where can I find affordable health insurance for my children?
Should my family consider a high deductible health plan?
Can mail-order prescription services save me money on my medical costs?
What is group insurance?
What is open enrollment?
What is an SPD?
What are HIPAA and COBRA?
What out-of-pocket expenses can I expect?
Where can I obtain health insurance quotes?
What is a non-cancellable policy?
What do I do now that I have lost my group health insurance coverage?
What is long-term care insurance?
When is the best time to buy long-term care insurance?
What questions should I ask when considering long-term care insurance?
What is a high deductible health plan or a HDHP?
What medical expenses are considered "qualified" expenses?
What are the Medicare premiums for 2006?
What are the out-of-pocket expenses for Medicare prescription drug coverage?
What is a Health Maintenance Organization?
What is an Individual Practice Association?
What is a Preferred Provider Organization?
What is "America's Health Insurance Plans"?
What types of services are covered by supplemental health insurance?
What does Medicare not pay for?
What is group health insurance?
What is an Summary Plan Description?
What is a HIPAA?