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High-Deductible Health Insurance and Health Savings Account (HSA) Update

Written by Nickel - 8 Comments

High-Deductible Health Insurance and Health Savings Account (HSA) UpdateAs long-time readers may recall, we switched from a traditional PPO health insurance plan to high deductible plan this past fall. We did this for a couple of reasons. First, it dramatically reduced our premiums. Second, it gave use access to a health savings account (HSA), which we intend to use as a Roth-like investment vehicle.

At the same time, this plan completely abolished co-pays and dramatically increased our deductible to $3000. Considering the premium savings, it was a no-brainer for us to switch, especially since our coverage (which is quite good) otherwise remained the same.

Of course, that “no-brainer” didn’t feel particularly good on a day-to-day basis, as we were paying a significant amount of money to our doctors and pharmacy. In fact, we’ve spent so much that we’ve already covered our deductible, and we aren’t even halfway through the year.

The good news is that, from here on out, we’ll only be responsible for 10% of the usual and customary amount. In most cases, this will work out to be less than what we used to spend on our old co-pays.

Published on June 4th, 2010
Modified on June 8th, 2010 - 8 Comments
Filed under: Insurance, Saving & Investing

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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8 Responses to “High-Deductible Health Insurance and Health Savings Account (HSA) Update”

  1. 1
    jim Says:

    My wife and I have a similar high deductible / HSA insurance plan. Ours is pretty good with a fairly low deductible. It has saved us money every year since I started it about 3 years ago. Plus we can also use any left over HSA money to cover our out of pocket costs for vision and dental or other future health cots.

    I think this kind of insurance is the best plan all around. Also helps keep consumers more accountable for our own spending.

  2. 2
    Keith Says:

    I have had an HSA and high deductible insurance plan for a few years. I haven’t needed it until two days ago (regular checkups are covered 100%). I sliced the tip off of one of my fingers and needed to go to the urgent care office. They gave me a 25% discount just for having a high deductible plan. I think this is how the system is supposed to work: paying with a high deductible is closer to paying cash than a PPO, so it should be less expensive. In any case, I have no complaints about my health plan.

  3. 3
    Kirk Kinder Says:

    High deductible plans should have been the cornerstone to Obama’s plan. This creates conscious consumers and will dramatically reduce costs. It also provides the ability to create a substantial savings account for medical expenses.

    A young person or family could save substantial sums that will come in handy as these folks age and reach retirement.

    I have had an HSA eligible plan for four years now. We have a nice sum in our HSA account, and we make the doctors justify each expense. We even negotiate costs.

  4. 4
    Anthony Says:

    I have a high-deductible plan and HSA for the following reasons.

    1. Lower monthly premiums. I am okay with this. We are healthy enough, that I don’t have to worry about expensive hospital bills.

    2. I have an emergency fund. Part of the reason that I have an e-fund is to help us with medical bills, should we need it.

    3. I have a high-deductible plan because I can invest in an HSA, which has the tri-facto of tax benefits. It goes in tax-free, earnings are not taxed, and goes out tax-free. I will build my HSA as a medical e-fund, of sorts, while I am young.

    4. My company puts in $100/month plus $200/year bonus into the HSA. Nothing better than free money. Between this free $1400, the difference in premiums, and our currently low medical bills, I will stick with a high-deductible plan and HSA for some time.

  5. 5
    Daron Says:

    Nothing seems to make sense at my Fortune 500 employer. We are probably the wave of the near future. Here are the facts.

    For the past four years I have, along with my family, used the PPO-like $700 deductible plan. This year the premium went up 58%, and coverage has gone down dramatically (although the company did not disclose this during the election period). The HSA would seem the best bet, right? Well, not if you need prescription drugs or mental health care, neither of which are covered by our HSA plan.

    There are simply no good answers with this employer. Since we have steadily lost health insurance options over the years, I have little doubt we will have only the HSA option within the next couple years. While this won’t be a disaster, if major areas of coverage are left out (note above), it will not work for many employees.

    A few side facts: a 26 year old co-worker, who frequently suffers from migraines, went from $40 a quarter for the only medication that worked on the migraines to $1400 a quarter, from last year to this year. Another example is a standard mammogram, due to lumps being found, along with an ultrasound and biopsy was $40 two years ago, while the same issue less the biopsy was $700 out of pocket this year, while the policy remained the same (the carrier switched but again the company did not disclose the differences during the election period).

    I’m not sure what any of this means, but the trend is disastrous and will lead to major problems in the near future. Self-employed employers such as mine will continue to soak the employees for all they can, and maybe rightfully so in a capitalistic world, until we finally find a way around this situation. It’s not working for many workers today.

  6. 6
    Glenn Says:

    I work for a fortune 500 company based in Round Rock, TX and we don’t have a high deductible plan option. I can almost get a cheaper high deductible plan on my own, but not quite yet. I figure in the next couple of years the company’s plan will be more expensive and I will switch at that point.

    I too agree that having to pay everything out of pocket is a good solution to keep people from going to the doctor unnecessarily. It seems the only reason to see a doctor is if you want something cut off/sewed back on, or you desire a drug not available without a prescription. I guess I am pretty cynical about the whole medical industry though.

  7. 7
    Steph Says:

    I also work for a fortune 500 and have done high deductible for 5 years but mine is horrible (all of our options are). After you reach your deductible your portion is either 40% for in-network or 60% for out of netwrok and it seems more and more doctors are going out of network. And, the plan doesn’t cover my yearly physical and/or pap at all. I have migraines so I’ve met my deductible already just on medication alone…they usually run $300-400 a month. They also forced us to start getting three month supplies of medications through caremark/cvs which is an awful company.

  8. 8
    BG Says:

    Loving my HSA. It takes a lot of work tracking receipts, filing claims to pharmacies that don’t take insurance, etc — but we are saving serious amount of money with the High-Deductible plus maxed-out HSA.

    The savings is all tacked onto the back-end when we file taxes — $1,500 off the tax bill.

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