Adjust Text Size

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

Written by Nickel - 8 Comments

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

Disclaimer: Discover is a paid advertiser of this site.
Reasonable efforts are made to maintain accurate information. See the Discover online credit card application for full terms and conditions on offers and rewards.

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

About the author: Nickel 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!

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

1
jim Says:
June 4th, 2010 at 1:53 pm
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
Keith Says:
June 5th, 2010 at 12:06 am
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
Kirk Kinder Says:
June 5th, 2010 at 12:14 am
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
Anthony Says:
June 5th, 2010 at 2:26 am
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
Daron Says:
June 5th, 2010 at 6:04 pm
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
Glenn Says:
June 6th, 2010 at 9:53 am
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
Steph Says:
June 7th, 2010 at 1:29 pm
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
BG Says:
June 10th, 2010 at 8:06 pm
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.

Top Cards by Category

CASH BACK CREDIT CARD (see all)

Blue Cash Everyday^® Card from American Express

Earn 100 Reward Dollars after you make $1,000 in purchases in the first three months of Cardmembership.

AIRLINE MILES / REWARDS POINTS CREDIT CARD (see all)

The Platinum Card^® from American Express

Earn 25K Membership Rewards(R) points after you spend $2,000 during your first three months of Card membership.

CREDIT CARD DEALS (see all)

Simmons First Visa^® Platinum

Consumer friendly credit card with a great low rate of 7.25% and save on interest charges. No balance transfer fees and no annual fee.

BALANCE TRANSFER CREDIT CARD (see all)

Discover it^® - 18 Month Balance Transfer

The new Discover it card is out to change the way people think about credit cards. No annual fee. No overlimit fee. No foreign transaction fee & no pay-by-phone fee. No late fee on your first late payment. And Discover won't increase your APR for paying late.*

LOW INTRODUCTORY RATE CREDIT CARD (see all)

Discover it^®

LOW INTEREST RATE CREDIT CARD (see all)

Simmons First Visa^® Platinum

Consumer friendly credit card with a great low rate of 7.25% and save on interest charges. No balance transfer fees and no annual fee.

BUSINESS CREDIT CARD (see all)

The Business Platinum Card^® from American Express OPEN

Limited Time Offer: Get 25,000 Membership Rewards(R) points after you spend $5,000 in the first three months of Card membership. Enroll and select a qualifying airline to receive up to $200 annually in statement credits for incidental fees, such as checked bags and in-flight refreshments, charged by the airline.

STUDENT CREDIT CARD (see all)

Discover it^® for Students