This post was originally published on 12/3/2012.
For most non-self employed people, it is “open enrollment” season. Usually, this is when employees renew or change their benefits for the new year.
One of the biggest choices employees face is picking a health insurance plan. If you have the option of picking the Health Savings Account (HSA), here are 5 reasons you should consider opting in for 2013:
- Low premiums: A HSA has lower premiums because it has a high deductible. This may scare you, but higher premiums are usually accompanied by a policy that pays for 80-90% of expenses after the deductible has been met (a HSA is 100%). Therefore, choosing a more traditional plan may be more expensive than a HSA.
- 100% coverage after meeting deductible: In a HSA, you pay all expenses up to your deductible; when the deductible is met, health care expenses are covered at 100%. There is no coinsurance, copays, nothing. Everything is covered.
- Individual control: With a HSA, you use a checking account used ONLY for qualified health care expenses. So when you go to the physician’s office or have a procedure done, bills are paid by YOU out of the checking account until the deductible is met. You may find that you will begin to use health care more carefully or maybe you might just start taking care of yourself better! In addition, you control how much you contribute into your checking account (HSA). There are annual limits (individual: $3250, family: $6450) on how much you can contribute, but in most plans, you should be able to contribute your annual deductible.
- Tax Savings: The amount you contribute to your HSA is tax-deductible. Keep in mind that any checks written out of your Health Savings Account must be for qualified expenses. If not, then you will be subject to a 10% tax penalty on those expenses deemed as unqualified.
- Year to year carry over: Unlike the Flexible Savings Accounts (FSA), you can carry over your balances from year to year with no limitation. For example, say you contributed $2600 for 2013 and used $1000, then the remaining $1600 carries over into 2014.
A Health Savings Account may not be for everyone, but if you have the opportunity to enroll in one, check it out carefully. Perform a financial analysis by determining how much you spent for qualified health care expenses with your current plan in 2012. This includes premiums, copays, coinsurance, and deductibles. Then compare it with what it would be for a HSA.
Question: Do you know what you are paying in total expenses in your current health plan? Have you ever looked for alternatives? Please share.