Health Insurance Articles

The Advantages Of High Deductible Health Insurance Policies

2011-05-30

Thanks to the new policies of recent healthcare reform and the accessibility of tax deductible Healthcare Savings Accounts, more people can benefit from the lower cost of high deductible health insurance policies. With a high deductible health insurance policy, an individual insuree can save up to $400 a month in health insurance expenses. Families can save anymore.

So what's the catch? With a high deductible policy, insurance holders would pay out-of-pocket for the first $500, $1,000, $2,000, or $5,000 in medical bills. If annual medical costs exceeded this amount, then health insurance policies kick-in. Insurees are still responsible, though, for some costs according to the policy. For example, most policies only cover 80 percent of medical expenses. After meeting the annual deductible limit, the insured would still pay 20 percent for a service.

With a high deductible health insurance policy, you are betting on your health. The higher the deductible, the bigger the gamble.

This can make sense for relatively healthy individuals especially now that healthcare reform requires health insurance companies to provide for preventive care and screenings. It's possible that a high deductible, low cost health insurance policy will completely cover (pre-deductible) annual checkups such as a physical and gynecological check, plus screenings such as stress tests and colonoscopies.

There's also another program to help offset the risk of paying a high deductible in the event of a medical condition arises: the Healthcare Savings Account (HSA). An HSA is a tax-free investment account created to grow a healthcare fund for you and your family. Like all investment accounts, there are rules regulating eligibility and contribution limits.

In 2009, anyone carrying a high deductible health insurance policy of $1,200 or higher could start a health savings account and fund up to $3,000 pre-tax for the year. Because this is an investment account, that money continues to grow tax free just like a retirement account. Money can be added to this every year and used throughout to pay for medical expenses. As long as the money is used for healthcare, the investment growth won't be taxed. Of course, there's always risk that an HSA account may lose money, depending on the type of investments held.

This fund can be tapped for other uses once the account holder turns 65 years of age. However, withdrawals would be taxed as income for non-medical costs.

With these new investment programs and free annuals, a high deductible health insurance policy can make a lot of saving sense for couples and families who can assess their future healthcare needs. Ask your insurance broker if a plan is right for yo