Previously, we provided an overview of High Deductible Health Plan’s (HDHP), characterized by lower premiums and higher deductibles. You can find that article here. These plans put a much larger burden on the out-of-pocket expenses for patients.
During the past decade, the government experimented with Medical Savings Accounts (MSA), which allowed for a limited number of eligible self-employed taxpayers to contribute to a tax-free fund to pay for medical expenses. In 2003, the MSA morphed into a Health Savings Account (HSA), created via an amendment to the overhaul of Medicare.
The result is a program that is linked to HDHP’s, where individuals may set up and contribute to a tax-advantaged HSA, to offset the high deductibles of HDHP’s. These plans allow you to pay for eligible health expenses, including expenses before the deductible is satisfied, with tax-free dollars.
Your employer may contribute to your HSA through payroll deductions, or you can contribute pre-tax dollars on an individual basis. Certain limits apply to the yearly contributions, in 2013, an individual may contribute up to $3,250 or a family may contribute up to $6,450 in pre-tax dollars.
One huge advantage of an HSA, is that this savings tool operates similar to an IRA. Unlike flexible spending accounts, any unused amounts at the end of the year continue to accumulate in subsequent years and you can keep your account when switching employers.
Some employers still offer a version of the flexible spending account, now referred to as the Health Reimbursement Arrangement (HRA). The employer funds this plan and unused funds are forfeited at the end of the year.
The key to success with HDHP’s is to take advantage of the tax-free opportunities to pay for deductibles and uncovered services. As a consumer, you have choices. In today’s economy, patients must consider where they will get the best value in healthcare. If you have an HDHP, you might want to consider your options. Typically, an Urgent Care facility like Emergency One will have co-pays that are one-third to one-quarter of what you would find at the hospital. If you are a member of an HDHP, Emergency One can help you save money while getting the best care in the region.
Let’s say you have a severe sore throat over the weekend and can’t wait to see your personal physician, your only options are the Emergency Room or Urgent Care. If your sore throat turns out to be “Streptococcal pharyngitis” or “Strept Throat” it can be particularly frightening for children, is highly contagious, and requires immediate treatment. The ER will cost you on the average about $500 for the visit and treatment, while at Emergency One, the same treatment and care would cost an average of just over $100 for a visit.
Your HDHP coupled with an HSA is an effective way to keep healthcare costs down by using tax-advantaged dollars to get the care you need. Combine that with lower fee options like Emergency One, you can save even more money, leaving more dollars untouched in your HSA that can grow tax-free until you need it.