High Deductible Health Insurance

By: EconomyWatch Content   Date: 17 February 2010

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As the name suggests, high deductible health insurance is a form of protection where the insured pays high deductibles before the insurer offers its share of coverage. The deductibles are higher than the conventional plans and the premiums tend to be smaller. The advantage with high deductible health insurance plans is that they have solid compatibility with health saving accounts (HSA). 

 

High Deductible Health Insurance and Health Saving Account

High deductible health insurance plans are considered as the best options for people with the least medical requirement or those who are facing tight financial situations. These high deductible health insurance plans offer coverage for catastrophic conditions. Ask for a higher financial input from the insured. However, a Health Saving Account (HSA) makes the entire process an opportunity for tax optimization.  

To be eligible for a health saving account, the recent data released by the Internal Revenue Service in 2010 states that the minimum deductible should be $1,200 for individuals and $2,400 for families. A person can deposit a maximum of $5,950 for self and $11,900 for family. The real advantage is that the balance can be carried forward to next year and keeps getting accumulated. The balance remains eligible for tax benefits until they are sued for purposes other than medical expenses.

The real purpose of an HAS is to give real-cushion for people with catastrophic insurance plans as the higher deductibles can present a financially challenging situation for any one.

 

Good or Bad: High Deductible Health Insurance Plans

Even though it saves a lot of cash in the form of premiums, catastrophic insurance (high deductible insurance plans) can cost a lot for people with limited funds at the time of paying the medical bills. For a low income family earning $25,000 annually, the high deductible insurance can eat up to 15% of the total cost. However, they offer a fertile opportunity for tax savings.

With HSA, people can contribute the maximum toward savings and if their health stays stable, they can avoid paying tax on their savings. High deductible health insurance plans, therefore, can offer cost effective opportunity to avoid tax and build a substantial amount for emergency purposes.


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