We've been fans of the HSA or Health Savings Account health plans in California since they we're called MSA's and for a very good reason. They saved 1000's of our clients 1000's of dollars. It's that simple. So what is an HSA health plan and what is their future in light of the Health Reform requirements? First, let's break down what the HSA is and how it can be beneficial. We'll also discuss if it's still the great savings it has been over the past decade and what's required to really make it make sense. So let's get started on the HSA.
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Very simply, the HSA generally refers to two separate parts. The first is an underlying high deductible health insurance plan. Most of the carriers offer these HSA qualified plans and you'll see the "HSA" type next to these plans when running your California health insurance quote for both the individual/family or Group market. Not any high deductible plan will do so make sure to look for the HSA sign. As a side note, almost all the HSA plans currently use the PPO network of doctors aside from Kaiser. With HSA plans, all benefits aside from preventative benefits are subject to the main deductible. This is the biggest difference in core health plan benefits between the HSA qualified plans and other PPO high deductible plans and usually, the main effect is for office visits (no copays or co-insurance) and prescription (no copays). Office visits (except for preventative) and prescriptions will be subject to the main deductible. Otherwise, it's a high deductible (should be lower cost) PPO health plan. So far, pretty straight forward.
The second piece is where HSA's differ and really, it's where the potential cost savings can be found now that the health plan rates are now pretty comparable with other high deductible PPO plans. If you are on a qualified HSA health plan, you may be able to fund a certain amount (indexed to go up each year with family plans allowing roughly double of an individual) into a separate tax-favored checking account. You may be able to write this money off at tax time and here's the bonus...you can use these pre-tax funds to pay for eligible medical and dental bills with no tax implication. As an example, the maximum yearly contribution is approximately $6K and for an individual, it's $3K. Let's look at the individual situation. If you fund the full amount each year (it's up to you how much you fund), and your federal tax rate is 30%, that's $900 (30% of $3000) of real after tax savings. Divide this by 12 and we can say that your premium savings is roughly $80/monthly. Once you take this into account against other PPO plans, the HSA starts to look real competitive. It used to be that the core HSA health plans were priced much better than other PPO plans but that's not the case any more. You really need the tax savings to make the numbers work unless....
Today, HSA health plans offer some of the lowest true max out of pockets on the market. What does this mean? Most PPO plans have a deductible and then you pay a percentage (co-insurance) until you hit a separate max out of pocket (may or may not include the deductible depending on plan/carrier). If you get a really big medical bill, the real out of pocket might by $7000-$9000 on mid-priced PPO plans. That's a big number. Many of the popular HSA plans today make the deductible and the max out of pocket the same number. This means you may have a cap of $4K or $6K on these plans. For some California health care shoppers, that out of pocket cap is more important than office copays and prescription copays. This low cap is a key driver for many HSA applicants. The tax savings is a bonus for these people.
A few notes.
Health insurance premiums cannot be paid from the HSA account. The HSA accounts are not use it or lose it. The amounts grow each year and interest and investment are tax-deferred. Most large banks or investment houses now administer HSA accounts with debit cards and various investment options. Wells Fargo has been a strong provider of the actual HSA accounts. The allowed expenses are actually extensive and follow the Federal list of allowable medical expenses. You can run your instant quote below (individual or group) for all California health plans including HSA and you can even segregate just the HSA eligible plans with a check box. This is a good summary introduction to the world of HSA's but we're happy to walk you through them as it pertains to your situation. We also have analyzed current best options for the HSA.
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We still have HSA compatible plans on the market:
California Individual and Family Market. Look at the Bronze HSA plans and then choose according to network and pricing. The benefits are standardized now so doctor choice and pricing rules. We can also see if you qualify for a tax credit. You can quote Individual Family HSA plans here.
California Small Group Market. The group market is a little tougher since there are so many carriers and HSA plans available. It really comes down to a company's demographics (age, area). Run your group HSA quote and compare Health Net, Shield, and Anthem which are usually strongest for the HSA plans in terms of pricing and benefits.
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