“Should I Consider a High Deductible Health Insurance Plan?”
It is annual enrollment time for most employer sponsored group health insurance plans. High deductible health insurance plans (HDHP) are offered to many people and it is very common to wonder, “Is an HDHP right for me and/or my family?”
The obvious attraction of these plans is the lower cost for premiums. By their very nature, HDHP’s can be provided at a lower premium cost because the insurer is not going to be paying any claims until the deductible is first satisfied by the out-of-pocket costs absorbed by the purchaser. Deductibles can approach $2,000 for individual coverage with family deductibles as high as $8,000 annually. These plans seek to drive down health care costs by placing more of the cost burden on consumers, in effect, incentivizing them to be more cost conscious when deciding on medical care.
HDHP’s are best suited to healthier people who have no chronic illnesses that require regular care. Individuals or families who require frequent medical interventions will usually fare better with more traditional medical insurance. Even though they will face higher premiums, their overall cost for services plus the premiums will often be less.
One appealing aspect of an HDHP arrangement is the possibility of funding a Health Savings Account (HSA) coupled with the HDHP. To be eligible for an HSA in 2022, the HDHP must have a deductible of at least $1,400 for single coverage and $2,800 for family coverage. However, there are significant benefits to contributing a portion of one’s paycheck to an HSA. Such contributions are pre-tax which lowers taxable income for the year. Disbursements from the HSA can be used to cover eligible medical expenses and any remaining dollars can be carried over to subsequent years. An additional benefit of these accounts is that they can be invested in growth assets such as mutual funds and allowed to compound tax free for many years. For 2022, “self-only” participants can contribute as much as $3,650 and “family” participants can contribute up to $7,300. For those over age 55, catch-up contributions of an additional $1,000 are permitted. In many cases, the employer may choose to contribute in addition to the employee, but the maximum amounts remain the same, regardless of the funding source. HSA balances can even be used to pay qualifying medical expenses after leaving the original employer or after the account owner has retired from the workforce.
If you would like to learn more about these and other wise financial planning moves, please contact us through our Level 5 Financial LLC website or via phone at 719-323-1240. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
