High Deductible Health Plan for HSA Accounts
Healthcare is expensive. Health insurance can be too. With a High Deductible Health Plan, you can save money on your health insurance and build wealth at the same time.
In this post you'll learn:
- What a High Deductible Health Plan is
- Why a High Deductible Health Plan is cheaper
- The best way to pay for healthcare expenses
- How to build wealth using a High Deductible Health Plan
By the end you'll see why a High Deductible Health Plan may be the best type of health insurance for you and your family.
Related Post: What is an HSA Account?
What is a High Deductible Health Plan?
So what is this High Deductible Health Plan (also called an HDHP)?
It is a type of health insurance where the amount you pay before the insurance kicks in is more than many health insurance plans. That amount you pay before the insurance company pays is called the deductible.
To qualify as a HDHP, the minimum deductible on the plan must be $1,350 for an individual or $2,700 for a family.
Minimum Deductible 2019
Many High Deductible Health Plans will have deductibles much higher than these minimums. And that can be a good thing.
Typically, the higher the deductible on the health plan, the cheaper the cost per month.
Why is that?
Because you pick up the tab.
Why a High Deductible Health Plan is Cheaper
Why do health insurance companies make HDHP plans cheaper than other health insurance?
Because the company knows they will not have to pay anything if you have a relatively low-cost health issue. All expenses up to the deductible have to be paid by you.
Why is that a good thing?
Because the money you save from paying a lower monthly insurance premium can build up. If a High Deductible Health Plan is $500 less than your current health insurance, that adds up to $6,000 per year.
That is money you can then use to pay for healthcare expenses. Or if you have no expenses, you can keep to use later.
If you have an expensive health insurance plan and don't use it, the money you paid each month is gone.
The Best Way to Pay for Healthcare Expenses
So you choose a High Deductible Health Plan and start saving money each month. Your money is building up to help cover any medical costs.
So what is the best way pay for healthcare expenses?
Certainly you could just pay out of your checking or savings account. But I think the best option is to open a Health Savings Account (HSA).
With a HSA, you have a tax deferred account specifically designed to pay for healthcare costs. Many come with a debit card to pay your medical expenses directly.
Or you can reimburse yourself for previous expenses you've paid.
HSA accounts have the added benefits of tax-deferral. So when you invest that money sitting in your HSA, you don't pay taxes on any interest, dividends or capital gains. That money can grow and compound without the drag of a tax bill.
Summary of HDHP Plans for HSA Accounts
With a High Deductible Health Plan, you get cheaper health insurance than norma. That savings can add up to a lot of money over time.
Using a Health Savings Account, or HSA, you can invest that money to let it grow and compound. Then you can have more and more money to use for healthcare. And if you don't need it, you can use it for retirement income at age 65 or later.
You pay your healthcare expenses from your HSA account using a debit care. Or reimburse yourself at any time. Just remember to keep your medical expense receipts in case you get audited.
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