HDHP for Health Insurance

Most of us get our health insurance through an employer, however if the current health insurance law remains fully in force that will not be so in less than a decade. This posting involves a current form of getting health insurance that might or might not be available in the future.

HDHP's or High Deductible Health Plans are currently being used by an increasing number of employers for their employees health insurance needs. These plans in my belief are excellent alternatives for many people for covering health insurance needs. When you are using a HDHP to cover your health care needs you generally pay a high deductible amount before insurance kicks in to pay the rest. The current deductible has to be at least $1200 for singles and $2400 for family coverage. Most plans work like this. If you go to the doctor, go to the hospital, buy prescription drugs, any approved health care you pay the full amount up to the minimum. Note that all plans cover an annual physical without any payment. Once you reach the deductible, the plan kicks in and pays everything after that. This works really well for those who are young and use little or no health care each year. Consequently it also works well for those who use lots of health care each year as well. The middle ground may or may not do as well. If you are considering using a HDHP you need to take a good look at your annual expenses and plan accordingly.

I had a HDHP the last few years I was employed and it worked very well for my wife and I. As an early retiree I have also signed up for one with my local BCBS agency and find it is much less expensive than having a plan that has co-pays. HDHP's are excellent for catastrophic insurance and frankly that is what insurance is supposed to cover. You buy your auto insurance to cover accidents and large losses, not for regular oil changes and wipers. For some reason we have gotten the idea that health insurance is supposed to cover your regular maintenance expenses if you will. As in any insurance purchase if you cover more you pay more.

If you have a HDHP plan you can also have a Health Savings Account, or HSA for short. These offer similar tax benefits that IRA's or 401-k's offer with one extra little kick money deposited in a HSA is not subject to FICA or medicare tax either. You can contribute up to $3050 if single, $6150 family coverage, and if you are over 55 years of age you can add $1000 each to those totals. You can invest those funds any way you like and withdraw them for approved medical expenses to cover the amounts that are not covered by your HDHP. if there is excess you can hold that amount over to the next year and let it accumulate over the years.

Once you have had a HSA for a few years you usually have more than enough money to cover any expense and still have some left over. So your only annual expense the deductible is well covered. HSA's are not only good for health expenses, but offer you good pre-tax savings vehicles, particularly young people. If you begin a HSA when young and healthy and max out your contributions annually as you age you will have abundant money for health expenses. You can continue even after age 65 to use these funds for health related expenses tax free.

Despite the current health insurance market and uncertainly I believe use of a HDHP and a HSA is an excellent way to pay for health care expenses.