High Deductible Insurance Better then none

by Lesley Politi on December 15, 2008

High-deductible insurance better than none

Published: Sunday, December 14, 2008 at 8:00 a.m.
Last Modified: Sunday, December 14, 2008 at 1:44 a.m.

An estimated 47 million Americans live without health insurance. Even among those fortunate enough to have coverage, many struggle to pay ever-rising monthly premiums, while still others worry about losing health benefits should they be laid off.

Clearly, it’s wise to know all your health insurance options and to be prepared should your situation change.

Some people opt for a high-deductible health plan combined with a health savings account to help lower monthly premiums while benefiting from available tax breaks.

Although not right for everyone, these plans can save money if managed carefully; and, they may mean the difference between carrying at least basic catastrophic coverage and having no coverage at all.

Here’s how they work

The federal government defines high deductibles as plans with annual deductibles of at least $1,150 for individual coverage or $2,300 for family coverage, and maximum out-of-pocket expenses not to exceed $5,810 for individuals or $11,600 for families.

High dedeuctibles can either be purchased through your employer, if offered, or independently.

Although monthly premiums are often considerably less than for lower-deductible PPO or HMO plans, coverage details vary widely so compare plans carefully.

For example, many of these plans either don’t include maternity coverage or charge extra for it; and preventive care, like annual physicals or vaccines, may or may not be subject to deductibles.

Among those most likely to benefit from high deductible plans:

Younger, healthier people who probably won’t reach the annual deductible amount.

Chronically ill people whose expenses will probably exceed yearly maximum out-of-pocket limits.

People earning more than the state’s Medicaid qualifying limit but who can’t otherwise afford to buy health insurance.

Those who could afford to pay their typical medical expenses out of pocket but want the protection provided by catastrophic coverage should major expenses arise.

Many people combine the high deductible account with a health savings account in order to take advantage of federal tax breaks. Health savings account features include the ability to pay for current and future qualified medical expenses on a tax-free basis.

Some plans allow pretax payroll deductions. Otherwise, you deposit after-tax dollars in your health savings account and take a credit on your federal income tax return, even if you don’t itemize deductions.

These contributions and their investment earnings accumulate tax-free.

Unlike flexible spending accounts tied to traditional employer-sponsored medical plans that have “use it or lose it” provisions, health savings balances roll over from year to year and are completely portable if you change jobs or plans.

2009 maximum annual contributions are $3,000 for individual high deductible coverage and $5,950 for family plans. People age 55 and older can also make annual catch-up contributions of up to $1,000.

Some health savings accounts let you pay for medical expenses as they occur using a debit card tied directly to your account balance.

In addition to IRS-approved medical expenses, you can also use your health account balance to pay for: health insurance premiums if unemployed; medical expenses after retirement but before Medicare eligibility; out-of-pocket expenses when covered by Medicare; and long-term care expenses and insurance premiums.

Many banks, credit unions, insurance companies and other financial institutions offer health savings accounts. For help finding one, consult your insurance broker or go to www.hsafinder.com. More information is also available at www.treas.gov/offices/public-affairs/hsa.

Source: www.dailycomet.com

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