Health Savings Account Rules


HDHP - High Deductible Health Plan

An HDHP or High Deductible Health Plan is a form of catastrophic health insurance coverage that is designed to work with a Health Savings Account  (HSA). The HDHP must have an Individual deductible of at least $1200 and a $5950 deductible for families (based on 2011 requirements). In order to afford the "out of pocket" expenses incurred by the high deductibles "Pre-Tax or Tax Deductible" contributions are made to a Health Savings Account up to the current contribution limit.  The money in the HSA is then available to pay for eligible medical expenses not covered by your HDHP. The maximum "out-of-pocket" expenses are limited on an annual basis as well,as of 2011 they are $5950 for individuals and $11,900 for families.


Shopping For An HDHP

When you are searching for a HDHP that you plan on using with a Health Savings Account you will want to make sure that it falls within the HSA limits. In other words, it needs to have a deductible of at least $1200 and a maximum out of pocket of $5950 for individuals. Normally if you are shopping online there will be a tag that says "HSA Compatible" next to the deductible information.

Another feature to look for when shopping for an HDHP is that routine annual exams are covered. Many of these high deductible plans will pay for an annual physical, Paps and other screening services. These are important because you are more likely to go in for an annual exam if it's paid for and this can help you avoid letting problems go unchecked. Letting health issues go unchecked is the primary knock that people have against the high deductible health plans. This is also why it's important to have an HSA in conjunction with the HDHP so you can pay for out of pocket expenses with pre-tax dollars.


HDHP / HSA Savings Examples

The premium savings that can be achieved from switching to a High Deductible Health Plan can be dramatic.  I recently looked at what it would cost to get health insurance for our family of four.  If I go with a PPO (Preferred Provider Option Plan) which is what we used to have it's $770 per month.  This is with a $1000 deductible, $25 co-pay and 20% Coinsurance!  This means that every doctor visit I'm going to have $25 coming out of my pocket, the first $1000 of expenses each year comes out of my pocket and even after that I'm on the hook for 20% of the bill?  I'm paying $770 per month for this?

If I go with a $5000 deductible PPO plan that qualifies to use with an HSA Account then my monthly premium drops to $476 or a $294 per month savings.  This adds up to $3528 per year, which is almost the entire $4000 difference in the deductible amounts!   I can put this $294 as pre-tax dollars into a Health Savings Account and let it grow until I need to cover some health related costs.  Anything I don't use in the first year is carried over to the next year.  If I have $500 or so left over in the HSA at the end of the first year then the difference in the deductible will be completely made up in the next year by the savings.  Best of all, there is no coinsurance on everything over the $5000 deductible so in my opinion this second plan is superior by a wide margin!

This example was run on 9/23/2011 and was for a family of 4 where the adults were 46 and 45 years old and there were two 17 year old children.  Rates may vary as there are many factors involved.