About HSA-Qualified Insurance

In order to open an HSA, you must have a High Deductible Health Plan (HDHP), which—as you may have guessed—features a higher calendar-year deductible than typical insurance plans. Sounds like a lot to swallow, but hold on: we actually like to think of these plans as “Low Premium Insurance Plans” because the real kicker with these HDHPs is their significantly lower premiums (that per-paycheck fee you pay for insurance) than traditional insurance plans.

For 2008, the IRS has the following requirement for a High Deductible Health Plan:

Single/Self-Only Coverage
Minimum Annual Deductible: $1,100 ($1,150 for 2009)
Maximum Out-of-Pocket Expenses: $5,600 ($5,800 for 2009)

Family Coverage
Minimum Annual Deductible: $2,200 ($2,300 for 2009)
Maximum Out-of-Pocket Expenses: $11,200 ($11,600 for 2009)

Most insurance companies will help you out and name their HSA-qualified high deductible plans something obvious like “HSA Plan,” but when in doubt, make sure your plan meets the requirements above.

The concept of HDHP is probably new to you. Many folks are a little concerned when they first learn that they must have a health plan with a higher deductible in order to have an HSA. But actually, an HDHP (when combined with an HSA) gives you some major advantages over traditional insurance:

Lower Premiums

The biggest advantage to an HDHP is that the premium cost is significantly lower than your traditional insurance policy—most often 20% - 40% lower! This is a huge advantage when you think about how premiums work: you always pay them, whether you’re in poor health (and need your insurance plan) or great health (and don’t use your insurance at all). With an HDHP and HSA, you’ll spend less in premiums, and the money you save will help you sock away more in your HSA. Then, that money can earn interest and grow tax free while you save for any future medical expenses!

Coverage for Serious Illness or Injury

A high-deductible health plan is designed to give you coverage in case of serious illness or injury (like, to use our own example, a nasty wipeout during our training on the halfpipe). And your HSA helps you save and pay for regularly recurring medical expenses and less financially-burdensome illnesses (like that pesky cold you might get every February).

In fact, the concept’s not all that different from car insurance. You pay a pretty low monthly cost for car insurance (unless you’re driving some fancy import—and then you may be paying more for your car’s health than your health!). Your insurance is there to cover those big expenses – like the $5,000 to $10,000 bill you might rack up if you forget to put the car in park and roll it into a building. But insurance doesn’t pay for the gas you put in it, or the bottle of touchup paint when some possessed grocery cart comes wheeling into your passenger door—that stuff comes out of pocket.

Earnings and Investments

Whoa—these are two words that are definitely never used when talking about traditional health insurance plans. Take that savings you get from lower premiums, invest it in your HSA, and give your healthcare dollars the opportunity to earn. Most HSAs earn interest and even allow you to invest in stocks, bonds, and mutual funds for bigger returns! (Check with your bank, or if you have one, your investment advisor to learn about their unique options.) And, when you get that annual earnings report, sit back and bask in the brilliance of your good financial sense.

100% Coverage

Many HDHPs get rid of that tired old co-insurance concepts (you know, where you pay 20% of all medical expenses after meeting your deductible) and give you 100% coverage after you meet your deductible instead—letting you know exactly how much you’ll pay out-of-pocket (or out of your HSA) if you have big medical expenses in a year. You may pay just a little more premium each month for a plan like this, but it might be worth it if you think you’re particularly likely to have a year of larger claims, or if you just like being able to budget around a defined maximum amount.

Think about this: If you (and your family) stay healthy during the year you could save some real money, but if something unpleasant happens health-wise, you’re covered. A health plan that rewards you for being healthy? Genius!

To check out some prices for a HSA-qualified High Deducible Health Plan, click the eHealth Insurance link on the right hand side of this page!