HSA Health Insurance - A Beginner's Guide
Before I had the option to have an insurance plan with an HSA, I had no idea health savings accounts even existed- despite a recent Human Resources course at a leading business school!Are you in my position? Not to worry! I've done the research for you, and have outlined the basics of Health Savings Accounts below. After reviewing this article, you'll know the basics of HSA insurance plans, plus have a pretty good idea of whether or not they're the right choice for you.
What is an HSA? How does it work with an insurance plan?
A health savings account (or HSA) is a savings account dedicated to health expenditures. The benefit of having a health savings account is that the funds you or an employer contribute to the account are not subject to federal income tax.
HSAs are available to those who have High Deductible Health Insurance Plans (aka HDHPs - High Deductible Health Plans), which are insurance plans that have lower premiums, but higher deductibles, meaning that if you have to pay a significant amount of money out of pocket (anywhere from around $1,200 to $5,950 for a single person or $2,400 to $11,900 for a family) before the insurance kicks in.
The funds in an HSA account roll over from year to year, so if you do not exhaust it before your insurance kicks in, the money will collect over time.
What do Health Savings Accounts NOT cover?
You're probably getting pretty excited about the whole concept of health savings accounts, but don't go crazy just yet - there are some things that you can't pay for with HSAs. Most of the restrictions are incredibly reasonable.
The only items that you can't pay for that you might expect you would be permitted to pay for with a health savings account are over-the-counter medications that are not prescribed. This was not always the case, but as of 2011, it is.
Additional items you cannot pay for with your HSA include:
- Cosmetic surgery (sorry, friends. That Botox is going to be out of pocket!)
- Marriage counseling (I know. Bummer)
- Swimming lessons (And you think that "drowning" might be considered a dangerous medical condition, but hahaaa... no)
- Weight reduction programs that aren't prescribed, but are instead for general fitness
- Dance classes and lessons - even if your doctor recommends them
- Non-prescription glasses (DAMN! And I was really hoping to buy some Wayfarers)
- Funeral expenses
- Insurance premiums for your spouse
- Maternity clothes
- Illegal drugs and treatments (Who would have thought?)
What do Health Savings Accounts cover?
Health Savings Accounts typically cover medical expenses including:
- Doctor and hospital fees
- Operations and follow-up treatments
- Dental treatments
- Nursing care
- Childbirth preparation classes
- Ambulance rides
- Orthopedic shoes
- Laser eye surgery
- Lab fees (for bloodwork and the like)
- Lodging for medical care
- Drug dependency treatment
- Treatment for alcoholism
- Home modifications for disabled individuals
- Fertility monitors
- Blood pressure monitors
- Insulin testing devices
- Hearing aids (and batteries for hearing aids!)
- Eye equipment and care materials
- Wound care products
- Test kits and medical monitors
- Mouth guards (to guard against teeth grinding)
- Heating pads
- Insulin testing devices
HSA vs. PPO vs. HMO
What differentiates a health savings account from a HMO or PPO?
There has been some confusion about what is what when it comes to health savings accounts, especially because so few people are familiar with them. A health savings account is not insurance; it is an account that you can use for health-related expenses that works in consort with a high deductible health insurance plan.
HMO insurance plans tend to have lower deductibles and lower premiums, but are more restrictive when it comes to choosing a doctor. PPO insurance plans offer more flexibility, but tend to have higher deductibles and premiums.
If you want a PPO with very low premiums, or none at all, chances are the deductible is going to be VERY high. That's why health savings accounts exist- they are there to cover you until the high deductible PPO kicks in.
Is a Health Savings Account Right for Me?
Not sure if having an HSA is right for you? If you have a high deductible health insurance plan, you should have an HSA - just so that you aren't totally screwed when you need to pay for that initial deductible. If your employer contributes to your HSA, you should definitely take advantage of the opportunity and open an account. If your employer offers to add the full deductible of a high deductible insurance plan to a HSA as one of your insurance options (in addition to a more typical HMO and PPO options), go for the high deductible PPO with the HSA account.
Generally, those who can benefit most from having Health Savings accounts are best for those who...
- Have employers who contribute to the HSA
- Like to pay for their own medical expenses up front
- Like to have the greatest possible degree of flexibility when it comes to choosing healthcare providers
Those who are in good health stand to benefit even more from having a high deductible PPO with an HSA account. Why? Because if a healthy person doesn't end up using the money in a Health Savings account, he or she will not spend everything in the account, and the balance will roll over from year to year, allowing the owner to save money for future health expenses (or perhaps periods during which he or she might go without health insurance due to being fired and not being able to pay for insurance in the meantime, or some other mishap).
Likewise, those who simply want to pay for most medical expenses up front and avoid the paperwork and approval dance first would enjoy having a HSA simply because they can use their HSA debit card for bill payment, prescription medication pickup, and the like.