Benefits
The premium for an HDHP generally is less than the premium for traditional health insurance. A higher deductible lowers the premium because the insurance company no longer pays for routine healthcare, and insurance underwriters believe that Americans who see a relationship between medical cost and their bank accounts will consume less medical care, shop for lower-cost options, and be more vigilant against excess and fraud in the health care industry. Introducing consumer-driven supply and demand and controlling inflation in health care and health insurance were among the government's goals in establishing these plans.
With HSAs, in catastrophic situations, the maximum out-of-pocket expense liability can be less than that of a traditional health plan. This is because a qualified HDHP can cover 100% after the deductible, involving no coinsurance.
HSAs also give the flexibility not available in some traditional health plans to pay on a pretax basis for qualified medical expenses not covered in standard or HSA insurance plans, which may include dental, orthodontic, vision, and other approved expenses.
HSA accounts also have an advantage over Flexible Spending Accounts since deposits are not necessarily tied to expenses in a particular plan or calendar year. They are automatically rolled over for future medical expenses or may be used to reimburse qualified expenses from prior years as long as the expense was qualified under an HSA plan at the time that the expense was incurred.
Over time, if medical expenses are low and contributions are made regularly to the HSA, the account can accumulate significant assets that can be used for health care tax free or used for retirement on a tax-deferred basis.
A recent industry survey found that in July 2007 over 80% of HSA plans provided first-dollar coverage for preventive care. This was true of virtually all HSA plans offered by large employers and over 95% of the plans offered by small employers. It was also true of over half (59%) of the plans which were purchased by individuals.
All of the plans offered first-dollar preventive care benefits included annual physicals, immunizations, well-baby and well-child care, mammograms and Pap tests; 90% included prostate cancer screenings and 80% included colon cancer screenings.
Read more about this topic: Health Savings Account
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