High-Deductible Health Plan (HDHP) and Health Savings Account (HSA) Basics

Hi, I'm here to help you learn about your high-deductible health plan. Over the

next few minutes, you'll discover what it is and how it works. With a high

deductible health plan, you often pay a lower premium in return for having a

higher deductible. The term deductible simply means the amount you need to pay

out of your own pocket for medical expenses before your insurance kicks in.

Just so you know, most medical services like doctor visits, MRIs and most

prescriptions count towards your deductible. Another thing to keep in mind,

you pay nothing for preventive care like annual checkups. Okay, let me give you an

example. Say you go for a jog and you trip. It happens, but this time you break

an ankle. An ambulance ride, surgery and some physical therapy later, you're

feeling better, but you now have a ten thousand dollar hospital bill. Let's say

your deductible is two thousand dollars. That means you have to pay two thousand

dollars out of your own pocket before your insurance coverage kicks in. Health

plan coverage varies, so be sure to check with your employer about your specific

coverage. Now, I know $2,000 is still a lot of money. The good news is, having a

financial account can help you pay for medical costs like this.

Your high-deductible health plan comes with a health savings account known as

an HSA. An HSA is an account that you can contribute to and withdraw money from

tax-free. It can help you pay your deductible, co-payments and other

qualified medical expenses like eyeglasses and dental work. You can even

take money out to pay for non-medical expenses, but if you're under 65 you have

to pay taxes and a penalty. With an HSA, you and your employer can contribute

tax-free. How much you can contribute is set by the IRS and may change from year

to year. All that money, including what your

employer gives you is yours, even if you switch jobs. And if your new employer

doesn't offer an HSA, you can still keep your account and use it to pay for

qualified expenses, but you won't be able to put any more money into it. Don't

worry if you have money left over at the end of the year. It rolls over year after

year, after ,well you get the picture. And because your contributions are tax-free,

you enjoy tax savings! So let's say this is your paycheck every month. Without an

HSA, your entire paycheck is taxed and $1,000 goes to the government. But here's

what's great about an HSA. So you take $200 from each paycheck and put it into

an HSA. Only thirty eight hundred dollars is taxed and nine hundred fifty dollars

goes to the government for a tax savings of $50 each month. That's six hundred

dollars a year you save in taxes and you also put twenty four hundred dollars

into your HSA that you can use for medical expenses like that two thousand

dollar deductible. Better yet, you can even invest that money, grow it tax-free

and use it for retirement. You must meet certain guidelines to qualify for an HSA.

Please check with your employer. Let's recap. You often pay a lower premium with

a high-deductible health plan. You have to pay your deductible first before your

insurance kicks in. With an HSA account, you enjoy tax advantages because

contributions are tax-free, investment earnings are tax-free,

and withdrawals for qualified expenses are tax-free. And remember, check with

your employer to see if you qualify!