Health Insurance And High Deductibles

When most people learn that their family's health insurance coverage is going to cost more, they shop for a more affordable policy. Often the solution is a combination of an insurance plan and a tax-sheltered Health Savings Account.

More than 1 million Americans have made a similar choice, signing up for high-deductible health insurance policies and associated HSAs since the program was introduced in late 2003 according to the Washington-based industry group, America's Health Insurance Plans.

The new plans are a bit complex, but a growing number of insurers offer them.

Under federal law, the policy must have a minimum deductible of $1000 a year for an individual and $2000 for a family; maximum out of pocket expenses; for example, copayments required for surgical procedures, cannot exceed $5100 for individuals and $10,200 for families.

People Help With Their Own Health Insurance

Policyholders, meanwhile, can set up HSAs that they fund with their own money. Employers also can contribute to their workers' HSAs. HSA contributions, generally set an amount equal to the policy's deductible, can best be used to cover health care costs, and unused money can be carried over at year's end. This differs from company sponsored Flexible Spending Accounts, health care savings plans in which unused money is forfeited after Dec 31 of each year.

Some companies are replacing existing catastrophic health coverage plans with the new plans because they see HSAs as a good way for workers to handle the higher deductibles. Others see them as a way of making workers more mindful of health care spending.

Health Insurance For The Young And Uninsured

The new policies are especially attractive to young singles, people in relatively good health and higher income people who can afford to cover higher out of pocket costs.

The new policies also are attractive to small businesses and the uninsured. Of the new policies purchased through eHealthInsurance, more than 40% were purchased by people with annual incomes below $50,000, almost half were families and more than one-third had been uninsured.

Affordable Health Insurance

It's the affordability. Participants get a lower cost premium and the money they probably would have been spending can be run through a savings account to buy day to day medical services.

More companies will adopt the plans because the trend is that more of the burden for health benefits is going to be moved to the employee.

On the other hand, people who can afford to fund the HSAs and don't need to draw them down entirely to cover annual medical expenses will be able to let them grow tax-free. In retirement, the excess savings can be used to purchase long-term care insurance and to pay for other qualified medical expenses.

That means that they're more popular for those approaching retirement age, especially if they don't have company plans available to them.

There are many health insurance alternatives, so it's important that people asses their individual needs.