It's open enrollment season for health insurance at many employers. I'm grateful that our family has health care insurance, but there are so many options available that it can be difficult to know what to do.
Several years ago, my husband and I decided to switch our family's insurance from a traditional insurance plan to a high-deductible plan (with a Health Savings Account – HSA). For us, it's been a good switch and here's why:
We save money
While technically we still pay the exact same amount per pay period, we expect that we'll eventually be able to pay less money towards our health insurance each month.
That may sound confusing, but here's how we do it. Rather than paying a high amount towards a traditional health insurance premium and a smaller amount towards our Flexible Spending Account (FSA) each year, we decided to switch it up. We pay A LOT less in premiums each year with the high-deductible plan. However, we now have to pay for all of our family's health expenses out of pocket until we reach our deductible ($4,500 with a family max of $8,000). So, we took the money we were saving in premiums and decided to max out our Health Savings Account (HSA) contributions, which are tax deductible.
Now, we use our HSA to pay for our medical expenses, and over the course of 3 years of contributions, we have a balance in our HSA of our family out-of-pocket max ($8,000) which gives us security in case of an emergency. So, I expect when we re-enroll in our health insurance this year, we'll cut the amount we contribute to our HSA (thus lowering our overall health insurance payments). We'll still contribute enough to pay for the year's expenses while maintaining our family max as a balance.
This works for us because we don't have huge medical expenses each year (several doctor's visits, glasses for all of us, a few doctor's visits for sickness, and a few prescriptions). We also had an emergency fund so if something happened the first year (before we were able to build a balance in the HSA), we would have still be able to make it. It's essential to build an HSA at the same time so you don't have to worry about paying your expenses out of pocket.
We can roll our Health Savings Account (HSA) balance from year to year
The main difference with a high-deductible plan is that you can have a Health Savings Account (HSA), which is different from a Flexible Spending Account (FSA) in that you can roll your account balance from year to year rather than use it or lose it like the FSA. Plus, our HSA account is portable, so it's still our account even if we switch jobs or insurance companies. There are federal guidelines that determine whether you're eligible for an HSA or not. For 2015, you must have a high-deductible insurance plan with a single coverage deductible of at least $1,300 or a family coverage deductible of $2,600 or more with guidelines on the out of pocket maximum.
We're more conscious of our health care expenses
With medical expenses rising rapidly, I never really understood how much it cost for our medical expenses while I was paying small $15/$25 copays for doctor's visits. Now, I fully understand how much it costs for specific procedures. While I would never decline treatment if it's truly medically necessary, it makes me think twice when a doctor orders an expensive medicine or a procedure just because. I discuss expenses and what's the best choice for us. Sometimes I think doctors order things (like extra blood tests) just because they know insurance will pay for it.
Because we have the HSA, we don't base everything on cost, though. For example, if we feel like the more expensive medicine works better than a cheaper version, we'll still go with what works best for our family rather than cost. That's the freedom of the HSA – the money is already set aside for health expenses so we don't have to worry about coming up with the money for payment.
What about you? Have you switched to a High-Deductible Health Insurance Plan with an HSA? Or does it not make financial sense for your family.
Please note: this is just what worked for our family. Before you make any changes to your insurance plans, make sure that it will work for you. Be sure you have enough money in your emergency fund to cover your deductible until you can build your HSA balance and be sure to contribute to an HSA so you don't have to worry about paying for all your expenses up to the deductible out-of-pocket.