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!