Standard PPO or HSA compatible Health Insurance, what is the difference?
The key to saving money on heath insurance is making sound purchasing decisions and realizing what your savings are really going to be.
When people think about high deductible health insurance plans, many do not quite understand the true cost savings of these plans.
When comparing plans you have to look at the difference in what you will have to pay out of pocket for services, premiums, the policy stop loss, as well as if co-pays are applied to the stop-loss on your policy (most policies with co-pays do not apply the co-pay to your deductible or out of pocket maximum – stop loss.)
To illustrate the significance of a stop loss, say you were very sick and kept going to the doctor, getting medication and test every couple of weeks for most of a year. Time you finally figure out what’s wrong it’s December and you have to go in for surgery. You had already spent $3,000 trying to figure out what was wrong. If you had a $3,500 stop loss you would have to pay for the negotiated cost for the surgery or the remainder of your stop loss. If you had an HSA plan, it’s simple you would have to pay a maximum of another $500 and you would hit your stop loss. On the other hand, if you had a co-pay plan and your co-pays added up to $2,500, in most cases you would only have $500 put toward your deductible so you would have to come up with an additional $3000 to meet your stop loss.
Consider this: a high deductible insurance plan generally does not pay anything on the behalf of the insured until a certain deductible is reached. However, one has to take into consideration that the doctors and pharmacy’s honor the rates negotiated with the insurance company regardless of who is paying the bill.
Reference to illustrate point:
Monthly premium on $500 deductible plan $4500 stop loss $ 430.00
Monthly premium on HSA $2400 plan $3500 stop loss 280.00 Difference $150.00
Item Bill total Negotiated Rate Co-pay Difference (cost savings)
Doctor’s office visit $ 100.00 $ 55.00 $ 35.00 $ 20.00
Prescription 35.00 15.00 10.00 5.00
Contributions to an HSA account through a section 125 plan are federally pre-tax and are pre-tax in most states. For more information on HSA accounts please visit http://www.treasury.gov/offices/public-affairs/hsa/faq_contributing.shtml#hsa1
HSA accounts are different from flexible spending accounts. A flexible spending account is basically a use it or loose it account, so one has to accurately guess how much one is going to spend during the year on medical expenses. HSA accounts are cumulative, the money you don’t spend on medical expenses during the year roll over into the next year. HSA accounts have other advantages as well when you retire. http://www.treasury.gov/offices/public-affairs/hsa/faq_contributing.shtml#hsa10 http://www.hsafinder.com/Using-an-HSA-for-Retirement
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