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A Guide to High Deductible Health Plans

March 21st, 2011 at 10:31 am

People who want to make sure they’re completely covered in case of a medical emergency may want to check into a high deductible health plan (HDHP.) Commonly referred to as catastrophic health insurance, high deductible health plans are intended to take care of the financial problems associated with medical expenses beyond what a normal health care plan would normally cover. Following is a guide to high deductible health plans.

Starting Out

A high deductible health plan goes hand in hand with a health savings account. They work in tandem. Basically a HDHP will cover you and your family in the case of a medical emergency. By definition you will be required to pay a rather substantial portion out-of-pocket. Having a health savings account (HSA) can help meet the cost of the high deductible. Because the money in a HSA is tax deductible the system is attractive to those who can put enough money in their health savings account to ensure they’re protected against the high deductible in the HDHP. This type of plan is only good for major medical expenses and doesn’t apply to certain types of medical care. One of the major benefits of a high deductible health plan is that the premiums are significantly lower than with a more traditional health care plan.

Tax Advantages

One of the major attractions of a HDHP is the tax advantage of a HSA. You can place more than $6,000.00 for a family or over $3,000.00 for an individual into a health savings account per year and 100% of that money is tax deductible. The money can then be used to pay the deductible for any emergency medical expenses that may be incurred. There is no limit on how much you can place in a health savings account, only on what is tax deductible. One caveat is that the money needed to be deposited before December 1, 2010 to qualify for a tax deduction in 2011. Consult your insurance agent, a tax attorney or an accountant to find out the deadline for 2012. Be aware the deadlines and amounts that are tax deductible may vary from state to state.

Coverage

A high deductible health plan will cover all major medical expenses and some routine medical costs. Preventative care, which includes such things as regular checkups for children or adults, weight loss programs, or plans designed to help a person quit smoking, are not included. There is usually a cap on the annual deductible. Once the cap is reached, the policy may cover all or part of routine medical expenses. The idea behind this type of plan is to protect you in case of a high-cost medical emergency. The HSA helps defer the out-of-pocket expenses caused by the high deductible. It’s a wonderful two-tiered system that can provide ample protection at reasonable rates.

Shop Around

As with any other type of insurance it’s advisable to shop around before signing any papers. The amount of the deductible in a HDHP has an upper and lower range stipulated by law, but individual plans may vary. The minimum and maximum amounts may change from year to year, based on the cost of living. Talk to your insurance agent about the potential benefits of a high deductible health plan. Have them explain how a high deductible health plan works, and what your advantages or disadvantages may be. It might even be worth your time to consult a tax attorney or accountant before making a decision.

Guest post from Jessie Mars. Jessie writes for http://www.healthinsurancequotes.org.

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