Health insurance is a partnership that helps you pay for health care expenses. It protects you and your dependents from paying the full cost of medical expenses when you’re injured, sick or need surgery. Here are some health insurance terms you’ve probably heard:
- Premium: The amount you pay monthly for health insurance coverage.
- Deductible: The amount you pay before your health insurance starts paying for covered medical expenses.
- Coinsurance: The portion you pay once your deductible has been met. You will pay this percentage until you have hit your out-of-pocket maximum.
- Out-of-pocket maximum: This is the most you will need to pay towards healthcare expenses in a given year. Your deductible and coinsurance are all applied towards your out-of-pocket maximum.
Health Savings Account (HSA)
A Health Savings Account is a personal savings account that allows you to set aside pre-tax money for qualified healthcare expenses. All funds contributed are yours to keep and any unused funds roll over from year to year.
Advantages of An HSA-Based Health Plan:
- Lower monthly premiums
- Save for future medical expenses
- Personal ownership
- Pay for medical expenses tax-free
- No “use it or lose it” policy
- Invest HSA funds, earn tax-free interest
How An HSA-Based Plan Works
You pay 100% of healthcare costs, except for preventive services, which are covered at 100%. You can use HSA funds to cover costs.
You pay a small percentage of eligible healthcare costs, and insurance covers the rest. You can use HSA funds to pay your portion.
Max Out-of-Pocket Phase
After you reach your max out-of-pocket, insurance covers 100% of eligible healthcare costs.
Any HSA funds leftover at the end of the year simply stay in your account, and can be used for future medical expenses. Rollover funds is not characteristic of typical health insurance plans.