“High Deductible Health Plan.” How does that sound? Does the word “high” seem a bit off-putting? If it does, you are not alone.
Economist Benjamin R. Handel found that when offered the choice between a high deductible and low deductible health plan, most Americans choose the low deductible. At first glance, “low deductible” sounds more appealing, right? Many people believe that the coverage on low deductible plans kicks in sooner. However, as inviting as “low deductible” may sound, it is important to remember that low deductible health plans go hand-in-hand with high premiums. When you pay your deductible, you are paying for healthcare that you actually receive, but when you pay for premiums, you are paying for “what-if” costs: “What if I go to the ER? What if I catch the Bubonic plague? I’d better fork out a bunch of money each month, so I know I’ll be covered in case something happens.” But how often do you actually go to the doctor? Does it really make sense to pay high premiums when you go to the doctor’s office twice a year? What if you were to pay for what you needed and kept what you didn’t spend?
According to The New York Times,
“Economists have a term for a situation like this, where one option is better than another under any circumstances, dominance. And that is what we see in many workplaces: The cheaper healthcare plan, at every level of medical spending, often has a higher deductible.”
By pairing a high deductible health plan with an HSA, you can turn it into a “no-deductible” health plan.
Your HSA funds can be used to pay your deductible. If you build up a nest egg of health savings, you won’t even feel your deductible.
Here’s how to bolster those savings:
- Contribute the annual limit to your HSA each year(or at least as close as you can). The annual HSA contribution limits for 2023 are $3,850 for individuals and $7,750 for families.
- Leave your HSA funds untouched as much as possible so that your savings can grow quickly and you’ll have the funds when you really need them, like in the case of an emergency. Though HSAs can be used to buy things like vitamins and band-aids, it’s usually better to save the funds for large, unexpected medical expenses.
- Invest your HSA funds! They grow tax free! HSAs can be invested in mutual funds, stocks, and bonds, and Start offers in-house investment options.
Investing your HSA not only produces rapid growth, but better growth. When your money sits in a bank account you may receive 1 or 2% interest, but when you utilize investment funds your savings can grow exponentially. In fact, there is no limit to how much your investments can grow.
Learn about in-house HSA investments here.
Simply put, when you pair a high-deductible health plan with an HSA, low-deductible (a.k.a. “high-premium”) health plans don’t stand a chance.