When
the Affordable Care Act went into effect over a dozen years ago, my role at a
health management firm (okay, let’s be honest: it was basically an insurance
company) at the time was to assist hospitals and provider offices in their
interactions with the company, from credentialing to getting their claims
paid. I recall that many of the billing
managers complained about the new health coverage policies (which my employer
did not sell) that people were selecting from the new insurance exchange
because they were choosing the cheapest policies, with high deductibles (the
amount the patient must pay out of pocket before the insurance pays anything),
and those patients were shocked when they had to foot the whole bill for an
office visit or simple medical procedure, and of course the office manager or
billing department got the brunt of the anger
I
think most people now grasp the concept of “high deductible” and steer away
from such policies. But are they smart
to do so?
MetLife
estimates that 45% of employers in the U.S. offer a high deductible health
policy that pairs with a Health Savings Account (HSA). An HSA is an account into which money may be
set aside by the employee (and his employer) tax-free to pay for health-related
services, medications, or products. If
the money is withdrawn and used for that purpose it is not taxed—meaning the
money going into an HSA is never taxed if used as intended. The money in the account can even be invested
and grow tax-free. Sounds like a pretty
good deal, yes? Yet, MetLife says only
29% of employees own an HSA through their employer.
I
suspect the low utilization rate owes to the fact that to contribute to an HSA
one must be enrolled in the accompanying high deductible plan (minimum
deductible of $1600 for an individual plan, $3200 for a family plan in 2024,
per IRS regulations). And as someone has
said, “’high deductible plan’ is the worst branding.” Who wants to be stuck with all that
out-of-pocket expense?
But
maybe we all need to do our math during open enrollment season. An analysis by Voya Financial showed that 75%
of individuals would have paid less with a typical high deductible plan paired
with an HSA compared to a standard, lower deductible plan. My own case is instructive.
When
first given a high deductible plan option, I had the same initial reluctance to
go that route, but the much lower monthly premium got my attention. Plus the employer contributed a nice sum to the
HSA (because they would save a bunch of money in their share of the premium
cost, so they wanted to encourage participation). These two factors alone nearly covered the
higher deductible. But with the other,
low deductible option I always contributed to a medical Flexible Spending
Account (FSA) to cover the deductibles and copays, and just a small portion of
what I had been putting into the FSA, added to the premium savings and employer
contribution would be enough to wipe out the financial risk of the higher
deductible. Plus, unlike an FSA, unused money
in an HSA account rolls over year to year and even follows the employee if he
leaves the company.
Out
of the workplace now and covered under Medicare? You can still take advantage of this
concept. There is a type of Medicare
Advantage plan that offers a Medicare Savings Account that operates much like
the private employer arrangement described above. They are not offered everywhere. I can’t find one available in my area. But if you are covered by regular Medicare
(as opposed to a Medicare Advantage plan) you can purchase a high deductible
supplement plan to cover the 20% coinsurance Medicare doesn’t cover. I pay one-third the premium for such a plan
compared to a lower deductible plan, and with a handful of routine doctor
visits and even a trip to the ER, I came out ahead this year (or at least as of
this writing).
Math
might not have been your favorite subject in school, but do some basic
calculations this open enrollment season.
You might be surprised at how much money you’re leaving on the table by
not considering a high deductible plan.
Until
next time,
Roger
“For
true wisdom has two sides.” Job 11:6 NIV*
*Scripture quotations taken from the Holy Bible, New International Version® NIV® Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.™ Used by permission. All rights reserved worldwide
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