HSA Inside Scoop - September 2018 - What you need to ask before enrolling in an HDHP
Summer isn't even over and across the country, people are already thinking about open enrollment for 2019 healthcare coverage. And with that comes decisions about which type of health plan is right for you.
Though we're fully onboard with people taking advantage of high-deductible health plans (HDHPs) -- not to mention the health savings accounts (HSAs) that usually come with them -- these decisions aren't easy, especially if your immediate healthcare future isn't certain.
HDHPs have plenty of outstanding benefits for those able to take advantage of them, but there are definitely some questions you should ask before submitting those forms. Here are just a few.
Do you need to be pushed to spend money on healthcare?
HDHPs have a lot of advantages, with one of the biggest being the HSA. But HSAs are savings accounts, first and foremost. If you're the type of person who never typically goes to the doctor (beyond yearly check-ups) unless it's an emergency, an HDHP might make sense, because you'll be limiting your out-of-pocket spending.
But life isn't a straight line. And sometimes, things happen. With an HDHP, you'll have to pay medical costs on your own until you hit your predetermined deductible, but having an HSA can help offset those costs with tax-free funds.
In other words, if you have an HSA with your HDHP, and are treating it as an emergency fund or a retirement account, it might make more sense to lower your premiums, pocket your money, and turn to your savings when you need medical care most.
Have any medical costs in the coming year?
No one can predict the future, but if you're relatively healthy and not anticipating any major medical needs, an HDHP is likely a less-expensive choice. And if you have an HSA with your HDHP, the money you set aside during the year will remain in the account for you to use in a future year.
Have very high medical costs in the future?
Sometimes, we have options when it comes to healthcare, like putting off a non-urgent medical procedure. If that's in your not-so-distant future, an HDHP might be a good option, simply because it will allow you to set aside more tax-free money in an HSA to cover your medical costs.
With an HSA in 2019, you can put aside $3,500 if you have HDHP coverage for yourself, and $7,000 if you have family coverage. If you're age 55 or up, you can add an extra $1,000 to those limits. And the money in your HSA can grow over time, in case you decide to postpone the treatment even further.
Other health plans might offer lower deductibles, but you might be limited in what's covered by the primary plan, and you won't have tax-free HSA funds to fall back on to cover these expenses.
Are you comfortable with a high deductible?
After all the above questions, this is probably the most important. HDHPs require you to be a little more diligent with your available funds. And you'll need to pay medical costs promptly, so they will be credited against your deductible, allowing you to fulfill that responsibility more efficiently.
On the positive side, having this responsibility will promote better, more frugal decision-making about your health spending. Because it's coming out of pocket, you'll be encouraged to "shop around" and find better deals without sacrificing the quality of your treatment. If you're already of this mindset, then there's no reason to dismiss HDHPs because of the deductibles.
But if you have a bank account that "ebbs and flows" a little more often than you'd like, speak with a financial advisor before making a decision about an HDHP.