What is an HSA?

A brief definition:

A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.

You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account.

You own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.

You must have an HDHP if you want to open an HSA. Sometimes referred to as a “catastrophic” health insurance plan, an HDHP is an inexpensive health insurance plan that generally doesn’t pay for the first several thousand dollars of health care expenses (i.e., your “deductible”) but will generally cover you after that. Of course, your HSA is available to help you pay for the expenses your plan does not cover.

There are many resources on the web with good information, including HSA Bank,  HSA Center, and the US Treasury Department. 

5 Ways to Lower Your Healthcare Costs

As you know, there's been a long-winded and often messy debate about the price of health care in this country and what to do about it. Well that's another discussion for another day. But what's important for you to consider is what you can do about the cost of your health care. Much of it is no doubt out of your hands - you have to live and work with the system we have. The odd thing, of course, is that most people have no idea how expensive health care is because they're insulated from the actual prices. But you can take certain steps that will help you save:

1. Get generic drugs. Big Pharma spends a lot of money to convince you to that you need to ask your doctor for brand-name, "designer" drugs. They also invest a lot of time and money on the other end of the equation to persuade your doctor to prescribe their pills. But as you probably know, most brand-name drugs have a generic version that will work just as effectively at a fraction of the price. Many pharmacies generic prescriptions priced as low as $4. (I have actually gotten generic antibiotics for free, though I can't figure out how that worked). Also, know that you can refuse a prescription and ask your doctor for something more affordable.

2. Shop around. When you're going to spend a sizable amount of money on some purchase or service, you probably shop around to compare prices and make sure you get the best deal for your money. That's just the wise thing to do, right? But very few people shop around for health care. This is particularly important for those without health insurance or who have a high deductible plan. Why not call around to several doctors and dentists to find out how much they charge? Here's a resource that might help. You might be surprised to find that there is some variability in the prices.

3. Avoid the emergency room if your life is not in danger. The emergency room of an American hospital is probably the most expensive place in the world to get health care. Most health insurance plans actually charge you a penalty to go (waived if admitted to the hospital) because it is so expensive. Unless it's really and truly an emergency, find an urgent care center.

4. Raise the deductible on your health insurance. Many people who have health insurance are over-insured. Most people don't need a "Cadillac" health plan - they need good, catastrophic coverage to protect against major claims. If you want a plan that provides a doctor copay and a drug card, you can still find those plans with higher deductibles. If you're covered through your employer, you may not have a choice here. But if you buy your own health insurance, you can save a lot of money by getting a higher deductible plan. Then put some of that savings aside for when you have the big claim. (An HSA plan is a great option to consider here.)

5. Consider "alternate dependent coverage." If you're on an employer health insurance plan, consider moving your spouse and kids to their own individual policy. Most small businesses pay some if not all of the premiums for their employee, but not for dependent coverage. In many states, assuming your family is healthy, you could save a lot of money by purchasing an individual policy for them. (Obviously we'd love to help you do that.)

Got other suggestions? We'd love to hear them.

Do I pay more to use a health insurance broker?

No. The health insurance industry is unique in that the prices are fixed, meaning your policy will cost the same regardless of how or from whom you buy it. If you buy directly from an insurance company, through a big clearinghouse, or from a broker, your plan's price will be the same. Nobody (including us) has any special deals or prices. If you are comparing quotes and are finding different prices, something about the plans is different.

But surely agent compensation affects the price, right? Doesn't it help to cut out the proverbial "middle man"? It could help the insurance company, but it doesn't help you. Brokers are paid a commission by the insurance companies, but because the prices are unaffected by this, our service comes at no extra charge to you. So you get all of the advantages of using a health insurance broker at no extra charge.

So the question to ask is this: Why would you buy insurance without a broker?

Critical Illness Policy: A Good Partner for High Deductible Health Insurance

For a variety of reasons, we believe that high deductible health insurance plans (both HSA-qualified plans and traditional plans) are a very strong option for many people. Of course for many clients, the economic reality is that this is the only kind of coverage that is affordable. But for many others, choosing a high deductible health insurance plan just makes more economic sense.

One option you should consider using to supplement a high deductible health insurance plan is a critical illness insurance policy. A critical illness policy basically pays you a set amount in cash if you have a heart attack/stroke or are diagnosed with cancer or any of several other critical illnesses. (It is actually set up as a term life policy so it pays if you die, but has the “critical illness rider” that pays out early with a qualifying diagnosis since there’s a very good chance you might survive that kind of event these days).

There are varying amounts of coverage, obviously. A policy as low as $10k will give you the money you need to cover your high deductible health insurance policy and will likely leave you with leftover cash you can use to cover expenses related to time off from work, traveling for care/treatment, or anything else you'd want to do with it.

It’s something I think is worth considering to supplement a high deductible health plan because there’s a good chance that if you hit a $5-10k deductible it’s because of this kind of event/diagnosis. Click here for more information, an FAQ, and a quick no-obligation quote.

What is "co-insurance"?

What is coinsurance? Let's break down the word. The prefix "co" typically means "with" -- so a "co-pilot" is one who pilots the plane with the pilot, or a "co-worker" is one who works with you. So "co-insurance" involves the client paying with the insurance company once the deductible has been met. Most traditional health insurance plans have 80% coinsurance (70% is also common). With 80% (or 80/20) coinsurance, once you've reached your annual deductible, you enter "coinsurance," where the insurance company is paying 80% and you are still paying 20%.

Now, any major medical insurance plan worth having will have a cap on your coinsurance payments, which is typically referred to as the "maximum out-of-pocket" expense. Once you've reached that maximum, the health insurance company will pay 100% of covered charges. (Stay away from any policy that does not have a lid on coinsurance).

For example, let's suppose you have a plan with a $2,500 deductible and 80% coinsurance with a maximum out-of-pocket of $3,000. (This is, in fact, a very popular plan.) And let's suppose you have major surgery or stay at the hospital a few days. You will pay the first $2,500 of charges. Then your insurance company begins paying 80% of charges, leaving you to pay the remaining 20%. Once you have paid another $3,000, you are done paying and the insurance company begins paying 100%. So your worst-case scenario is $2,500 (deductible) + $3,000 (coinsurance) = $5,500.

There are plans that offer 100% coinsurance, meaning once you've reached your deductible you are finished, which is a very attractive feature. You'll find this is more common with higher deductible plans, including the majority of HSA-qualified plans.

What if you're between health insurance plans?

What do you do if you're between health insurance plans? For example, you get a new job but must wait 90 days before your benefits start. Short term health insurance can offer affordable protection to fill in the gap when you’re between major medical plans:

Short term health insurance is designed to fill the gap between plans. It is designed to serve those who are between jobs, recent graduates who are no longer eligible for coverage through their parents and anticipate getting coverage through an employer fairly soon, and new employees who are not yet eligible to participate in their employer’s coverage. Short term health insurance typically provides major medical protection only so that you will at least have protection from unexpected major health expenses while you’re in between policies, and the good ones count as creditable coverage (which is important if you’re planning to join an employer-sponsored plan later). They are generally much cheaper than other health insurance options.

Short term health insurance typically involves very minimal underwriting, meaning you can get in place within 24 hours. You choose how many months of coverage you want (1-12). If you live in Georgia, South Carolina, or neighboring states and are interested in short term health insurance, contact AC Forrest Insurance Group for a free quote and more information.

How Child-only health insurance plans can save you money

If you're looking to find more breathing room in your budget (who isn't), it might be worth taking a look at what you pay for your family's health insurance. Most small employers cover 50-75% of an employee's health insurance premium, but the employee is responsible for paying the premium for dependent coverage. If your whole family is covered on your employer's group health insurance plan, you might be able to save a significant amount of money by moving your spouse and/or dependents onto an individual plan. Here's a few reasons why:

* On most group health insurance plans, there is a single rate for "children" that is the same whether you have 1 child or 8 kids. As a general rule, if you have 1-2 kids you are almost always going to get a better rate by placing them on child-only individual plans, where if you have 3+ kids you might be better off on the group plan.

* If you work for a small employer (especially under 25 employees) and there are people with significant health conditions, that group has likely been "rated" - meaning the premium has been elevated over the initial quote due to enhanced risk. It could be as high as 66% higher. That higher rate obviously applies to everyone on the plan. If your dependents are healthy, you will likely save a lot of money each month by moving them onto individual health insurance coverage (as opposed to paying the group rate + 66% or whatever).

* If you are a younger worker and most of the employees on the group plan are older, you might well find that you can save money by moving your dependents onto individual health insurance plans.

There are some companies (particularly in South Carolina) that offer very good child-only coverage that might even be more comprehensive than your group plan (at a better price). If you're looking to find some more breathing room in your budget, let AC Forrest help you assess whether adjusting your family's health insurance coverage makes sense for you.