The Pros and Cons of High-Deductible Health Insurance Plans and HSAs

When it comes to health insurance, high-deductible health plans (HDHPs) paired with health savings accounts (HSAs) are an increasingly popular choice, especially if you’re looking to save on monthly premiums.

What Are HDHPs and HSAs?

An HDHP is a health insurance plan that has lower monthly premiums, but higher deductibles than traditional plans. In other words, you may pay less money per month than you would for traditional insurance, but you will have to pay more out-of-pocket to reach your deductible until you coverage kicks in.

An HSA is a tax-advantaged savings account you can use for qualifying medical expenses. You must be enrolled in an HDHP to use it.

Pros of HDHPs and HSAs

The following are typical benefits of an HDHP and HSA insurance plan:

• Lower monthly premiums—Arguably the most enticing aspect of an HDHP plan, people who choose this option typically see significantly lower premiums. This can be useful if you are generally healthy and rarely visit the doctor.

• Tax advantages—Contributions to your HSA are pre-tax, and any withdrawals for your qualified medical expenses are tax-free as well.

• Employer contributions—Many employers offer contributions to an HASA, which is essentially more money toward your healthcare expenses.

Cons of HDHPs and HSAs

The following are some reasons why an HDHP plan may not be your best option:

• High out-of-pocket costs—Because an HDHP plan has a higher deductible (typically $1,650 for individuals and $3,000 for families), you’ll need to pay a higher amount of money before insurance covers expenses.

• Not ideal for chronic medical issues—For those with ongoing medical needs or chronic illnesses, the high deductible of an HDHP can outweigh the savings you get from lower premiums.

Contact Us

While HDHPs and HSAs are becoming a more popular selection for health insurance, they might not be the best option for everyone. The professionals at Ace Insurance Consultants in Knoxville, TN can help you decide the best choice for your needs and budget. Contact us today for more information.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.