The Difference Between A High-Deductible Health Plan And A Health Savings Account

11 November 2015 by Elijah Steward

Discussions about health savings accounts sometimes fail to emphasize that the financial account is separate from the insurance policy. Individuals seeking to purchase health insurance can make a more informed decision by understanding the difference between a health savings account and a high-deductible health plan.

The health insurance policy, referred to as an HDHP, is usually obtained first. Once you have been approved for insurance coverage, you are ready to open the financial account, referred to as an HSA. The tax benefit of the financial account arises because the health insurance policy meets specified requirements.

High-deductible health plan

As its name implies, a high-deductible health plan requires the policyholder to absorb a minimum amount of medical costs. For HSA purposes, the deductible amount of an HDHP must fall within a specified range. There is a minimum qualifying deductible amount and a maximum qualifying deductible amount.

For individual coverage, the minimum deductible amount for 2015 is $1,300. The maximum deductible in 2015 for an individual is $6,450. Policies with deductible amounts outside of the acceptable range do not qualify for HSA treatment.

For family coverage, the minimum deductible amount for 2015 is $2,600. The maximum deductible amount for family coverage in 2015 is $12,900, so there can be considerable variation between plans that qualify for favorable HSA tax treatment.

After you have paid the annual deductible amount, the HDHP begins to cover medical costs. An HDHP is likely to pay for some types of preventive medical care without regard to the deductible requirement. Typical types of preventive care include the following:

• Periodic medical examinations
• Immunizations
• Routine prenatal care
• Health screening procedures

Health savings account

An HSA is essentially a savings account with tax advantages. There are annual limits on the amount that can be contributed to the account. The contribution limits for an HSA are not the same as the HDHP deductible amounts. For 2015, you can contribute up to $3,350 to an HSA if your HDHP is for individual coverage. For family coverage, you can contribute up to $6,650.

Many employers provide funding for an HSA as an employee benefit. If you contribute out of your own pocket, a tax deduction is available for the contribution. Withdrawals from your HSA that are used to pay for medical expenses are not taxable.

An HDHP generally cannot be established if you have another form of health coverage. If you are married, you may be eligible for an HDHP if you are not covered by a health plan of your spouse. Contact a health insurance provider like David Paulson Agency Inc for more information on choosing a suitable health insurance policy.

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