Health Insurance is a necessary form of insurance for any successful member of modern day society. Medical costs from a slip and fall or accident can bankrupt or at the least cause financial hardship to the average American. Without the protection of major medical insurance a broken wrist can easily cost upwards of $30,000. This leads to a difficult decision for healthy individuals, do I pay $300 - $400 monthly premium to protect myself in the unlikely event that I fall extremely ill or have an accident requiring a surgery? The answer to this question is a High deductible major medical insurance policy with an HSA or Health Savings Account. The HSA plans have three major advantages for healthy individuals, they are: excellent benefits with low regular monthly installments, tax-free attached savings account, and the ability to invest money saved in the Health savings account.
Health insurance plans have a typical structure where the higher the monthly premium the lower the initial out of pocket deductible is before health benefits begin. An example of this kind of major medical insurance is: Lauren a 40 year old mother has a $1,000 deductible with a monthly premium of $377. Lauren would spend $ 4,524 ($377 *12= $4,524) dollars a year on this coverage, this would be excellent health coverage for a young mother, but would turn out to be a waste of money if she were to remain healthy for a period of 10 years. Lauren would spend $45,240 on health insurance premiums over the ten year period.
HSA's are structured to allow individuals to save on monthly premiums while still protecting clients from catastrophic financial losses associated with a severe illness or injury. HSA's have a much higher deductible and also a significantly lower monthly premium. An example of an HSA health insurance policy is: Lauren has a similar health insurance policy with a $5,000 deductible health insurance policy for a monthly premium of $171. Lauren would spend $2052 a year on monthly premiums. If Lauren were to remain healthy for a period of 10 years she would spend $20,520 on monthly premiums. This represents a significant savings over a traditional health insurance policy.
The savings on the monthly premiums that is provided by a HSA compatible major medical insurance plan is designed to be deposited into a HSA account at a Bank of America or other financial institution. The money that is deposited into this sort of HSA account is tax deductible! In our previous example Lauren spent $45,240 on traditional health insurance premiums and $20,520 on HSA, high deductible health insurance account premiums. This is a savings of $24,720 over a 10 year period. The $2,472 of yearly savings is tax deductible on a yearly basis.
The HSA accounts that are issued through Aetna place their accounts at Bank of America. Bank of America has a policy that once a HSA has a balance of $1000 it can be invested in select mutual stock or bond funds. This is similar to the treatment regarding money that is saved in an Ira. This is a large advantage of a HSA account, the ability to invest money on a tax free basis that can be used to cover future medical expenses.
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