If you pay attention to any piece of news, you no doubt have heard SOMETHING about health insurance over the last few months. Coincidentally, in the midst of potential health care reform, it is open enrollment for many individuals covered under employer sponsored health plans. Because of this, I thought it would be a perfect time to do a breakdown and analysis of the options that may be available to you inside of your plan.
A majority of Americans (me included), have noticed an emergence of alternative health care options offered inside of their benefits packages over the past couple of years. While we understand that most of the time new, innovative products introduced into a market are usually a good thing for that market; we (the creatures of habit that we are) tend to resist change. Because of this, as open enrollment comes around each year, we have a tendency to default to whatever option we selected last year. Considering the complexity of the system (PPO…HMO…HRA…HSA…FSA…OAP…POS…and so on), this behavior is not entirely unwarranted.
Well I decided that this year, because of personal factors as well as the national attention the health care system is currently receiving, that I would break from the “herd” mentality and really understand the ins and outs of the options available to me. Once I started doing some research and really reading up on these alternative options, I began to realize some very exciting things.
In the show today, I want to focus on two of the more popular options available today: Health Reimbursement Accounts (HRA) and Health Savings Accounts (HSA).
An HRA is a Consumer Driven Health Plan option that offers a different approach for managing health care needs. It provides both an in-network and out-of-network benefit just like an Open Access Plan (formerly PPO), except for this plan allows your employer to fund the account each year with credits for FIRST dollar coverage for health care and pharmacy expenses. Unused dollars each year will roll over to the next plan year as long as you continue to participate in this option.
An HSA is like a personal savings account with investment options for health care, except that it is all TAX FREE! You have the ability to open an HSA at a bank or individual HSA administrator. HSA dollars can be used for eligible health care expenses even if you no longer participate in the original High Deductible Plan. Unlike an HRA, you are responsible for making contributions to an HSA, however, these contribution are an above-the-line deduction on your tax return (they decrease your taxable income dollar for dollar).
As you listen to the show, I will walk through the specifics of these plans to help you decide what type of plan may make the most sense for you and your family. I also share some tips on how to get the most bang for your buck from the insurance company by taking advantage of offers such as Walmart’s $4 prescription program. My hope is that, after listening to this show, you will feel equipped and empowered to go research your plan options and select the one that best helps you get your financial house in order. If you find something you feel worthy of noting, feel free to leave a comment and share with everyone!
Josh Kowall says
November 6, 2009 at 3:07 pmBrian,
Thanks for the great podcast. I just had to make my Heathcare election for next year and we had a really hard time deciding b/t our options. Especially considering that my company changed our options and this year’s PPO was much more expensive than last year. We stayed with the PPO option because we were concerned our expenses would be severe in 2009 and thought it was the “safer” choice. Wish I would have heard this earlier, it may have helped push our decision the other way. They don’t make it easy, it was a very complicated decision. You should publish your spreadsheet on how you did the math to make the HRA decision.
Donald Patterson says
November 6, 2009 at 8:53 pmOK. But what I really want to know is how can I get health insurance when I don’t qualify for an group plan (my 18 months of COBRA are coming to an end but I am still HIPPA eligable) and my family has pre-existing conditions.
Rob Shipp says
November 11, 2009 at 2:49 pmBrian,
Another informative podcast.
Our small business has been using the HSA/HRA combination successfully now for about 3 years. Here are a couple of points I’d add.
1) Do not use your HSA funds until after the claim has been submitted to the insurance carrier. In other words, try not to pay at the time of service even though you may know that you will be 100% responsible(until your deductible is met). If the provider files the claim, you will likely still receive the negotiated discount. If you’d payed on the day of service, you’d likely be paying the full usual and customary fees set by the provider.
2) This one is more anecdotal, but there are sometimes big pre-payment discounts for “big ticket” procedures. In our case, we didn’t have maternity coverage during our most recent pregnancy(although a maternity rider is available with most HSA’s), but were able to negotiate a 50% discount because we offered full payment during the first trimester. Most hospitals/providers do have a policy regarding this, but we were shocked to discover that it amounted to half off for us.
Josh says
November 13, 2009 at 12:02 pmFlexible Spending is a great way to reduce your taxable income for qualifying expenses. However, I think a huge step toward improving the heath care system would be to stop making us guess how much we expect to spend next year. My family has a major medical expense scheduled for early December that we had no way of knowing about 13 months ago (when we made our guess for how much flexible spending we would need this year).
I already had to submit my guess for next year. I have no idea what I’m going to spend up to 14 months from now. I would prefer to just have an account I can add money to whenever I need it, and then pay with the debit card. When taxes are due, you can submit your account details, including how much you spent, and get the deduction. It would be easy to audit because it is a completely separate account.
Brian Preston says
November 16, 2009 at 11:45 amHey guys,
I got the following email from John and it was such good information I wanted to share it. So, John, thank you!
” Brian,
I was listening to your podcast in the car (and am writing this a
roadside park) so someone may have pointed this out already but you
CANNOT use an FSA to pay the deductible under a Health Savings Account
and still get the full tax benefits.
Having any other medical coverage (except for something de minimus like
medical coverage under an auto policy) like being on your spouses plan
or having an FSA renders the HSA contributions after-tax. The idea being
you already get a deduction for the HSA – getting another for the FSA or
your spouse’s employee getting one for premiums is double-dipping.
Also if you revisit this, you may want to point out HSA balances can be
used to pay qualifying LTC premiums.
I thought the cast was great, especially your point about comparing the
dollars behind co-pay vs co-insurance.
I listen to every cast. Keep up the good work.
John”