What's Better For Me? A Traditional Health Plan Or A Plan That Permits Funding A Health Savings Account (HSA)?

What's An HSA?

Health Savings Accounts (HSA’s) can be used in conjunction with High Deductible Health Plans that have out-of-pocket maximums at or below $8,300 for individuals or $16,600 for families and that pay 100% of all covered expenses after the out-of-pocket maximum is reached.

Higher individual and family out-of-pocket maximums are permitted for ACA plans ($9,200 for individuals or $18,400 for families), BUT HSAs cannot be established for any High Deductible Health Plan that has out-of-pocket maximums that exceed the $8,300/$16,600 threshold (see above paragraph).

Per Affordable Care Act requirements, these plans must cover 100% of preventive care benefits without a deductible. In accordance with IRS guidelines issued in 2019, carriers can cover certain chronic condition treatments as preventive care. For example, some carriers consider generic ACE inhibitors, beta blockers, statins and certain insulins or other glucose-lowering agents as preventive treatments under these guidelines.

People who establish an HSA account can fund that account with a bank or other financial institution and use that account (usually through use of a debit card) to pay for any qualified medical expense (generally any health, dental or vision care expense excluding cosmetic procedures). Annual contribution limits for an HSA are $4,300 for an individual and $8,550 for a family. In addition, individuals 55 or over can make yearly "catch-up" contributions of $1,000, but only one catch up contribution can be made per HSA account (each adult family member can have a separate account).

Amounts contributed to a Health Savings Account are tax deductible. This means that someone who pays for an expense from his or her Health Savings Account saves the equivalent of that person's federal marginal tax rate (and state marginal tax rate in almost all states with state income taxes), including taxes for Social Security and Medicare. For example, an individual who has a $1,000 expense to pay and who has a 32% federal marginal tax rate and no state income tax will only be paying $680 for the service if s/he pays that from his or her Health Savings Account.

How Does A Traditional Office Visit Co Pay Plan Work?

Traditional office visit copay plans have a copay for items like doctors' visits and a deductible (possibly with coinsurance thereafter) for major expenses like hospitalization. Some ACA plans have copays for primary care office visits (or copays for a limited number of primary care office visits), and specialist (and, if applicable additional primary care) visits are covered after the deductible. With other copay plans all primary and specialist visits have copays.

These plans include drug coverage. Drug plans may have separate deductibles for the hospital/medical portion of the plan, BUT covered expenses for drugs count against the plan’s maximum out-of-pocket limit. (NOTE: some office visit copays have no deductibles at all, others have a deductible only for hospital/medical, and others may have separate deductibles for both hospital/medical AND drug coverage).

The ACA permits only two individual deductibles and one family deductible. Hospital/medical deductibles, copays and coinsurance AND drug deductibles, copays, and coinsurance, as applicable, count against the maximum out-of-pocket limit.

What Does This Mean For Me?

An individual or family purchasing an Affordable Care Act plan will normally have choices to select EITHER a High Deductible Health Plan (with or without a separate HSA account) or a traditional office visit copay plan. Individuals who have always had traditional office visit copay plans may find that it's more cost effective to purchase a High Deductible Health Plan and fund a Health Savings Account.