High Deductible Plans***
Health Savings Accounts***
MR. WATSON: Health Savings Accounts are for those under age 65. Why? Medicare. Folks 65 and over get Medicare. Know this!!!
MR. WATSON: HSAs are pretty cool. Remember earlier we talked about deductibles controlling health insurance premiums? The higher the deductible, the lower the premium.
MR. WATSON: Well, with a HSA, you buy a plan with a high deductible, called a High Deductible Health Plan (HDHP). For a family, a minimum deductible of at least $2500. It can be higher, this is the minimum. You can make a tax deductible deposit of an amount equal to the deductible, in this case $2500. Saves you money on taxes and it grows tax free. When you go to the doctor you use the money in the HSA to pay him. Tax free dollars. Same with your prescription drugs.
MR. WATSON: When you have paid medical expenses equal to the deductible, the policy starts paying. Maybe 80% and you pay 20%. But there is a maximum out of pocket, a stop loss of $13,300 for 2018. So your loss is minimized.
BASEBALL: What if I use the money for shoes?
MR. WATSON: Shoes? No way. You would be taxed and penalized, 10%. Has to be qualified withdrawals, for medical expenses.
Flexible Spending Accounts***
- cafeteria style plan (this means you choose from a menu of benefits offered by the employer)
- salary reduction, pre-tax dollars contributed to be used to pay medical expenses
- used with high deductible health plans
- money not used is lost each year (huh?...this sucks!)
Health Reimbursement Accounts
- similar to above but employer contributes the money pre-tax (cool)
- unused money can be rolled over each year (as it should be)
- saves employer money on health insurance because they use High Deductible Health Plans....lower premiums
- money in account used to pay deductibles etc.
Other Types of Medical Expense Coverage
Hospital Indemnity Policies
Hospital Fixed Rate Policy
MR. WATSON: These are very popular and inexpensive. They pay directly to the insured. If you buy $100 a day benefit, if you are in the hospital for ten days, it will pay you directly $1,000. These are very popular and inexpensive. The policy pays you directly. A hospital fixed rate , sometimes called a Hospital Indemnity policy. They cannot coordinate the benefits. The check is sent to you. You can use it for whatever you want. This is kind of like monopoly, if you pass go you get $200. Underwriting & admin costs are easier than other health plans & claim costs are not affected by increases in medical costs. Why? Because the insurance company is not paying any medical bills. They pay you each day you're in the hospital. Know this. You will see it on the exam.
Limited risk policy .
MR. WATSON: Remember? Limited Risk policies, also called
- "dread disease" policies or
- "critical illness" policies or
- "specified illness policies".
You do not have to be diagnosed as terminally ill for them to pay a benefit. Once diagnosed, the policy may pay a flat dollar amount. It may also pay a flat dollar amount during chemo when you miss work. It pays directly to the insured and she can do with it as she chooses. Heart disease. Airplane passengers. Cancer. Strokes. Those kinds of things. AFLAC, the duck.
Short Term Medical Expense Policies (Limited Risk)
- covers for a specified period of time
- 90 - 180 days (chosen at time of application)
- Does NOT comply with Patient Protection & Affordable Care Act (might have pre-existing conditions, certain exclusions & life-time or annual maximum benefits)`
- can't renew and coverage expires at the end of the term
