Last week, we discussed how health insurance plans with high deductibles can cause painful medical bills under the right circumstances. Dave’s story is a reminder of why it is important to plan carefully when selecting your health insurance policy. In fact, Dave’s situation might have been avoided if he had set up a health savings account (HSA).
HSAs are used with high-deductible health insurance plans to allow policyholders to save money for future medical costs. The money saved in these accounts is also tax-free and rolls over each year. These accounts do not have ‘spend it or lose it’ rules.
If you are healthy, have a health insurance policy with a high deductible (over $1,300 for individual coverage for 2016 plans) and want to save for future medical expenses, you might benefit from using an HSA. Money you put into an HSA can be used for out-of-pocket medical expenses, and dental and vision costs. If you were in Dave’s situation, and had $1,300 saved up in an HSA, you might not be financially caught off guard during a medical emergency.
How do you set up a health savings account? It would depend on your situation. Some employers may help contribute to health savings accounts (although they are not required to). In most other cases, you can start an HSA through your bank or credit union.
Other Options for Avoiding Excessive Medical Bills
There are multiple ways you can avoid ending up like Dave from last week’s blog. For example, you might qualify for cost-sharing reductions if you fall within a certain income threshold and have a Silver plan through the health insurance marketplace. You could also set up a flexible spending account (also known as an FSA) through your employer.
There are also Federally Qualified Health Centers, which provide discounted care for people within specific income thresholds. We recently wrote a newsletter detailing how to find and use FQHCs. The best way to avoid excessive medical bills is to do your homework beforehand. Know what options are available for avoiding excessive medical bills caused by high deductibles.
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