Health Savings Plans Versus An Hmo

Health Savings Plans Versus An Hmo

Health Savings Plans also called Health Savings Accounts or HSAs are a limited medical savings plan that is resembling to an IRA. The contributions are used to pay your medical expenses. For 2008, the annual contribution limit was $2900 for an individual and $5800 for a family. The contributions are made pre - tax such a regular IRA so the amount you put in is not taxed. For most people this allows for a higher amount of your medical expenses to be tax free and may lower you ' re over all medical costs. Below normal IRS rules, you can only deduct amounts that are better 7. 5 % of your Gross remuneration. So if you made $100, 000 and you had $10, 000 of medical expenses, only $2500 could be deducted. Beneath an HSA, if you contributed $5800, that amount would not be taxed.
Health Savings Accounts have to be guilty to a High Deductible Medical Plan with at initial an $1, 100 deductible for an individual or $2, 200 for a family. What is winsome about this plan is it can seriously limit your total out - of - pocket expenses and the premiums are much lower than those of an HMO. The plan that is right for you depends on how much of the cost of the plan you have to contribute versus what your boss pays.
If your director is paying 100 % of your plan costs and allows an HMO as an option that is commonplace the best traveling to go. But since HMO Plans run about $1, 600 a month in premiums for a family, most employers will not cover those 100 % and many won ' t offer them at all. The $1, 600 does not cover the office Co - Pay which runs $20 to $80 depending on the plan. They also boost to not cover much of the prescription costs. Many common prescription medicines cost over $100 per month. So an average family is wearisome force to spend at fundamental $1, 000 leading the premiums for their medical care.
Bare with me, I ' m trying to get to the meat here pretty quickly. If your manager only covers 50 %, than your memento cost inclined the hefty synopsis would be $800. Most employers at introductory set - up your premiums to be pre - tax. So even though you are paying at first off $9, 600 a year that is $9, 600 you don ' t have to pay taxes on. That is a little better than our first example, but can we lower your overall costs?
High Deductible Medical Plans have a few nice features. First, the premiums are much lower than an HMO. The motive for this is you are contracted to pay all of the medical costs up to the deductible. So you are taking on some of the risk of the plan. The higher the deductible, the lower the premiums and I would recommend declaration one in the middle. These average about $500 per month. If your gaffer is paying 50 %, your cost would be $250. 00. If you select a plan with a $4000 deductible and maximum out - of - pocket expenses, then your total costs would be $7, 000. You would save yourself $2, 600 a year. You would want to contribute at front an amount equal to your deductible each year. As a by-product, the entire $7000 is also tax deductible. On double a flexible spending account, you don ' t lose what you don ' t use. It can vegetate like an IRA.
Health Savings Plans can also cover other medically related expenses uniform as eye - glasses, contacts, dental bills, etc. Make clear-cut you do your own math to decide which medical plan would be best for you. Then shop around to find the best premiums / deductible modification for you and your family.