However, over the past few years with some reforms signed into law, we now have the option of High Deductible Health Plans in conjunction with Health Savings Accounts (HDHP HSA). These are available to both employees with other health insurance benefits available, and to self-employed individuals. The gist is this: a HDHP is a health plan with a very high deductible (from $1100 to $10000 or more) in conjunction with reasonably low monthly premiums. The extremely high deductible means that this type of coverage is designed to handle catastrophic medical coverage – major accidents or illnesses. Everything else you pay out of pocket.
A Health Savings Account is a tax-deferred savings account that can be used to pay for most medical expenses. You can contribute up to a certain cap every year (for families it’s currently $5450) and this rolls over from year to year. Contribution is not required, but it makes a lot of sense since it’s all pre-tax, like an IRA. In addition, depending on the HSA account, you may be able to invest your money into mutual funds, stocks, bonds, CDs, or simply let it sit there accumulating standard interest rates. Most HSA providers will give you a checkbook and debit card so that payment is simple and easy – use your debit card when paying for prescription drugs or a doctor’s visit, and you’re set.