Health Savings Accounts
A Health Savings Account is a medical savings account that is available to United States taxpayers enrolled in a High Deductable Health Plan. Funds put into a Health Savings Account (HSA) are not subject to federal income tax at the time of deposit.
Funds in the account can be used for qualified medical expenses at any time without federal tax liability. Unused funds in an H.S.A. can be rolled over to the following year. It acts similarly to an I.R.A. in that the person who is enrolled can withdraw from the fund at retirement age for any reason. Like IRA money withdraws from the account prior to retirement, a penalty will be assessed.

What are the benefits of an H.S.A.?
-Funds in account roll over year to year.
-Tax benefits on contributions, earnings, and distributions
-Funds used for approved medical expenses are always tax free even if the High Deductable Health Plan coverage ends
Account is portable so that if you leave an employer or Health Plan your account goes with you.
-It is a long term investment opportunity
-H.S.A.ís encourage savings for future health care expenses.

What is covered or, what can I use my Health Savings Account funds for?
-Routine Medical visits
-Treatment and diagnosis of disease or ailment
-Prescriptions drugs
-Some non-prescription drugs
-Eye care including glasses, contacts
-Dental care including braces and dentures
-COBRA premiums
-Braille Books
-Midwife services
-Transportation costs associated with healthcare
-Seeing-eye dogs
-Qualified long term care services

What preventative care benefits can a plan offer?
-Periodic health evaluations
-Routine prenatal and well-child care
-Tobacco cessation programs
-Obesity weight loss programs
-Screening services

How much money can I put into a Health Savings Account?
For 2014, these amounts are $3,300 for single HDHP coverage and $6,550 for family HDHP coverage.

Are there income limits on who can have an H.S.A. account?
There are no income limits that affect HSA eligibility. However, if you do not file a federal income tax return, you may not receive all the tax benefits HSAs offer.

Is a Health Savings Account the same as a Flexible Spending Arrangements (FSA) or a Health Reimbursement Arrangement (HRA)?
No, generally Health Savings Accounts is the only type of health saving plan that can roll over from year to year. It also allows the enrollee to take the account with them regardless of where the enrollee goes to work.

Who can contribute to a H.S.A.?

Additional HSA Funding Option
-IRA funds may be rolled to an HSA on a one-time basis
-Subject to the annual HSA contribution maximum
-Only traditional IRAs qualify at this time
-Individuals must remain covered by a qualifying HDHP until the last day of the 12th month following the month of rollover to avoid tax penalties.

When can distributions be taken from an HSA?
-HSA dollars can always be used to pay for qualified expenses on a tax-free basis, regardless of age or healthcare coverage.
-If HDHP coverage ends, contributions cannot be made to an HSA, but distributions to pay for qualified expenses are always allowed.
-If reimbursing expenses from previous years, sufficient records must be maintained to prove the expense was not previously reimbursed.
-HSA dollars can be withdrawn for any non-qualified expense prior to age 65, subject to a 10% penalty and regular income tax.
-After age 65, withdrawals can be made to pay for any non-qualified expense, subject to regular income tax.

Tax Treatment and Advantages for Employees/Accountholders
-Contributions are either pre-tax through a cafeteria plan (via paycheck) or tax-deductible
-Interest and investment income are also tax-free or tax-deferred
-HSAs grow in the same tax-deferred manner as IRAs
-Withdrawals for qualified medical expenses are always tax-free. After age 65, funds may be withdrawn for any reason without penalty, subject to regular income tax.

For additional information and downloadable brochures, please go to the Insurance Resources page under the H.S.A. Information and Enrollment section.

Preferred Network Discount Billing

One of the most valuable benefits of most major medical plans is Preferred Network Discount Billing. These amounts will vary depending on the services provided and can range anywhere from 45%-90% less than the original billed amount from the provider.

*Specific discount % amounts are not guaranteed because they are actually based on the insurance companies agreement for the services provided and the amounts that are allowable for billing to the insured.


  • This is the minimum amount that is payable before most benefits are payable by insurance.

  • The deductible is renewed at the beginning of each year.

  • Generally the higher the deductible is, the lower the premium is.

The term deductible is one that many insured's have heard time and time over. Health insurance plans have a deductible amount that has to be paid by the insured before the insurance company pays anything. The deductible is still much like what it has always been with the exception of optional benefits such as co-pays and Wellness Benefits Riders. When you hear the term deductible, this is the amount that must be paid by the you, the insured. The following examples explain how the deductible works.

Let's use a plan with a $500 deductible and a co-pay of $20 for doctor office visits. You visited the doctor for the flu and he additionally ran some blood tests and performed an x-ray. In this instance we will assume that $90 is the doctor's charge for office visits.  The $20 co-pay benefit would cover the $90 office visit and you would only pay the $20. The insurance company would cover the balance charged by the insurer. Assume the charges for the X-ray and lab work are $400. These charges would be billed separately from the doctor office co-pay per visit. With you not having met any of your deductible for the year, the remaining $400 (or less due to Network Discounts) would be payable by you to the physicians and facilities that performed them. See example 1.1 below. 

Example 1.1

$90 Doctor Office Visit

You Pay $20

Insurance Pays $70


$400 Lab & X-Ray Charge

You Pay $400
 (or less due to network discounts)

Insurance Pays $0


Let's look at another medical bill. Strep is going around at your office. You go to the doctor and are charged another $90 doctor office charge and for a Strep test at $75 and you also receive a Penicillin shot. The shot will likely be billed as a surgical procedure at a charge of $75.   

This time the $90 is again covered by the $20 co-pay and the insurance company pays the balance. The $75 Strep test and the $75 injection totals are $150. (You have already met $400 of your $500 deductible earlier this year.) You would pay the remaining $100 of your deductible against the $150 in charges, leaving a remaining balance of $50 to be paid. The remaining $50 would be carried over to the co-insurance level of the plan.  See example 1.2 below. 

Example 1.2

$90 Doctor Office Visit

You Pay $20

Insurance Pays $70


$150 Lab and Injection

You Pay $100
 (or less due to network discounts)

Ins. Pays Co-Ins. % for remaining $50

Now your deductible has been met for the year and everything else will be paid according to the co-insurance level you chose when you bought the policy. Co-pays you make to the doctors office will not go towards satisfying your deductible. (Remember that the insurance company has already paid on these portions of the claims.)


Deductibles - How to Reduce Health Insurance Premiums

Let's examine the deductible. The higher a deductible is, generally the lower the premium is. Make a judgment based on your own financial capabilities and not just on what "sounds" good. 

Let us assume a $250 deductible is $100 per month than a policy with a $750 deductible. The deductible is the most effective way of managing your premiums as it impacts the premium more than any other factor.  In this example you are paying an additional $1200 per year to protect yourself against a "potential loss" or exposure of $500 more of your out-of-pocket expense. Many insured's find that raising the deductible saves them hundreds and even thousands of dollars yearly without exposing themselves to much more risk. The risk is relative. How much risk are you willing to take and at what price? At what level does the insurance policy cost more than what it is worth?  At what level of premium does the insurance policy become a "bill paying service" instead of a "safety net" to protect you against significant financial loss?


  • The $ amount that may be included in some plans that is due per incident.

  • Generally the higher the co-payment is, the lower the premium is.

The co-pay that comes with many of today's health insurance plans is often referred to as the Doctor Office Co-Pay. The Co-Pay is a benefit in itself which allows the insured only has to pay a first dollar portion usually $20-45 for doctor office visits. (The deductible of the health plan does not usually have to be met for these charges.)  The insured can pay the co-pay for doctor office visits and not have to satisfy the deductible of the plan for regular physician services. This co-pay usually applies to the doctor office visit charges and usually does not apply to any charges the physician would bill for outside facility charges such as radiology, blood tests, etc.

If an insured goes to the doctor for a case of the flu the doctor might run blood tests or even do an x-ray of a patientís lungs. The bill would therefore consist mainly of a doctor office charge, a lab test reading, and a radiology charge. The co-pay would usually only apply for the doctor office charge. The radiology and the lab screening would go towards satisfying the deductible and coinsurance levels of the policy.

Let's say the doctor office charge was $90, and the remaining charges add up to $250, and the insured had chosen a $20 co-pay in their plan. The $90 would be taken care of with a $20 fee paid by the insured. There should be no balance left and the remaining $70 of the doctor office charge would be $0. The $250 remaining charges would be the responsibility of the insured, assuming that the deductible of the plan had not yet been met for the year.  The insured only saved a total of $70 on the visit. The insurance premium that is paid by the insured every month includes a charge for having this co-pay benefit on the policy.

Let's use the example of a monthly premium for the insured of $280. Let's also assume that $40 of that monthly premium is for the doctor office co-pay benefit. That insured is paying $480 per year for a benefit that only saves them, in this scenario, $70 per visit. For this benefit to be cost effective, the insured would have to visit the doctor nearly 7 times per year for the benefit to be worth what they are paying for it. A large family might benefit by the added insurance of a co-pay additionally if there are several children on the plan.

The person purchasing insurance should breakdown these numbers and evaluate whether the benefits are worth the cost. A co-pay benefit can be a significant portion of the premium that the insured pays each month. Remember that generally the lower the co-pay is the higher the monthly cost. Many plans give the insured the ability to remove the co-pay benefit altogether, resulting in an even lower premium.


Co-Pays - How to Reduce Health Insurance Premiums

A $20 doctor office Co-Pay is more expensive than a $25 doctor office co-pay. A $30 co-pay is less again, as is a $40 co-pay. Assume that the premium associated with a $20 co-pay is an additional $38 per month in premium. A $40 co-pay being an additional $12 per month. No co-pay at all would of course be $0.

You would then be paying an additional premium of $26 per month to protect yourself against a "potential loss" or exposure of $20 each time you used the doctor office co-pay.

This should encourage you to "do the math", when selecting benefits.


  • This is amount in percentages that both the insurance provider and the insured are responsible for.

  • Co-insurance is another method to keep insurance premiums lower.

  • Generally the higher the co-insurance is, the lower the premium is.

 Most people know this as the 80/20, 80%, 50%, or 100% type of policy. Most policies that we sell are either 80/20 or 50/50 plans. These are the co-insurance levels for the plan. 

When you see this on a policy or quote it is referring to the percentage the insurance company will pay on the charges that are incurred after you have met your deductible. Many clients ask who pays what percentage. Typically plans will show the insurance company's portion first in this benefit description. An 80/20 plan would mean that after your deductible has been met, the next "x amount of medical charges" will be paid for at 80% by the insurance company and you will be responsible for the 20%.  After this amount has been paid by you, the plan would typically pay at 100% for the remaining charges incurred up to a Lifetime Maximum Amount.  You have now reached your maximum out-of-pocket (stop-loss) expenses for the year.

The co-insurance levels and life time maximums will all impact your premium. A higher Co-Pay generally will lower your premium, as will a higher deductible and a lower Co-Insurance level.


Example 1.3

Let's assume your plan has a $500 deductible, $20 doctor office co-pay,  80/20 to $5000 (referred to above as "next x amount of charges"), and a lifetime maximum of $5 million. Let's assume you have not met any of your deductible. You go to the doctor and are diagnosed with a lung infection and pneumonia that requires a hospital stay.

$90 Doctor Office Charge

You Pay $20

Insurance pays $70


$600 Hospital Admission

You Pay $500

Insurance pays $0


$100 Remaining From Above

You Pay 20% or $20

Insurance pays 80% or $80


Example 1.4

You have paid the $20 for the doctor office charge. You paid the first $500 and have satisfied your deductible.  You have also paid your 20% of the co-insurance level from the remaining $100 left over from the Hospital Admission charge. You are now in the co-insurance portion of your policy and have met $100 (even though you only had to pay $20 or 20%) of the next $5000 in charges. Assume you had to stay a few days and accumulated a bill, up and above what we have dealt with so far, totaling an additional $6500 in medical expenses.


$6500 additional charges

You pay 20% of $4900 or $980. (Remember you paid 20% on the additional $100 above.)

Insurance pays 80% of $4900 or $3920.
(Remember the insurance paid 80% on the additional $100 above)


$1600 remaining from above

You pay $0

Insurance pays 100% or $1600.


Your maximum out-of-pocket has now been met.

You have now satisfied your entire deductible, and co-insurance level of the policy.  The insurance has begun to pay at 100% up to the Lifetime Maximum of $5 million dollars as it did with the remaining $1600 above. You are said to have reached your maximum out-of-pocket. In this case the out-of pocket limit would be $1500. This number is reached by adding your deductible of $500 to the 20% portion of the next $5000 in charges which equals the maximum out-of-pocket expense in any  one year to the total of  $1500.  $1500 is also considered your stop-loss.



Co-Insurance - How to Reduce Health Insurance Premiums

A health insurance plan with an 80/20 or 80% co-insurance level is much higher in general than is a 50/50 or 50% policy.  These co-insurance levels have stop-losses or maximum out-of-pocket expenses to protect you against a devastating loss. Risk is the determining factor..

A health insurance plan (X) that has a $750 deductible and 80/20 to $5000 is lets say $280 per month.
A health insurance plan (Y) that has a $250 deductible and 80/20 to $5000 is lets say $480 per month.
Both plans have 100% coverage up to $5 million after the maximum out of pocket has been met.

  • Your maximum out of pocket for Plan (X) would be $1750 per year.

  • Your maximum out of pocket for plan (Y) would be $1250 per year.

  • Your increased "potential loss" or exposure would be $500 in any given year.

You would pay $2400 per year (with Y) to protect yourself against a "potential loss" or exposure of $500.

You should always calculate the risk and potential loss exposure along with the premiums associated with these options. In order to compare benefits and risk against premium cost, you should compare several options for each of the above and calculate the differences in premium. 

Never shop for health insurance on the basis of premium alone. You should make informed decisions and buy what is right for your individual situation. That is where a reliable career agent comes in.

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