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Tax Advantaged Accounts

High Deductible Health Plans: What to Know

November 2, 2018
2019 HDHP &HSA FactsIndividualFamily
HDHP Minimum Deductible$1,350$2,700
HDHP Maximum Out-of-Pocket Expenses$6,750$13,500
Maximum HSA Contribution$3,500$7,000
2020 HDHP & HSA FactsIndividualFamily
HDHP Minimum Deductible$1,400$2,800
HDHP Maximum Out-of-Pocket Expenses$6,900$13,800
Maximum HSA Contribution$3,550$7,100

*Age 55 or older can contribute an additional $1,000

Who should consider an HDHP?

Although choosing between a high deductible and a traditional health plan will depend on a variety of factors, there are certain circumstances when particular individuals should consider HDHPs for themselves or their families.

For example:

If you are in good health and have the ability to save money, an HDHP could be an option for you. In addition, if you typically don’t need maintenance prescription drugs and have not had or anticipate any significant medical expenses, such as surgeries, throughout the next year, an HDHP might be an option for you.

Most of us don’t anticipate needing extensive medical treatment but if you’re planning a pregnancy, for example, a traditional plan could be a better option for you because of the lower deductibles and copays, however, if you choose the HDHP, you have the opportunity to take advantage of an HSA to offset costs.

The Value of the HSA

When strictly comparing deductibles, a traditional health plan might seem more advantageous, however the ability to have an HSA is a key benefit of an HDHP. Some may consider paying a little more money upfront for out of pocket medical expenses as a negative.

By saving the difference that would have been spent paying for traditional health premiums in an HSA the funds can potentially grow in a tax-free environment to cover those circumstances when it’s necessary to pay out-of-pocket medical expenses..

For example:

If you’re paying a premium of $575 per month for an HDHP and you’d be paying $680 for a tradition health plan, you can invest the $105 difference into an HSA to pay for qualified medical expenses. If you don’t use the funds that you’ve saved in an HSA throughout the year, the money in your HSA will rollover to the following year, unlike an FSA (flexible spending account).

An HSA for the Future

Another strategy unlike the example above, you could consider saving the money in an HSA until you retire and use it to cover medical expenses later in your life.

Medical expenses you can cover with an HSA include dental treatment, long-term care, prescription drugs and laboratory fees to name a few examples.

Your HSA stays with you, even if you change jobs. Keep in mind, if you later decide to enroll in a low-deductible (traditional) health plan, you will no longer be eligible to contribute to your HSA.

For 2019, the IRS established that the HSA contribution limit for an individual is $3,500 and for family coverage the limit is $7,000.

For 2020, the contribution limits for HSA increased. For individuals with self-only HDHP coverage, the limit is $3,550. For indiivudals with family HDHP coverage, the contribution limit is $7,100.

However, with a self-directed HSA, it’s possible to invest the funds in traditional or alternative investments, such as real estate, to increase the amount of money you have in an HSA.

Growing Your HSA

An HSA that is self-directed allows you to invest in stocks, bonds, real estate, precious metals and other alternative assets within your health savings account.

These are not considered contributions and can assist in growing your HSA in a tax-advantaged environment to cover qualified medical expenses now or in the future when you retire.

Have Questions?

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