I'm getting a new job and this Company offers a HSA. I have never heard of such a thing. I have always had the typical health insurance. Can any one explain what is a HSA. Is it bad. I have a family and was wondering if this a good idea to join or go on my own.
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It depends on how much your typical annual medical expenses are.
An HSA plan means you have a High Deductible Health Plan. So for family coverage, you have atleast a $2,500 deductible before insurance kicks in. You will have to check you employer's plan to see how much their deductible is. All of your medical expenses you will pay for out of pocket until you reach your deductible. So a doctor's visit is no longer a $20 or $30 copay, it might be anywhere from $100 to $250 depending n the visit. When you reach the deductible, then the insurance coverage kicks in, either at 100% or you may have small copays for each visit.
Now you have the option to open up a "Heatlh Savings Account" at the bank you prefer. Your employer or the insurance company probably has a preferred HSA bank, but you can usually pick your own if you wish to go outside of that. With an HSA you can have pre-tax payroll deductions taken out of your paycheck and put into this account. Because it's pretax you save about 30% versus just getting it from your paycheck, but you have to use this HSA for your out of pocket medical expenses for that deductible, regular withdrawals are subject to taxation and penalty. Depending on your bank, you can often invest your HSA in stocks or mutual funds as an investment vehicle and future nest egg for health expenses.
To many people this sounds absolutely horrible and very confusing, who prefer to simply show their ID card and have a $30 copay. But the upside is that there can be considerable savings when using an high deductible plan and a HSA. Generally, they tend to be the preferred option for healthy people as they can use their HSA to invest with, rather than paying high monthly premiums for healthcare they don't use; and also for people with lots of medical expenses who hit that deductible early on and have full coverage after that. But people who have a "medium" amount of health expenses every year, say they hit exactly the deductible each year but never anything more, then a regular co-pay plan is generally more preferable.
Going outside of your employer to purchase a health plan is generally more expensive, as your employer has negotiated group rates, and employers typically pay for about 70% of the premium on average. It's important to note that this is often the reason employers switched to HSA plans, so they could continue paying for the majority premium costs. The average family plan nowadays costs about $12,000 per year!