HSA vs PPO: Which to Choose for Open Enrollment? | Ep. 6 | Winenance Wednesday
Updated: Nov 14, 2020
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What you’ll learn in this episode:
1. What is an HSA (Health Savings Account)? (3:51)
HSAs are advantaged “savings” account for people with High Deductible Health Plans (HDHPs).
An HSA allows you to make contributions “tax free” and save money for future medical expenses.
2. Who can contribute, and how much can you contribute to an HSA? (7:38)
Must participate in a HDHP
High deductible means you have to pay your full deductible out of pocket before insurance kicks in.
Contribution limits are dependent on whether your healthcare plan is Individual or Family.
Don't guilt or shame yourself for "overspending" in a particular category.
If you are spending where you find value (i.e. spending intentionally), then you're putting your money where it's most important to you.
4. How to choose between an HDHP and HSA vs. PPO? (29:04)
Consider financial circumstances, family circumstances (i.e. do you have a spouse or kids), and health status for you and your spouse/dependents.
If you have health issues that require a significant amount in annual healthcare expenses, it may not be fiscally possible for you to participate in a high deductible plan. A more traditional PPO may be better in the long run.
Typically 3 types of people who sign up for an HDHP/HSA:
Those who do not use health insurance very often, if at all (other than preventative care). Advantage: Lower premiums (savings from what is deducted from your paycheck) & tax savings. Probably would not contribute much to the HSA (or only enough for employer contribution)
Those who go to the doctor a few times & year and have “manageable” medical expenses. Advantage: Lower premiums & tax savings. Probably would only contribute what they needed to spend to the HSA.
Those who use the HSA purely as an investment account and have “manageable” medical expenses. Are willing to “front the money” in exchange for long term growth. Advantage: Lower premiums, tax savings, future tax free income. Usually will max out their HSA.
Start with reviewing previous years health expenses (medical, dental, copays, premiums, etc…).
Run the numbers on your current options and see how they stack up against previous year’s expenses. Keep in mind that you do want some medical expenses, because you want to be able to pull from the account tax-free, but also know that almost everyone has some at some point, and worst case, you treat it like a Traditional IRA after age 65.
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