Many individuals and companies are faced with an intimidating fact these days. Health insurance costs are rising at high rates and have been for a number of years now. A survey by the Kaiser Family Foundation found that the cost of employer-sponsored family health insurance premiums nearly doubled in the time period from 2002-2012. The same survey found that the employee’s portion of the yearly premium more than doubled, from $2,137 to $4,316 in the same time frame. Even though 2012 saw an increase in premiums of a comparatively low 4%, many insured saw their co-pay increase, effectively raising the total cost required for an insured to use their insurance. Many employees and individuals find that they are paying a large portion of their income for their insurance or they are shopping for new insurance on a yearly basis in order to keep their costs from rising quite as much.
I would suggest that we should view health insurance in a different way. Many people are currently using health insurance as health care financing. When you finance a car you are making payments over time for something that you can’t afford to pay for all at once. However, you don’t finance the oil changes and the tire rotations for the car. You can afford to pay for these expenses and since they are predictable you can save up for these expenses. Since you would end up paying the financing company’s expenses plus your mechanic’s expenses, financing your oil changes and tire rotations would increase your cost compared to paying the mechanic directly. There are similarly predictable costs in health care. For example, if you know that you need an annual physical, a certain number of visits every year for a chronic condition (i.e., hypertension, diabetes, etc.), plus 1 to 2 sick visits per year you will save money by paying the physician directly for this care vs. paying the insurance company to pay the physician.
To continue the car analogy let’s also discuss the purpose of insurance. In areas other than health care you obtain insurance for unpredictable and financially catastrophic events like totalling your car. Once again, you don’t buy insurance to pay for an oil change. Doing so would increase your cost for the oil change. Having a high deductible health plan (“HDHP”) meets the goal of insuring against a financially catastrophic health care bill and at the same time may decrease your monthly insurance premiums vs. your current health insurance.
In today’s health care market many people are using health insurance to pay for predictable and affordable expenses and, in doing so, are increasing their costs for these services. Austin Osteopathic Family Medicine and the Annual Physical Plan (“Plan”) were created to help you pay directly for primary care and to decrease your cost for health care. The Plan is considered a reimbursable medical expense for health saving’s accounts (“HSA”), which are bank accounts with special features that may be paired with a HDHP.
When you pay for primary care at our clinic with your HSA account you are paying with pre-tax money. For example, a person that is in the 25% tax bracket (yearly income of $36,250-$87,850) would save $125 in taxes for every $500 they payed for health care through an HSA account. Other benefits of and HSA include that is rolls over from year to year, it is portable and can go wherever you go, and you can use the account to invest. Additionally, the funds are available to you, in retirement, for non-medical expenses.
If you would rather just see the numbers, look at the real-world example from HSA Educator.