Types of Health Insurance & Health Savings Accounts

When it comes to Health Insurance, there are many options.  But there are a couple main points you need to understand to figure out what’s the right type of health insurance for you.  Recently, we discussed the different parts of a health insurance plan.  Today, we’ll look at the two main types of health insurance.

Health Maintenance Organizations (HMO) – HMO’s can often be less expensive than PPO’s in part because they are more restrictive on who you can see when you want to go to a doctor.  The Network of Doctors has agreed to a reduced price and so you must stay within the network (except for an emergency) in order to receive service.  You also may be required to go first to your Primary Care Physician to get a referral to a specialist even if you know what type of specialist you need to see.  You often will pay a Co-Payment on your visits with this type of health insurance.

Preferred Provider Organization (PPO) – PPO’s are a very similar type of health insurance, although they tend to offer more flexibility to the participant.  You will typically have a deductible anywhere from $500 – $10,000 per year in a PPO.  You also usually have more flexibility in which specialists you see with a PPO.

Health Savings Accounts

Health Savings Account is a Savings Account (or possibly brokerage account) that allows you to save and grow money with tax advantages which can be used tax free to pay your deductible and other medical expenses.  You must have a high deductible plan to participate in an H.S.A., but if you do, you can set it up.  The government sets a limit for a person or family each year which can be put into the plan.  For 2010 this contribution limit is $3,050 for singles and $6,150 per family.

This will be set up with a bank, and NOT with the health insurance company who is providing the insurance.  The money that goes into the plan is tax deductible, and as long as it is used for qualified medical expenses such as Doctors, Hospitals, and Prescriptions, the money can be pulled out tax free.

Often, these plans will give you a debit card &/or checks to pull money straight out of the plan to pay for service.  Or you can use the debit card to pull cash out and pay cash or reimburse yourself.  If the money is never used for medical reasons, it can be pulled out without penalty after age 59 ½ according to current rules.

This post is Part 4 in the series Disability and Health Insurance. To use this as a growth tool to better understand your own calling, please read Pt 1, Pt 2 and Pt 3.

Photo credit: caroline_1

Get Instant Access To