How does a HSA work?

Legislation establishing Health Savings Accounts (HSA) took effect on January 1, 2004.  HSAs and HSA eligible health insurance plans are becoming more and more popular.  Here are the basics:

  • A HSA is a tax-favored savings account that may be used in conjunction with a HSA-elgibile high deductible health insurance plan to pay for qualifying medical expenses.
  • Choosing an HSA-elgible plan may help you save money.  Typically, the monthly premium on an HSA-elgible high deductible plan is less expensive than the monthly premium for a lower deductible insurance plan.
  • Contributions to an HSA may be made pre-tax, up to a certain annual limit.
  • Funds in the HSA may be invested at your discretion.  unused funds remain in the account and accrue interest year-to-year, tax free.
  • Not all high-deductible plans are elgibile for use in conjunction with a HSA.

How does an indemnity plan work?

A traditional Indemnity plan offers a great deal of freedom in choosing which doctors and hospitals to use, but will probably involve higher out-of-pocket costs and more paperwork.  Under an Indemnity plan, you may see whatever doctors or specialty you like, with no referrals required.  Though you may choose to get the majority of your basic care from a single doctor, your insurance company will not require you to choose a primary care physician.  An Indemnity plan may also require that you pay up front for services and then submit a claim to the insurance company yourself.

You may have an annual deductible that will need to be met before the insurance company begins to pay on your claims.  Once your deductible has been met, the insurance company will typically pay your claims at a set percentage of the “usual and customary” (UCR) allowance for that services. The UCR rate is the amount that healthcare providers in your area typically charge for any given service.

How does a POS plan work?

A POS (Point of Service) plan combines some of the features offered by HMO and PPO plans.  As with an HMO, members of a POS plan are required to choose a primary care physician (PCP) from the plan’s network of providers.  Services rendered by your PCP are typically not subject to a deductible.  Also, like HMOs, a POS plan typically offers coverage for preventative care visits.

You may recieve a higher level of coverage for services rendered or referred by your PCP.  Services rendered by a non-network provider may be subject to a deductible and will likely be covered at a lower level.  If services are rendered outside of the network, you will likely have to pay up front and submit a claim to the insurance company yourself.