Tennessee Health Savings Account (HSA) plans are a great way to get very low cost health insurance and save a bundle on your income taxes at the same time.
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Tennessee HSA Health Insurance Plans - An Illustration
The best way to explain how these plans work and how much they can save you is through a simple illustration. I am going to use a fictitious family and the numbers could vary based on your location, age, health and so on.
We will use a typical family with a 40 year old male and a 35 year old female and two children. They will purchase a $5,000 deductible HSA health insurance plan. This is a full PPO major medical plan with over $3 million in coverage per person.
The way the plan itself works is very simple. The family has a single $5,000 deductible for their health care expenses. Once it is met, and it is unlikely that it will be, everything is covered 100%. It is that simple. There are no doctor or prescription co-pays. All expenses are paid by the family until the annual $5,000 deductible is met.
Before I continue, you should realize that since this is a PPO plan, the family is entitled to a reduced or discounted PPO rate for office visits, labs, prescriptions, etc. So, an office visit might be $65 instead of $100. With a traditional plan, which would be more expensive, the office visit might be $35.
The plan costs a total of about $380 a month.
Because this family has an HSA compatible plan, they are allowed to open up a special savings account called a Health Savings Account. The insurance company will help you open one up or you can go to one of the many banks or brokerage companies to open up one of these special accounts.
The family is entitled to put a certain amount of money each year into this account. They do not have to open one up if they choose not to, and there is no minimum amount that they must deposit (although there is a maximum). This savings account is entirely optional. Any money you put into this special savings account is your money, in your name. It has nothing to do with the insurance company.
For this illustration we are going to further assume that this family is in a 28% tax bracket and they are going to deposit $4,000 a year into their savings account. Remember, it is their money, their savings account. It earns interest and does not disappear at the end of the year.
For each dollar they contribute each year to the account, they can deduct that dollar off of their gross income.
If they are in a 28% tax bracket that amounts to a savings of $1120 a year or about $93 a month (28% of $4,000). So, the net cost of their health insurance is $380-$93 = $287 a month.
The money in the Health Savings Account can be used for any medical expense. Even expenses that are not a part of the plan like dental, vision, chiropractic or mental health.
Clearly, these plans are best suited to someone in a somewhat higher tax bracket. That is where they really shine.
You can have even higher deductibles for greater savings or put in more money into your HSA account.
What you need to look at is the amount of money you will save on premiums over a traditional plan. When you do so, you discover that HSA plans can save you a lot of money.
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