#024 – Traditional PPO vs. HDHP/HSA answers the question posed by an anticipated Dad to be. Is it better to switch from a high deductible health plan (HDHP) with Health Savings Account (HSA) to a traditional PPO plan due to a possible family addition? Listen in to what Scott has to say!
Health Savings Accounts Save Your Hard-earned Money
Most people do not understand how Health Savings Accounts work, nor how they help you save REAL money.
Would you light a match to a dollar bill? Then why are you not using a Health Savings Account? Because lighting a match to your money is what you do when you enroll in a traditional health plan.
Understanding How HSAs Work
Traditional PPO vs. HDHP/HSA highlights some easy to understand but often misunderstood concepts.
- Eligible High Deductible Health Plans can have a deductible as low as $1,400
- You are not required to use the HSA provider through you employer
- Anyone can contribute to your Health Savings Account – not just you
- You are not required to contribute only through payroll deduction
- Not all HSA providers allow for funds to be invested or offer limited options
- You can contribute a lump sum to your HSA at anytime during the year
- Many HSA providers charge you a fee – choose one that is free!
Easy To Calculate Your Savings
To calculate the amount you save on every dollar you spend with a Health Savings Account, divide 1 by 1 minus your tax rate or 1 / (1 – Your Tax Rate)
For the 22% bracket the calculation would be
1 / (1 – .22) or 1 / .78 = 1.28
Rather than earning $1.28, paying Uncle Sam tax at 22% of $1.28 or 28 cents and having $1.00 left to pay the doctor or hospital,
Using a Health Savings Account, you earn $1.28, pay Uncle Sam 0% tax on $1.28 or NOTHING and have $1.00 left to pay the doctor or hospital and STILL HAVE 28 CENTS IN YOUR POCKET TO SAVE AND INVEST UNTIL WELL AFTER RETIREMENT!
As always, I appreciate you! Tell your family, friends, co-workers, boss and firm administrator to listen to Doxcost!
In the next episode, we’ll cover all the things you don’t know about HMOs, PPOs and EPOs. See ya then!