I’ve long been a proponent of high deductible plans. The part you’re missing is that you also get the opportunity to contribute pre-tax money to a Health Savings Account, which is money that you get to keep (and even invest) over the long term. You can spend that HSA money on medical expenses but if you save it, it turns into another tax-advantaged savings account like your IRA and 401(k).
I agree. I think I just had a very conservative mindset with respect to medical insurance which led me to a traditional plan. HSA would certainly have been a better choice in retrospect given that deductibles were never really an issue.
If you require care for chronic medical issues, that often not even one treatment. So, the annual numbers might work out, but you're still left with a massive cash-flow issue at the beginning of every year (because there hasn't been time to fund the HSA, you have to float the deductible + co-pays/% up to your max OOP).
And that's assuming your income supports the max HSA contribution in the first place. Maybe after a few years, it balances out a bit, if you're lucky.
> The part you’re missing is that you also get the opportunity to contribute pre-tax money to a Health Savings Account
Post-ACA, high-deductible and HSA-compatible are not the same thing anymore. In my state, for example, there are no longer any HSA-compatible insurance plans but there are several high deductible ones.
HSAs can be wonderful, but you absolutely have to have a good one. Some of them still pay less than 1% interest and charge monthly fees. The ones which can be invested and have no fees are an amazing savings tool.
Indeed—the people who get by far the most benefit out of them are those who can afford to pay for everything without taking money out of the HSA, then claim those expenses much later in retirement (when you can also just start taking money out). To them, it’s another tax-advantaged retirement account, significantly raising their max annual contribution limits.
But--most importantly--it's a retirement account that you can spend early, if you have to, if you have unexpected medical expenses (which is the main reason an otherwise financially responsible person would have unexpected expenses). And in that scenario it's a much appreciated buffer for needing to withdraw money from another retirement account.
But frankly, even if you are spending the money on medical expenses in the same year, you're also getting a lot of benefit out of spending pre-tax rather than post-tax money.
Because a healthcare plan isn’t insurance. You used the correct term. If you want a prepaid healthcare plan that’s fine, just stop calling it insurance since it’s not.
Totally agree it should be available for cash pay.
It's insurance in the sense you have annual out-of-pocket maximums--which is really the key feature for a lot of people. I can cover $5K or $10K for a year but not, say, $100K or more.
