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Limited Benefit Health Insurance Plans which may identify themselves as Fixed Indemnity Plans, Specific Disease Plans, Indemnitication Plans (i.e., Cancer Policy, Heart Policy, Accident Policy), Discounted Pharmacy or Dental Plans do not meet the federal requirement for minimum health insurance coverage as of January 1, 2014.
Limited benefit health insurance plans are not replacements for comprehensive health insurance coverage. If you lost coverage under a comprehensive plan and are considering a limited benefit plan, there are several things you should have in mind when reviewing the coverages offered by a plan:
Before deciding if a limited benefit health insurance plan is right for you, carefully consider if the plan meets your current and future needs. Know the limitations of the coverage and understand the expenses that will and will not be covered under the policy. Also, ask your agent if there are any exclusions or limitations specifically spelled out in the policy, so expenses that fall within the coverage gaps do not surprise you.
High Deductible Health Plans
Another health plan option is a “high deductible health plan” (HDHP). HDHPs provide the same types of coverages as a comprehensive health insurance plan, but only cover catastrophic health care costs. This means you will be responsible for paying much more of the upfront cost before the policy would pay any benefits for eligible medical expenses. HDHPs have a lower premium to compensate for the higher out-of-pocket costs incurred with these high deductibles.
There are two types of HDHPs:
Health Savings Accounts (HSA)
An HSA is a savings account that allows you to set aside funds for future qualified medical expenses. An insured enrolling in a HDHP with an HSA can deposit funds for health care expenses on a pre-tax basis into the account. Earnings on HSA balances are also not taxable. Withdrawals of HSA funds to pay for eligible health care expenses are exempt from federal and state taxes as well. Unused funds in an HSA at the end of a year can roll over into the next calendar year.
If you’re considering either type of HDHP, make sure to read the policy form—paying careful attention to the benefits and the limitations of the plan. Review the implications of having a high deductible. For instance, will you have the funds available to pay a large deductible or high medical expense in the event of an unexpected illness? Also, consider whether the tax-saving advantages of an HSA are appropriate for your particular financial situation and contact a tax consultant if you have questions.