It’s no secret that health savings accounts (HSAs) offer numerous tax benefits. These tax savings are one of the primary reasons why HSAs are gaining traction in the market. However, while HSA participation continues to increase at a rapid pace, the majority of the attention when it comes to HSA tax benefits is focused on employees. While those HSA tax benefits are great, there are less well-known HSA tax benefits for employers that are just as significant. These employer HSA tax benefits should not be kept a secret. So, whether you’re an employer that already offers an HSA program to your employees or you’re just looking into the affordability of an employer-sponsored HSA program for your company. You need to understand HSAs and the benefits they have for you.
What is an Employer Sponsored HSA?
An HSA is a tax-advantaged savings account that can be used to help your employees pay for eligible medical expenses when combined with a high-deductible health plan (HDHP). An HSA-compatible HDHP often has lower monthly premiums than lower-deductible health insurance plans. And HSA contributions are tax-deductible up to annual IRS limits. A small business can deduct all employer contributions to employee HSAs as an income tax deduction. Employers also do not pay payroll taxes on employees’ pre-tax contributions. Employees’ lower premiums under an HSA-compatible HDHP may result in cheaper cost-sharing for the business overall. It is important to note that not all HDHPs are HSA-eligible, so be careful when choosing.
Setting Up An HSA
Creating an HSA is a simple process. Here’s a rundown of the steps.
Determine Eligibility – Determine whether your employees have HSAs through approved HDHPs supplied by the company or acquired privately. Then, select how much employees will contribute to their HSAs and whether your company would match their contributions.
Create a Cafeteria Plan – A section 125 cafeteria plan allows employees and employers to contribute to the HSA tax-free. Employees, spouses, and dependents can all participate in the plan. One of these programs might be set up by your company or a payroll agency. Employers must write a document outlining the benefits offered, contribution limitations, and participation restrictions. As well as other information required by the IRS before launching a section 125 benefits plan. Depending on the plan, they may also be required to conduct non-discrimination tests to verify that it does not favor highly compensated or specific employees. Starting a cafeteria plan can be challenging without the right understanding. Which is why many employer’s hire a third-party administrator to set up and administer their cafeteria plan.
Manage Contributions – Employees can submit HSA payments to their custodian or bank-administered account after the Section 125 plan is implemented. If you wish to contribute to your workers’ HSAs, you must submit your payments to their accounts as an employer. At the close of the fiscal year, your company must also supply your employees with the necessary tax documentation, including W-2s.
Keep in mind that annual HSA contribution restrictions must be followed by both employees and employers. For 2023, the HSA contribution limits for self-only coverage are $3,850 and $7,750 for family coverage. For 2024, the HSA contribution limits for self-only coverage will be $4,150 and $8,300 for family coverage. Those aged 55 and up are eligible for a $1,000 catch-up contribution.
Employer Tax Benefits
When it comes to tax benefits, HSAs have the unrivaled ability to benefit both employees and employers. While employees can profit from the triple tax advantage that HSAs provide. Businesses can also benefit from significant HSA tax advantages. Employers can obtain HSA tax benefits through payroll and FICA tax benefits. To maximize HSA employer tax benefits, you must first set up your cafeteria program.
With this setup, you benefit from even lower payroll taxes if you choose to contribute to your employees’ HSAs. Because your employer HSA contributions aren’t included in your employees’ income and thus aren’t subject to federal income tax, Social Security or Medicare taxes (commonly known as FICA tax). Employer HSA payments are also tax-deductible as a company expense, so you gain both on the front and back end. It’s important to know that FICA tax is a 15.3% split tax burden between the employee and the business. Company FICA tax savings can be so significant that many employers prefer to increase their company HSA contributions in order to maximize their FICA tax savings. This method can be a sensible way to increase your employees’ total compensation while keeping your bottom line in mind.
Maximize Your Benefits
Regardless of how you handle employer HSA contributions, the next step in making the most of your HSA program and maximizing employer tax benefits is to increase both the number of employees who actively participate in your HSA program and the amount of pretax money they contribute to their HSAs through payroll deduction.
As an example, a firm with 100 employees that use an HSA through its cafeteria plan can save more than $50,000 per year in FICA tax savings alone. That employer would save six figures—a significant sum—in two years. Money that would otherwise have been paid out as a tax expense. Essentially, the more employees who have HSAs and contribute to them, the lower your payroll taxes will be, as will your income and FICA tax savings.
Small Business Owner’s HSA
You may be wondering if you qualify for an HSA as a small business owner. This is determined by the nature of your business as well as your health insurance. A requirement for establishing and contributing to a small business HSA is that your health insurance needs to be an HSA-eligible HDHP. When it comes to HSA contributions for individuals, business owners face different requirements than their employees. There are extra requirements that apply depending on the type of small business you run.
Self-Employed HSA
A self-employed HSA option is fundamentally identical to choices for employers. Because an HSA is not a sort of insurance, you must have an HSA-compatible health plan as a self-employed individual. According to IRS HSA rules, you can only open an HSA if you have an HSA-eligible high-deductible health plan (HDHP). It doesn’t matter if the qualified HDHP is yours or your spouse’s; it just has to be HSA-eligible. If you are classified as a dependent on another person’s tax return, you are not eligible for a self-employed HSA option.
A self-employed HSA can be not just a way to get tax savings on healthcare spending, but also an essential component of a retirement plan. Because, in most cases, self-employed individuals and small business owners do not save as much for retirement as those who are traditionally employed. An HSA can help you save money on eligible medical expenses while also serving as a retirement account for you.
You can deduct some of your contributions on your personal income tax return if you set up an HSA and contribute to it as a sole proprietor. You can claim the deduction if you make a profit during the tax year. However, you may not contribute more to your HSA than your net self-employment income. While many employees can contribute to their HSA before taxes, as a self-employed individual, you can make HSA payments after taxes and then deduct them as a line item on your Schedule C. It requires slightly more paperwork, but it is still a simple approach to save money on qualified medical bills.
S Corp and C Corp Owner HSAs
The IRS has particular requirements for specific corporate entities based on ownership—whether held by individuals or investors. Certain corporate entities are restricted from receiving HSA funding as a result of these requirements. HSA financing limits apply if you own 2% or more of a S Corp. When it comes to employer contributions to a S Corp HSA, the company cannot provide owners with a tax-free contribution. Contributions from the S Corp firm to the owners’ HSAs are taxable income. You cannot make pretax contributions to your HSA. While S Corp HSA contributions are taxable to the owners, they are also tax deductible to the company as a compensation expense. Even after-tax HSA contributions provide a considerable tax break on eligible medical expenses.
On the employee side, or if you own less than 2% of a S Corp, the restrictions do not apply. Which means that a S Corp business can make tax-free contributions to their employees’ HSAs as long as they comply with current IRS standards on employer contributions. Because a C Corp is an entirely different legal entity, the IRS treats owners the same as employees. If you own a C Corp, you are eligible for your company’s HSA, including making pretax contributions to your HSA account. Remember that all contributions must adhere to current IRS requirements on employer HSA contributions.
LLC HSAs
If you are a single member LLC with an HSA-eligible high-deductible health plan (HDHP). Your HSA will function similarly to that of a self-employed sole owner. While you will not be able to contribute to your HSA before taxes, you will be able to contribute after-tax to your HSA and claim a line item deduction on your Schedule C. Bottom line, even as a single member LLC, having an HSA saves you money on healthcare costs. However, if you are an LLC with workers, you cannot directly participate, but offering this type of HSA cafeteria plan to your employees has numerous advantages.
Working With EZ
If you want to save money while still looking after your employees’ health and finances, offering an HDHP with an HSA is a terrific alternative. If you’re not sure where to start with HDHPs, HSAs, and cafeteria plans, EZ can help you get started and answer all of your questions along the way. We can also provide you with quick, accurate quotes and enroll you in an excellent plan – all for free! There is no hassle and no obligation. To get started with us today, simply enter your zip code in the box below. Or call 877-670-3531 to talk with a representative immediately.
Attracting and retaining employees is important to building your business, and one of the ways to do this is by offering an appealing benefits package. Since good health insurance is one of the most sought-after benefits for employees, you have to pay extra attention to what you’re offering. It might not be enough to offer one choice, so you might want to look into different types of plans you can offer, especially plans that offer a lot of options, like high deductible health plans (HDHP) and preferred provider organization plans (PPOs).
What Is a HDHP?
A high deductible health plan (HDHP) is like any other insurance plan with one key difference. If you guessed by its name that these plans have high deductibles, you are correct! HDHPs do have a higher deductible compared to most insurance plans, but in return, your employees will get a lower monthly premium.
Another major advantage of HDHPs is that you can offer the option of a health savings account (HSA) alongside them. An HSA is a tax-advantaged savings account that allows your employees to put aside money to help pay their out-of-pocket costs for health services. Employees can only contribute to an HSA if they have a HDHP, so if you think an HSA will be an attractive option for your employees, consider offering a HDHP plan so you can also add an HSA to their benefits.
To explain HSAs to your employees, and make them aware of how beneficial they can be, break them down with quick facts like:
You can use your HSA funds tax-free!
You can’t lose your HSA. Even if you change jobs or insurance plans, your HSA follows you.
HSA funds don’t expire! They roll over into the next year, so you don’t have to worry about losing money if you don’t use it before the year ends.
HSAs provide tax advantages because the contributions are pre-tax. Additionally, they accrue tax-free interest, and you can use the funds for qualified expenses tax-free.
Not only that, but similar to a 401k plan, you can match a percentage of your employees’ contributions to HSAs, which will make the option of an HSA-qualified HDHP even more attractive.
What Is a PPO?
A preferred provider organization plan (PPO) is health insurance that offers the best access to a network of healthcare providers like doctors, hospitals, labs, and specialists.
PPOs generally offer the largest network for your employees and will have plenty of options when it comes to providers. PPOs also offer coverage for services outside of their network, your employee would just have to pay more of the bill than they would with an in-network provider. This freedom to choose their provider is a huge perk to most employees.
Additionally, PPOs can offer uniform healthcare coverage. If you have employees in more than one state, this gives you the ability to offer nationwide network access. This means all of your employees will receive the same coverage no matter where they live.
Can I Offer Both Types of Plans?
You can absolutely offer both an HDHP and a PPO. While PPOs generally have lower deductibles and higher premiums, some PPOs actually qualify as HDHPs. That means you’ll also be able to offer the option of an HSA with a PPO plan that is considered a HDHP. For 2022, as long as the PPO plan’s deductible exceeds $1,400 for individuals and $2,800 for families, it’s classified as an HDHP, and can be considered HSA-eligible.
Adding healthcare options like plans that include HSAs, or PPOs that allow them to choose from a wide range of healthcare providers to your employee benefits package can keep your employees happy, and boost employee retention. If you need help adding or changing your employee’s healthcare plan, EZ.Insure has you covered. Our expert agents can answer any questions and help you find plans that fit your employees best. We offer free instant quotes with no obligation. All you need to do is enter your zip code into the bar above or call us today at888-350-1890.
If you feel like healthcare costs are out of control, you’re not alone. It seems like costs are constantly rising, making it hard for many to afford a health insurance plan or their medications. Because of this, many people end up going without health insurance and avoiding doctor visits, which can mean missed diagnoses and delays in treating major health conditions. But health insurance doesn’t have to be unaffordable or unattainable. EZ knows how to save you thousands on health insurance without sacrificing coverage, so you can remain insured and healthy, while saving money at the same time.
Opt For A Higher Deductible Plan
Your first option for saving money? Cut your monthly premium by switching to a high deductible health plan. One of these plans could work for you if you don’t go to the doctor often, or if you don’t need any ongoing treatments, because if this is the case, you probably won’t ever need to meet your deductible. High deductible plans can be risky, though: if something ends up happening to you, you’ll have to pay a lot out-of-pocket to meet your deductible.
Save money on your prescription medication by opting for a different drug tier.
Another way to lower your healthcare costs is by taking a look at your prescription drugs, and at your plan’s drug formulary. If your doctor is prescribing you a name-brand medication that has a high copay, check to see if there are any less expensive generic drugs available – you could end up saving 30-50%.
Check your plan’s drug formulary (the list of medications included in your plan, and their costs), as well, and see how your insurance company classifies your medications. Every plan’s formulary has four different pricing tiers, and each insurance company – and every plan! – has a different formulary, so comparing them all can get quite confusing. EZ’s agents are here to help, though – our agent will go over your medical needs, and compare plans and their drug formulary tiers to help you find a plan with affordable drug costs.
Enroll In A Wellness Incentive
If you are enrolled in your employer’s health insurance plan, find out if they offer any wellness programs or incentives. Some companies will offer a lower premium to employees who participate in wellness challenges or other incentivized programs. This could end up saving you a lot of money, or could even get you free coverage!
If you decide to opt for a high deductible health plan, or if you already have one, then start contributing to a health savings account (HSA). HSAs are only available to those with a qualified high deductible health plan, and they allow you to put money aside tax-free to pay for qualified healthcare expenses. You will accrue tax-free interest, and you will also be able to withdraw money from the account tax-free. Not only are these accounts triple tax-advantaged, but the funds in your account rollover automatically each year and continue to grow until you use them!
Before getting any lab work or tests done, make sure to ask it it is covered!
Make Sure Tests Are Covered
Avoid surprise medical bills – before you agree to any tests ordered by your doctor, make sure that they are covered under your plan. Be aware that, even if your doctor prescribes a test, such as blood work to confirm a diagnosis or rule out health conditions, it may not be covered. If it isn’t, ask your doctor for other options.
Not knowing what’s covered in your plan can end up costing you thousands of dollars. If you find that you are often being sent for tests that are not covered, consider finding a different plan that offers more coverage. Our agent can compare plans for you and find a plan that offers the coverage you need to get any necessary tests done, so you can avoid surprise bills – and save money.
Negotiate
If you receive a high bill from your doctor’s office or hospital, don’t automatically assume that it is correct – as many as 8 out of 10 times, higher than expected medical bills have some type of error. If a bill seems off to you, then contact your provider and ask them to go over it with you and explain why it is so much. If your high bill is not due to a billing error and you are having trouble paying it, then negotiate with your provider – ask if they can lower the bill, or if they can offer you a monthly payment plan.
Telehealth can save you hundreds of dollars by avoiding a doctor visit copay or emergency room visit.
Going to the ER should be your last resort. When you are not feeling well or need immediate care then you should consider more affordable options like urgent care or telemedicine. Telemedicine is a great option, because it allows you the convenience of speaking to your doctor over the phone and getting prescription medication sent over to your pharmacy. This eliminates having to pay a doctor visit copay, or a huge hospital bill. If your plan doesn’t offer telemedicine, EZ can help you find an affordable plan that does offer this option.
Health insurance is not cheap, but that doesn’t mean that you can’t find an affordable plan. EZ understands the need for affordable health insurance, especially in times of uncertainty. Don’t stick with the plan that you already have if it’s too pricey, or doesn’t offer the coverage you need. One of our agents can find you a more affordable plan with just as much coverage, or more. We can easily compare all available plans in your area within minutes, at no cost to you. Taking advantage of our free services is just another way you can save money with EZ. To get started, enter your zip code in the bar above, or to speak to an agent directly, call 888-350-1890.
An increasing number of employers are jumping on the high deductible health plan bandwagon. In 2006, only around 6% of companies that offered healthcare plans offered High Deductible Health Plans, but in 2019 that number soared to 26%. There are definitely good reasons to consider offering one of these plans to your employees, but you do need to know that not all high deductible plans are the same. With some high deductible plans, you can offer your employees a Health Savings Account (HSA), which has tax advantages for them and for you. But first you need to make sure you’re choosing the right plan.
What Makes an HDHP HSA-Eligible?
In order to offer an HSA, your high deductible health plan must meet certain criteria.
It might seem like a small distinction, but not every high deductible plan is a High Deductible Health Plan (HDHP) with a capital “H.” The difference is that an HDHP not only has a high deductible, but it also meets certain criteria. If your plan meets this criteria then – and only then – can you offer an HSA alongside it. To be an HDHP, the plan must have:
A deductible that meets minimum requirements. A “high deductible” isn’t just a matter of opinion; each year, the IRS sets the minimum deductible amount for a plan to be considered HSA-eligible. For 2020, the deductible for an individual must be at least $1400, and for families, it must be at least $2800 for the plan to be an HSA-eligible HDHP.
A maximum out-of-pocket amount.Having a high deductible plan means having higher out-of-pocket expenses, but the good thing is that there is usually a limit to how much you have to fork out each year in deductibles and copays. To be an HSA-eligible HDHP, this out-of-pocket maximum must be below a certain amount. For 2020, that number is $6,900 for an individual and $13,800 for family.
No insurance coverage until the deductible is met.In order to take part in all of the advantages an HSA has to offer, you do have to give up some coverage. But don’t worry, there are some exclusions. Wellness and preventative care, which even includes things like help with weight loss and quitting smoking, as well as regular checkups and care resulting from accidents, can all be covered before the deductible is met in an HDHP with HSA.
These are the rules for offering an HSA alongside a high deductible plan, and there are also a few other rules surrounding contributing to an HSA to be aware of. In addition to being covered by an HDHP, you also cannot:
Have any other health coverage
Be enrolled in Medicare
Be claimed as a dependent on someone else’s tax return
Why Offer an HDHP with HSA?
Now that you know what makes a high deductible plan HSA-eligible, the next question is: why offer this type of plan to your employees? It all comes down to savings. Offering a healthcare plan to your employees is the right thing to do, and studies have shown that employees with healthcare are happier and more productive. But there’s no doubt that it’s expensive. Choosing a plan with a high deductible is one way to keep your costs down, because premiums on these plans are usually much lower.
Just look at this comparison: in 2019, the average employee contribution to a healthcare plan without a high deductible was around $6,200 for an individual and $14,700 for a family. For HSA-eligible HDHPs that number was around $5,200 and $14,000 respectively – a savings of $700 – $1,000.
Of course, HDHPs are not perfect. To some employees, especially lower income ones, the out-of-pocket expenses can feel like a burden. This is why it’s important to make sure the plan you choose is HSA-eligible. Having the HSA allows them to set aside money pre-tax to help pay for medical expenses that come up throughout the year; you can also help them out by contributing to their HSA (the maximum contribution allowed by both you and your employee combined is $3,550 for an individual and $7,100 for a family).
Offering an HSA alongside a HDHP (and contributing to it!) means that your employees will be more likely to enroll in your plan. It may also be the difference between them skipping out on preventative care or necessary treatments – possibly leading to poor health and more sick days in the future – and using their plan when they need it.
There’s a lot you need to know when you’re the boss. You’ve got to know your business, and also know what’s best for your employees – and sometimes that means reading up on things that aren’t your business – like health insurance. But don’t worry, you don’t have to go it alone! EZ can answer any questions you have, and can help you find the plan that works best for your employees and your business. There’s nothing we can’t answer, and we’ll never hassle you or charge you for our services. If it’s just quotes you’re after, stop by, give us a few seconds of your time, and be on your way. You’ve got enough to do! To get started with us, enter your zip code in the bar above. Or to speak with an agent directly, call 888-350-1890
If you’re a newbie shopping for group health insurance for your small business, how are you feeling about the whole process? Confident? Nervous? Confused? We get it, there’s a lot of feelings to feel when it comes to picking a plan. But we’re here to guide you, and steer you past some of the common surprises and pitfalls that may come your way.
You Might Need More Info Than You Thought
Conduct an anonymous employee health survey prior to shopping, so that you know what your employees want in a plan.
We’ll start you off with an easy one. When it comes to getting accurate quotes, you used to be able to simply provide the age ranges of employees. Now you need to have their exact date of birth, as well as the dates of birth of any spouses or dependents they want to cover. Don’t be caught fumbling around for info, make sure you’ve collected all of your data before even looking for a plan. We would suggest conducting an anonymous employee health survey prior to shopping, so that you have all of the facts at your fingertips, as well as a good idea of what your employees are looking for in a plan.
A Provider You Thought Was Covered Isn’t
A lot of people are attached to a certain doctor or healthcare provider. When choosing a plan, you need to pay close attention to the network that is offered, especially since many plans are reducing the size of their networks to cut insurance costs. You could end up with unhappy employees who are unwilling to enroll in your plan if the network is too small or if their doctor isn’t included. And if this is your second time offering insurance, pay extra close attention to any changes made to the network; plans can change from year to year, so the providers that you were sure were covered, may not be.
Your Employee Isn’t Eligible
Employees are usually required to work at least 30 hours to be eligible for certain plans.
This one might really come as a surprise. You’ve decided to offer healthcare to all of your employees, but that doesn’t mean that all of your employees are eligible. The state your business is in, your insurance company’s rules, or even the policy you choose can dictate the number of hours an employee must work to be eligible for your plan. Employees are usually required to work at least 30 hours to be eligible for certain plans; they must also satisfy a waiting period before they are covered. It could be disastrous to extend coverage to an employee who signs up, only to find out later that they were ineligible for the plan. They could end up saddled with a giant medical bill even though they thought that they had insurance.
You Need to Communicate with Your Employees – A LOT
Keeping your employees informed about their health coverage is not a courtesy, it’s an absolute must. You need to provide a Summary of Benefits Coverage (SBC) to participants and beneficiaries prior to enrollment in the plan, at renewal of the plan, within 90 days of a special enrollment period, and within 7 business days of a written request.
You also need to give each employee covered under the plan a Summary of Material Modification (SMM) when there are changes made to their health benefits. We know, that sounds like a lot of paperwork, but it’s important that you familiarize yourself with all of these notices. Remember, EZ’s agents can help you manage all of the crazy insurance admin that you have to deal with!
Prescription Drug Pricing Is Complicated!
If your employees are counting on prescription drug coverage in their group health plan, then you’re going to want to take a closer look at how your chosen plan covers medications. All drugs are priced differently, and generics cost less than brand name medications, but what you might not know is that the same drug may be priced differently by different insurance companies. The same drug might even have a different copay on different plans with the same company. Familiarizing yourself with different plans’ drug formularies can help to cut down on prescription price surprises.
One more thing that you might not have realized in regards to prescription drug coverage is that some plans now actually have a separate drug deductible. Just as with a general deductible, your employees would have to meet a set amount of drug expenses out-of-pocket before their plan would begin covering the cost of prescription medications. Again, this is where an employee health survey would help to give you an idea of what your employees need, and what you need to avoid when looking at healthcare plans.
A High Deductible Isn’t Always a Bad Thing
Yes, a high deductible can sometimes be a burden to employees, especially those with lower incomes, and you might think that if you’re providing healthcare you should avoid any plans that might pile high out-of-pocket costs onto your employees. But you might be surprised to find that some employees actually prefer these lower premium plans, especially if they rarely use medical services and are just looking for a safety net in case of emergency. This is especially true if you pay a higher percentage of their (low) premiums (meaning you’ll still be saving money), choose a plan that is HSA-eligible, and then contribute to those health savings accounts. HSAs have tax advantages for both you and your employees, and having that money put aside means that employees will be able to cover a surprise medical expense.
The list of things you need to know about healthcare plans as an employer can seem endless, and it may feel like you are constantly being surprised by some new rule or protocol. But we promise, you’ve got this! And we’re here to support you, simply contact one of EZ’s knowledgeable agents and you’ll have all the answers to your insurance questions at your fingertips. We can also sort through all of the plans on offer and get you instant, accurate quotes so you can find the best plan for your business and your employees – and we’ll do it all for free! No hassle, no obligation, and no surprises!To get started with us, enter your zip code in the bar above, or to speak to an agent, call 888-350-1890.
Medical bills can be a huge source of stress. They can seem like they are never ending, but there is actually a limit on how much you can spend on out-of-pocket healthcare costs. The out-of-pocket maximum, which is the annual limit that you are required to pay for covered health services, is your financial saving grace. Each health insurance plan has different out-of-pocket maximums. Understanding yours will help you get a better handle on how much you will be paying out-of-pocket with your policy.
What Is an Out-of-Pocket Maximum?
An out-of-pocket maximum is the amount that you will have to pay for covered health services. Once you reach that amount, your insurance will pay for all covered services. All copayments, deductibles, and coinsurance count towards your out-of-pocket maximum. However, your monthly premium payments do notgo towards your out-of-pocket maximum.
How It Works
If you need a medical procedure, generally you and your insurance company will each pay a portion of the cost. You will pay enough to meet your annual deductible, and your insurance company will pay for the rest of the procedure, unless you have to pay coinsurance as part of your policy. If your plan does require you to pay coinsurance then you will also have to pay 20% (usually) of the cost of the procedure, even after meeting your deductible.
After you have met your deductible, you will continue to pay copays and coinsurance until you meet your out-of-pocket maximum. After you meet your maximum, insurance will then pay 100% of any medical costs. You will not have to pay for copays or coinsurance after meeting your maximum.
After you have met your deductible, you will continue to pay copays and coinsurance until you meet your out-of-pocket maximum.
Here’s an example to illustrate how out-of-pocket maximums work. Let’s say Mary has a health insurance plan with a $2,000 deductible, a 20% coinsurance requirement for all care after meeting the deductible, and a $5,000 out-of-pocket maximum. She has to have surgery and the total hospital bill is $20,000. The costs will break down like this:
Mary will pay her $2,000 deductible, leaving $18,000 of the bill.
Her coinsurance requirement is 20% of the $18,000, which is $5400. But because Mary’s plan has an out-of-pocket maximum, she and her insurance company will end up each paying part of this cost.
Mary has already paid $2,000 to meet her deductible, and her out-of-pocket maximum is $5,000 so instead of owing $5,400 in coinsurance payments, she only owes $3,000 ($2,000 deductible + $3,000 coinsurance = $5,000 maximum out-of-pocket payment).
Her insurance company will now cover the remaining $13,000 of the cost of the procedure.
Do All Plans Have a Maximum?
All plans that meet ACA standards have out-of-pocket maximums. For 2020, that number is $8,2000 for individuals and $16,400 for families. Some plans may have a lower maximum, but none will be higher than those amounts. Plans with higher monthly premiums generally have lower out-of-pocket maximums, while plans with lower monthly premium plans, like catastrophic or high-deductible health plans, have higher out-of-pocket maximums.
In order to find the right plan for your needs and budget, you have to take into account everything that it has to offer, including things like out-of-pocket maximums. Doing all the research alone is time-consuming and can cause confusion and missed opportunities. EZ will make the process quick and painless; we’ll explain everything clearly, give you real-world examples of how the plan would work for you, compare quotes, and calculate costs for you. We will set you up with one agent that will help you find the right plan for your medical and financial needs. To start saving, enter your zip code in the bar above, or to speak to one of our licensed agents, call 888-350-1890.
Maximize Your Benefits
