Health Savings Accounts (HSAs) are the best option for people who want to limit their out of pocket expenses while saving money on taxes. After all, who couldn’t benefit from an extra tax-deduction at the end of the year? Originally designed to meet the needs of individuals who wanted to mitigate the risks associated with high-deductible health plans (HDHPs), HSAs allow members to contribute a predetermined amount of money into a tax-deferred savings account. Most of these accounts come with a debit card that can be used to pay for out-of-pocket medical expenses, similar to a Flexible Spending Account (FSA). The main difference between an FSA and an HSA is the length of time the money is available. Most FSA accounts require the member to exhaust the funds every year, or risk losing their money. An HSA doesn’t have this restriction. In fact, the money can be invested and used as an alternative way to save for retirement. Keep in mind that it will still be subject to annual maximums as outlined by the U.S. Tax Code.
PPO Plans, or Preferred Provider Organizations, are designed to keep out-of-pocket costs to a minimum, but their monthly premiums are much higher than HSAs and HDHPs. These plans will be easier to use and seem more like the plans offered by employers, but they are not always the best choice financially. A PPO makes sense if you think you will be going to a lot of doctors’ appointments and you want a predictable plan that is easy to manage.
Be careful to read the fine print, and ask your broker to explain the Arizona health insurance plans thoroughly. Unlike many employer-sponsored plans, individual health insurance comes with a lot of “loopholes”. These include a lack of coverage for pregnancy and childbirth, higher co-insurance and higher co-pays for hospitalization. You may also need to purchase a separate prescription plan with your new Arizona health insurance plan, since many of the individual health plans provide minimal coverage for prescription drugs.