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How to Pick the Best Medical Plan

Medical Plan — HDHP

A HDHP is a high deductible health plan. HDHPs are usually PPO plans but you can find an HMO plan that has a high deductible.Generally most HDHP plans have lower premiums but with higher deductibles and out-of-pocket annual maximums. Anyone with an HDHP can open an HSA when their HDHP is defined as compatible.

Medical Plan — HSA

An HSA is a health savings account which is owned by you as the individual. With an HSA you can deposit a defined amount of money annually on a pre-tax basis into your HSA account. The amount you or your employer deposits is your money to use all deposits you make are treated as a federal tax deduction. On your 1040 above the line some states also allow a deduction for deposits into an HSA in some cases employers can choose to make deposits into an employee’s HSA which immediately becomes the employees money once deposited. Deposits your employer makes in your HSA are not taxable. Your money in the HSA may earn interest or dividends and these gains are not taxed when you use your HSA funds on qualified medical dental or vision expenses. You do not have to pay taxes on these funds. We like to say HSA is provide a triple tax win for any personal tax matters.

Consult your tax professional, as you will pay penalties and could be taxed if you withdraw HSA funds for non-medical use.

Medical Plan — EPO

An EPO is called an exclusive provider organization. Some EPO plans look like a PPO plan, but the doctor and the hospital provider network is where the plans are different. Only contracted doctors and hospitals will accept EPO plans. PPOs sometimes will cover the cost of care from medical providers who are out of network or not contracted with your plan. In the case of an EPO plan, you only have the coverage inside the EPO network if you use non-EPO medical providers. We’ll need to pay cash as your EPO plan will not cover any of these services.

What about an FSA?

To learn more about FSAs, check out our post “What is a Flexible Spending Account?”

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