Like many Texans, Jerome is comparing health insurance plans during this open enrollment season. As he is looking for coverage for his family of three, he wants to make the smartest financial decision for his family. This is exceptionally difficult since the government shutdown has placed a great deal of uncertainty about medical care plans through the ACA marketplace.
His wife has given input. He knows that his son wants to keep his pediatrician that he has seen his entire life. Beyond that, he doesn't anticipate many medical expenses throughout the coming year for his family. But he is frustrated by all the jargon as looks at the plans.
The plan options he has looked at include terms like high-deductible health plans, cost sharing reductions, HSA-eligible plans, copays, and maximum out-of-pocket costs. Frustrations boil over into overwhelming with all of those words. Jerome is determined to figure it out, but isn't sure where to turn or how to figure it out.
If you've felt the same way as Jerome, you're not alone. Choosing the right health insurance plan, especially when balancing health care costs for a family, can feel like a maze.
Finding the "Right" Health Insurance Coverage
Jerome knows that entering the maze that is coverage details is complicated. Between looking at HMOs, PPOs, Marketplace Plans, and Private Plans he discovered it might be time to bring in some help from an expert. He just wanted to find some relief.
Jerome's wife wants him to explore why a Health Savings Account (HSA) enabled high-deductible health plan (HDHP) might be a better choice than a traditional ACA Marketplace health plan because of tax benefits. What did she know that he didn't, and how could it make a real difference for your finances as well? Yep. Time to call the agent.
Lower Monthly Premiums Free Up Cash for Savings
One of the first things Jerome noticed about the High-Deductible HSA-enabled plan was the lower monthly premium compared to traditional plans from Obamacare. For example, a traditional bronze plan might cost $1,130 a month for his family of three before premium subsidies are applied. A similar high-deductible plan comes in at $950. That $180 difference may not seem like much, but for Jerome's family, it adds up to $2,160 in annual savings on the insurance premiums alone.
Rather than putting all of that savings back into the family budget, Jerome liked the idea of using it to fund a family HSA. Health Savings Accounts are tax-advantaged accounts which allow him to save specifically for healthcare expenses which gives his family more flexibility to manage costs throughout the year. By choosing the lower-premium plan, Jerome could shift his savings into something that worked directly for his family's health. He liked the idea of planning for the future health expenses.
Total Cost of Risk: A Smarter Way to Calculate Financial Impact
Like most Texans, Jerome was worried about his deductible amount. But his wife correctly informed him that meeting a deductible wasn't the end all, be all. Jerome always loves being reminded like this.
She recognized that the out of pocket maximum for health care costs was the number to focus on. If they had major qualified health expenses, the out of pocket medical expenses can escalate quickly. With this in mind, Jerome didn't stop at monthly premiums. He wanted to understand the full picture of costs.
That's when Jerome learned about the total cost of risk for health benefits coverage. This idea combines the sunk cost of health insurance premiums with the portion of costs from medical services that you pay up to the out-of-pocket maximum (MOOP). Consider this:
- Traditional ACA Bronze Plan: $1130/month premium + $9,200 MOOP = $22,760 total cost of risk.
- HSA-Eligible High Deductible Health Plan: $950/month premium + $8,250 MOOP = $19,650 total cost of risk.
By looking at the total cost of risk, Jerome realized that the HSA-eligible HDHP gave his family lower overall financial burden in a worst-case scenario by over $3,000! What's more, traditional plans often require copays even after hitting the MOOP, meaning his family could face additional out-of-pocket expenses. With the HSA-enabled plan, Jerome could use tax-free HSA funds to cover qualified expenses, putting that HSA to work.
Tax Benefits For Your Bottom Line
Jerome was intrigued when he learned about the triple tax advantages of an HSA.
- His contributions to the HSA reduce his taxable income.
- Interest or investment growth on the funds in the HSA is tax-free money.
- Withdrawals from the HSA for qualified medical expenses are also tax-free.
This not only opens up a new way for him to manage healthcare costs, it also reduces his income taxes for the year. He absolutely loves the benefits of this super tax-advantaged account.
If Jerome contributed $8,750 (the annual contribution limit for families in 2026) to his health savings account, he would lower his taxable income by the same amount. At a 22% tax rate, that's $1,881 in tax savings.
The real kicker is that any unused funds roll over year after year. This means he can build a healthcare savings fund for the future as well. The traditional ACA plan offered no such benefit, which made the HSA-enabled option even more appealing.
Building Long-Term Savings for Healthcare
The idea of saving for future medical needs sealed the deal for Jerome. With an HSA, he could create a long-term healthcare emergency fund that rolled over year to year and even allowed investment options that gave the money more opportunities to grow. He imagined how much his family could save over the next decade, especially as healthcare expenses increase with age. This was a big difference from flexible spending accounts he had used with his employers in the past.
Building a savings account for future expenses meant Jerome's family didn't have to be blindsided by future health care services they might need. By choosing an HSA-enabled plan, he was taking steps to prepare for both the expected and unexpected medical costs of his family while also saving money and receiving tax benefits.
Why an HSA-Enabled Plan Was the Right Choice for Jerome’s Family
After comparing the options, Jerome saw how much the HSA-enabled health plan could benefit his family. The lower premiums gave him room in his budget to fund an HSA, while the plan's lower total cost of risk reduced his financial exposure in a worst-case scenario.
He was thankful that he had contacted a health insurance specialist at Insurance For Texans. They had helped him make sense of the jargon in the policies and how he could use the plans to his advantage with their medical expenses. Jerome's family isn't unique in wanting to make the best choice financially and practically. An HSA-enabled health plan could be the right solution for your family, too.
If you’re feeling overwhelmed by health insurance options, like Jerome once was, it’s time to take a closer look. Click the button below to explore HSA-enabled health plans and find the one that works best for your family’s needs and budget!