Health insurance is a type of insurance that covers medical expenses due to illness. These costs may be related to hospital bills, medication costs, or doctor visits.
This is how health insurance works
Health insurance can be tricky to navigate in the US. This is a business with many regional and national competitors whose coverage, pricing, and availability vary from state to state and even country to country.
About half of Americans have health insurance as a work benefit, with employers paying some of the premiums. 1 Employer costs are tax-deductible to the payer and employee benefits are tax-deductible, with certain exceptions for S Corporation employees.
High Deductible Health Plan (HDHP)
An increasingly popular type of health insurance is a high-deductible health plan (HDHP). These plans have higher deductibles and lower monthly premiums. Your users are the only ones eligible to open a Health Savings Account (HSA), which offers significant federal tax benefits.
For 2022, the IRS defines a high-deductible health plan as one with an individual deductible of at least $1,400 or a family deductible of at least $2,800. Out-of-pocket expenses total $7,050 for individuals and $14,100 for families.
In 2023, the deductible remains the same. But the out-of-pocket caps will increase to $7,500 and $15,000, respectively.
High-deductible health plans offer a unique advantage. If you have a health plan, you can open a health savings account — and deposit your pre-tax earnings — that can be used to pay for eligible medical expenses. These plans offer triple tax benefits:
- Contributions are tax-deductible.
- Contributions grow on a tax-deferred basis.
- Qualified health care expenses are tax-deductible
Why do you need health insurance now?
No one plans to get sick or injured, but serious illness can happen to anyone at any time. The cost of treating this disease can take a financial toll on your long-term accumulated savings. That means you may have to compromise when it comes to getting the best education for your kids or not paying your mortgage. Today, medical expenses are constantly increasing.
For example, a 440 mg vial of the cancer drug Herceptin costs about 1,10,000. Depending on body weight, patients typically require 17-19 vials of treatment a year. The cost of medicine alone is 180,000-200,000. Plus hospitalization fees, medical fees, chemotherapy fees, etc., your total cost may be as high as 2.5 million. These already very high costs increase every year. Most sensible people have taken the necessary precautions to ensure their health as quickly as possible. Health insurance is a vital service and you need funds in case of emergency. A single illness can wipe out all the savings you’ve made for your children’s education, marriage, home purchase or even retirement. You don’t want your family’s dreams to be shattered by an illness, especially when you could have been financially secure. It is beneficial to have health insurance when you are young and healthy. Not only do your premiums increase as you age, but you also run the risk of being denied health coverage.
How to choose a good health insurance?
Anyone with health insurance will tell you that purchasing health insurance is one of the smartest financial decisions any earner makes. Now that you’ve decided to buy health insurance, you need to know how to choose a good health insurance plan to meet all your needs. Here is a list of the benefits good health insurance should provide you:
- Prevent many serious diseases
- Flexibility to choose your health insurance
- During the term of the contract, even if the health status changes, the premium will not increase
- Long term contract term, protecting you into old age
- Huge hospital network, easy medical treatment