HSA vs Copay Plan: Which Plan Works Better For You?

With so many options, shopping for the right health insurance plan can be stressful. Explore these tips to determine whether an HSA or copay plan is better for your needs.

Choosing between a traditional copay plan and a High-Deductible Health Plan (HDHP) with a Health Savings Account (HSA) can be quite easy when you understand each option. Begin by examining each plan’s differences, advantages and disadvantages, and cost to you over time.

HSA vs Copay Plan

In comparison to a high-deductible health plan (HDHP), a copay plan has predetermined costs you must pay any time you receive specific medical services. The fixed payment is established by the insurer and won’t vary depending on the cost of your visit or medication.

Something else to consider is a plan’s deductible and out-of-pocket maximum. A deductible is the amount of money that you need to pay for certain medical procedures, prior to your coinsurance kicking in. The out-of-pocket maximum is the max amount you’ll pay for medical expenses; once met, your insurance will cover excess costs for that calendar year.

Check your Summary of Benefits and Coverage to determine whether copays count towards meeting deductible or out-of-pocket maximums.

How Does It Work?

While it will vary by plan, a copay plan could look something like this:

• $35 copay for office visits
• $20 copay for generic prescription medicine
• $60 copay for brand name prescription medicine

Depending on the plan, certain services such as preventative care generally don’t require a copay. The main difference is that under this plan you’ll pay a higher monthly premium. A perk of having a copay plan is always knowing how much you’ll pay when visiting a doctor or emergency room, or when having a baby.

Is A Copay Plan Right For You?

A copay plan is often for those who go to the doctor often or need frequent medical care. Families with small children also rely on this type of health insurance to more easily budget for unplanned doctor visits. Copay plans typically come with lower deductibles compared to high-deductible health plans. They are ideal for budgeting medical expenses and knowing your out-of-pocket costs.

Plan With HSA

Health savings accounts (HSAs) are dividend-bearing savings accounts that grow tax-free. They work in combination with HDHPs and are used to save for qualified medical expenses not covered by your medical insurance plan. If used toward these expenses, funds can be withdrawn tax-free.

HSAs work alongside HDHPs and cannot be used alone. Anyone can open an HSA account who has an HSA-qualified health plan. Preventative care is often fully covered by HDHPs but only partially for diagnostic care. If you need to see a doctor, expect to pay the entire medical bill until you meet your deductible and coinsurance kicks in. Once co-insurance contributes, you’ll only pay the remaining amount determined by the HDHP plan.

An HSA can be used to cover that remaining amount of your medical bills (and related expenses) as they arise. It can also function as a savings account to help plan for future, less routine and more expensive medical costs like surgeries, braces, prescription glasses, and even rehabilitation, counseling services, and dependent care.

Active HSAs allow contributions from almost anyone, but will most commonly come from the account owner and their employer.

HSAs are an optional employee benefit that some employers offer. HSAs are also available through many financial institutions, including A+FCU. Note that there’s a contribution limit set by the IRS annually that depends on whether you have self or family coverage. When evaluating HSA providers, it is important to consider fees, investment options, and fund accessibility.

How Does An HSA Work?

After paying your deductible your coinsurance will kick in, which is just cost sharing percentages between you and your insurance company. For example, if you’ve met your deductible of $2000 for the year, you might be responsible for something like 20% when you visit a specialist. This means you’d only be responsible for $20 if you’re billed $100 for a visit. You would pay this bill using your HSA funds by writing a check from your HSA account, using your HSA debit card, or through online bill pay using the HSA website or app.

HSA plans are a great way to have coverage at a lower premium. The biggest HSA benefit is that funds will always roll over from year to year. Also, at the age of 65 you’re able to use the funds in your HSA for any reason without being penalized. You’ll just pay income tax on funds used on non-health expenses.

Is An HSA Right For You?

HSA plans are a great fit for people who are enrolled in a high-deductible health plan. They can also provide excellent tax advantages since contributions to an HSA are tax-deductible, the money in the account grows tax-free, and withdrawals for qualified medical expenses are also tax-free. In addition, any contribution made through payroll deductions reduce your federal income tax liability.

Summary

An HSA can help offset your medical expenses, especially when used with an HDHP. Account contributions and withdrawals for qualified expenses are tax-free and using payroll deduction for this benefit helps reduce overall tax liability. If you don’t have an HDHP, have a family, and require frequent diagnostic medical care, a copay plan may be a better option.

Neither an HSA or copay plan is better than the other; you just need to decide which plan meets all of your needs and will benefit you the most.

A+FCU Can Help You Plan For The Future

With an HSA from A+FCU, you only need to deposit $10 to start. Using our direct deposit option saves you time and effort by allowing your paycheck to be automatically deposited. You can also set up automatic deductions for health insurance, taxes, and other savings goals. We can also help you understand payroll deduction loans and how to automate your savings.