Question

You must be covered by a ______ ______ ______ ______ (HDHP) to be able to take advantage of HSAs. HDHP generally costs ______ than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the health savings account

Answer 1

To take advantage of HSAs, you need to have an HDHP, which costs less than traditional health care coverage.

Step-by-step explanation:

In order to take advantage of Health Savings Accounts (HSAs), you must be covered by a High Deductible Health Plan (HDHP). HDHPs generally cost less than traditional health care coverage, which allows you to save money on insurance and put it into your HSA. A deductible is an amount that the insurance policyholders must pay out of their own pocket before the insurance coverage starts to pay. In the context of HDHPs, this deductible is usually higher than that of traditional plans, which translates to lower premium costs.

However, individuals with an HDHP must be ready to pay higher out-of-pocket costs until the plan's higher deductible is met. While these plans can be cost-effective for individuals who do not frequently need medical care, they can be financially challenging for those who require regular medical services or who might encounter an unexpected health issue.

Aside from HDHPs, there are other insurance models like fee-for-service and Health Maintenance Organizations (HMOs). In a fee-for-service system, providers are paid according to the services they provide, while HMOs receive a fixed amount per enrollee. These models differ in cost and management of care from HDHPs, affecting individuals' choices based on their healthcare needs and financial situation.