By Andrew Housser
If you've complained that you have no control over your health care dollars, brace yourself: In the future, chances are good that you'll have more control than you ever dreamed of.
That control is likely to come in the form of a health savings account (HSA). These tax-benefited accounts allow consumers to save money (and earn interest on those savings) specifically for health care expenses. HSAs come with high-deductible health plans, which offer health insurance coverage with a much higher deductible than comes with an HMO. An individual deductible might be $1,000 to $2,000, and a family deductible might be $5,000 to $10,000.
High-deductible plans save consumers money on monthly premiums, with the idea that they invest tax-deductible contributions in their HSA. Then, if a medical need arises, a consumer can pay qualified medical expenses from the HSA fund (on a tax-free basis) -- thus paying for health care with pre-tax dollars. The funds in the HSA roll over from year to year and can be maintained indefinitely if they are not needed.
In 2007, about 20 percent of U.S. employers offer a high-deductible health insurance plan, but nearly half anticipate doing so in the future, according to Hewitt and Associates. The catch is that for many people, having enough savings in the HSA to cover the deductible can be a daunting hurdle. (To understand contribution rules, see http://www.kiplinger.com/columns/ask/archive/2007/q0118.htm.) For those in this situation -- or those who are switching to an HSA for the first time -- here are some tips to help with accumulating an HSA nest egg.
Remember, as long as you don't exceed your annual contribution limit in any single year, there is no such thing as too high an HSA balance. The money in the HSA belongs to you. It is an investment in your future health.
|Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.|