This is a guest post by Miranda Marquit who is a personal finance writer that contributes to several personal finance blogs and websites.
One of the strategies you can use to save money on your health insurance premiums is to add a Health Savings Account (HSA) to the mix. A Health Savings Account helps because you can only open one if you have a high deductible health plan. If you raise your deductible on your health insurance plan, then you can find through online insurance quotes that your premiums go down. You can put a portion of the money you save from your premium into a HSA, where it will grow in much the same way that an IRA does. Another bonus is that contributions to your HSA are tax deductible, so you save money by having your taxable income lowered.
The Money In Your HSA Is Yours
One of the great things about a HSA is that it belongs to you. Some insurance companies will help you automatically put money into a HSA if you choose a high deductible plan, but that account is not the insurance company’s; it’s yours. The same is true of arrangements made with employers. This money is yours, and it grows tax-free, as long as the money you withdraw is used for qualified health care costs.
The HSA strategy works well because you can use the money in your Health Savings Account to pay co-pays, and to pay the out of pocket expenses that help you meet your higher deductible. And, because a HSA functions like an IRA, you can actually start taking distributions from it at age 59.5 (but you will have to pay taxes on any money you withdraw and don’t use for medical purposes). A HSA can do duty as a back-up retirement plan if you end up not using the all of the money in it for medical costs.
A HSA Isn’t For Everyone
A Health Savings Account can be a great tool that allows you to put more of your money to work for you, and help you better manage your health care costs. However, a HSA isn’t for everyone. In some cases, it might not actually make sense to have a HSA. If you have high medical costs, or if you make frequent visits to health care professionals, you may end up using your entire deductible. If you regularly meet your deductible, that high deductible, plus the premiums you are paying, can be too expensive. Those with chronic conditions, or those who need expensive medications may not benefit from a Health Savings Account.
The HSA works best for those who have few health care expenses. You can put your premium savings into the HSA to be used to cover your out of pocket costs, and you are still covered in the event that something unexpected, like a hospital stay, happens. For many, the HSA is one of the most practical ways to save money on health care costs, while ensuring proper coverage.
Miranda contributes to several personal finance blogs and web sites, including InsuranceQuotes.org, a site specializing online insurance quotes.