Health Savings Accounts - The Alternative to Standard Health Insurance

By: Chip Cantrell

Health insurance costs are skyrocketing. It is not uncommon for a family policy covering the parents and three children to be priced in the range of $900 to $1,000 per month. Many people are finding they don't have the money to pay for these premiums. Going uninsured is risky, but more Americans feel they have no other choice. As a result hospitals are shifting costs to privately insured patients to make up for the growing number of uninsured patients that are unable to pay for the care they receive. So what can be done? This seems to be a terrible Catch 22. The increases in the costs of care resulting from the uninsured drive up the price of premiums on private insurers while the premium increases drive up the number of uninsured. Are we spiraling out of control? Enter Health Savings Accounts!

A Health Savings Account (HSA) is an interest bearing checking account used to accumulate funds to pay for high deductible health insurance and out-of-pocket healthcare costs. These health insurance plans should pay for 100% of covered costs after you reach the deductible.

Contributions to these plans are tax-deductible if made by an individual or excluded from the employee's taxable income reported on their W-2 at year-end. To qualify for an HSA, you must meet the following criteria: (1) You must first be covered by a single high deductible health plan; (2) You cannot be entitled to Medicare benefits; and (3) You cannot be eligible to be claimed as a dependent on another's tax return.

After the health plan has been obtained, an HSA is set up with a financial institution. You may find that many local banks offer these accounts and can even help with obtaining the initial health insurance coverage. Or you can first contact an insurer such as Blue Cross / Blue Shield and they can help you with both the insurance and banking needs. In either case, the establishment of the account is relatively easy.

The main benefit to these accounts resides in the fact that you are saving money that belongs to you to pay for healthcare. Therefore, a person is more likely to try to stay healthy and live a healthier lifestyle to be able to hang onto their own money. In fact many of these high deductible plans offer wellness coverage without a deductible to enhance this benefit. These accounts also lead consumers to make more informed decisions in healthcare and to seek out cost savings on their own in obtaining care. This may finally put the market back in control of healthcare costs. The highest quality of care at the best price will finally apply to hospitals too!

There is one big caveat with these plans. Until you have accumulated enough funds in the account to cover the deductible. Any healthcare costs you have in excess of the funds in the account will have to be paid by you. Also, the insurance premiums are substantially lower. However, you must take care to deposit enough funds in the account on a regular basis to ensure sufficient funds for both the premiums and out-of-pocket costs. But, once you have accumulated sufficient funds in the account to cover out-of-pocket costs, you may be able to reduce your monthly payment to simply the amount of the insurance premium.

HSA's are not for everybody. But, they are definitely worth a look. It's easy enough to go to your health insurer or local financial institutions and run the numbers. You might be pleasantly surprised. Hey, a buck's a buck. Save all you can!