Are You Paying Too Much For Health Insurance?

Almost everyone knows how important health insurance is, but with rising costs, not everyone can afford it. Generally, high deductible health plans (HDHP) provide insurance that is far less expensive than other plans. If you combine the tax savings of the Health Savings Account (HSA) with the lower premiums of the HDHP, you may be able to substantially reduce your health care expenses.

An HSA is a tax‐exempt account you use to pay for certain medical expenses. If eligible, you may claim a tax deduction for contributions to the HSA account even if you do not itemize deductions.

Another benefit of the HSA is that medical expenses that are otherwise not deductible can be paid for with tax deductible funds. For example, the Treasury Department has said over the counter drugs such as “aspirin” are eligible expenses. [Effective 2011 you can no longer by non‐prescription medication with HSA funds]

Unused contributions remain in the account and the interest or earnings grow tax free. HSA investment options are very flexible and range from money market funds to stock market mutual funds. Most HSA custodians provide check writing and debit cards making it very easy to use the accounts.

The combination of the HSA and the HDHP is not appropriate for everyone, but it’s a perfect example of the benefits of comprehensive financial planning. By taking advantage of the HSA tax benefits, selecting appropriate investments, and choosing a compatible insurance plan, you can drastically reduce your health insurance costs.

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