What's an HSA?

An HSA-compatible plan is a rather new option that functions similarly to an IRA, the retirement account people are more familiar with. I’ll give you a thumbnail sketch here and point you toward some more data if you’re interested. With an HSA plan, you take a high deductible health plan and combine it with a tax-free health savings account. (Tax free in the sense that anything you deposit in the account is tax-deductible, and you’ll never pay taxes on it as long as you use the money to pay health-related expenses). In an HSA plan, you’re typically paying for catastrophic coverage only. In other words, you’re on your own with expenses up to your deductible amount (doctor visits, meds, etc.), but the plan will kick in at 100% once you reach that deductible. Some HSAs give you a preventive care option that will take care of mammograms, OBGYN, physicals, up to a set dollar amount per year.

In the meantime, since your monthly premiums are cheaper on a high-deductible plan, you’re putting some of the savings into your health savings account, which you can then use to fund your expenses up to the deductible. The money in that account is YOURS. It grows with interest, rolls over year to year, etc.

That’s a basic sketch of an HSA-compatible plan. For more info, www.HSAbank.com has some helpful information. (That’s an online bank that specializes, obviously, in health savings accounts.)

HSAs aren’t for everyone, but if you can take the mental leap to consider a plan that would have you paying out-of-pocket for doctor visits and the like, meaning a major-medical or catastrophic plan, you’ll find them to be a very interesting option. That’s the biggest hurdle for most people to overcome, even though I think these plans make a whole lot of sense for a whole lot of people. (Both of us have our own families on an HSA plan). With the tax savings your health dollars go farther, and if you’re healthy you can build up a nice chunk of tax-sheltered money that you’ll probably need eventually.