Health Savings Accounts — Right for You?

Following just on the heels of the war on terrorism, the rising cost of health care is likely the top hot-button topic for this election. (That is, of course, unless you’re talking to someone who doesn’t care who’s elected, as long as it’s not George Bush.) For the rest of us, we’re probably going to be considering the impact on our personal lives when we make a voting decision and, with an estimated 27 million people without health coverage, I suspect this issue will be a driving factor.

The real question then, is which plan has a better chance of providing the promised coverage without hindering freedom? Strangely, even after spending considerable time trying to determine the specifics of the Kerry plan, I wasn’t able to find anything more specific than “We have a plan.” Personally, I think Health Savings Accounts (HSA’s), which were a part of the Medicare reform and are already a reality, are the better bet. In a nutshell, here’s how they work:

First, you buy a high-deductible ($2,500 – $5,000) insurance policy. Since your deductible is higher than most other plans, your premiums should be considerably less. Then you put tax-free money (up to $5,150 for families) into your Health Savings Account. When you go to the doctor, the payment for the visit comes out of this account. If you exhaust the entire deductible, the insurance kicks in and picks up 100% of the tab. (This provides the “safety net” of catastrophic insurance.) If you don’t use all of the money in the account, it rolls over to the following year. The money can be used for medical purposes at any time without tax. Once you hit 65, you can begin withdrawing the money for retirement. Since you have complete control over how this money is spent and get to keep the remainder, the theory is that you’ll become a wiser consumer (looking for better prices, buying generic medicine, etc.)

You can get more information about HSA’s at the HSA Insider.

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