Let’s first look at traditional major medical insurance:

Generally, most people own a low deductible major medical plan with a $20 or $30 co-pay feature to cover routine medical procedures such as doctor office visits and the like. The premiums are very expensive and usually increase each year, sometimes by as much as 20-30% or more. These increases may feel especially harsh on those individuals and families who are in pretty good health and fortunate enough not to need their medical insurance very often. Unfortunately, there is no financial reward at the end of the year for those using a limited amount of their health insurance benefits. So you continue to pay high premiums year after year and there is nothing you can do about it. Until now…

Introducing HSA Medical Plans

HSA medical plans are basically two plans rolled into one. The first plan is high deductible health insurance coverage – the second plan is a savings account that is also qualified by the IRS as an IRA (Individual Retirement Account) and because this plan is qualified by the IRS it is fully tax deductible. Each year, 100% of the amount you put into your HSA account is fully tax-deductible. In 2004, individuals can deduct up to $2,600 and families can deduct up to $5,150. Self-employed can also deduct 100% of their health insurance premiums.

Here’s how they work together

It all begins with your personal health insurance coverage. In order qualify the plan must meet one very important requirement, have a high deductible. For individuals, deductibles begin at $1,000; for families, deductibles begin at $2,000. This can be very beneficial in several ways:

• A high deductible means lower insurance premiums
• Less chance of high rate increases every year
• Underwriting flexibility for many pre-existing health conditions

It is important to note that many health insurance plans which qualify to be part of the HSA program are offered by top rated insurance carriers nationally. As a matter of fact, qualified health insurance plans are virtually identical or maybe better that the health insurance plan you own today, with two basic modifications; the way deductibles and co-pays are handled. This is where your “self-directed” Health Savings Account comes into the picture, it puts you in control of your basic health care expenditures.

Is HSA right for you?

Each situation is different, but most experts agree that virtually everyone can benefit from an HSA. One of the first things to consider is your ability to qualify for a new medical plan. If you are in good health, a qualified high-deductible plan will significantly reduce premiums. The savings you realize from the lower premium can then be redirected in your tax-deductible HSA account and used when needed, as well as accumulate for future needs.

Are there any negatives associated with an HSA plan?

Some insurance agents do not want to take a lower commission with an HSA, as opposed to selling a higher premium policy. Some insurance companies may not want less premium dollars (which instead go into your account). In addition, some people who are used to paying co-pays may have a hard time understanding the concept, or react emotionally to a higher deductible amount, without understanding the “money in the savings account” part of the equation.

To achieve optimum performance, plan participants must have the discipline to fund the health savings account.