Should I Switch to an HSA?

Dave explains the basics of the Health Savings Account (HSA).

QUESTION: Anthony is considering switching his traditional health insurance to a Health Savings Account (HSA). Is that a good idea?

ANSWER: The HSA could be the answer to the health care crisis we have in America. For example, if you have a typical couple at 30-years-old, they can get an 80/20, $1,000 deductible policy for $250 a month. If that same couple took out an HSA they could get that same plan for $150 a month.

The difference is that the HSA will pay 100% of the costs after the deductible. But the deductible is much higher – like $5,000. You’re saving $100 a month though. With the HSA, you’re also allowed to save your deductible annually into a tax-deductible savings account, and it grows tax-deductible.

For this type of health care insurance to work, you need to have a good emergency fund for the minor doctor’s visits that will come up. You also need to take the $100 each month that you’re saving and put that toward saving.

The HSA is fantastic for people who are not chronically ill. For a healthy family, the HSA is a perfect plan.

The other great thing about the HSA accounts is that it forces the insured to apply market pressure to keep medical costs reasonable.