How to Safely Reduce Your Health Insurance Cost
by Tom Russell

   A few years ago Congress made “Health Savings Accounts” permanent. The program benefits all Americans under 65. However, to qualify for a tax-free Health Savings Account (HSA), you must acquire a high-deductible policy that does NOT have co-pay benefits for doctor visits or prescriptions

   Is this the best way for Arizona residents to own health insurance? The numbers tell an interesting story.

   Let’s say you and you and your spouse are both 50 years old. If you purchase a traditional co-pay plan with a $1000 deductible at the hospital, your total combined monthly premium (with a well known Arizona insurance company) would be $690. You can use your co-pay right away for doctor visits and prescriptions; you do not have to meet your deductible first.

   Now, staying with the same insurance company, if instead of a co-pay plan let’s say you opt for the HSA (Health Savings Account) high deductible plan. What happens? Yes, you lose your co-pay and your deductible climbs to $5500. This means your medical expenses are paid by you and accumulate toward your deductible. Once the deductible is met, the plan pays 100% of your eligible expenses for that year, including doctor visits and prescriptions. However, your total combined premium drops to $325 per month. This is a savings of $4280 per year in premium! What if you took all or just part of this $4280 savings and placed it in an HSA account? You would instantly get a tax deduction for the full amount of your deposit, and the account grows tax deferred.

   Once you acquire a policy that is “HSA Qualified”, where do you open your tax-free HSA account? It does not have to be through the insurance company that sold you the policy, but can be with the financial institution of your choice. As one example out of many, just do an internet search on “Wells Fargo Health Savings Accounts” or “Vanguard Mutual Funds Health Savings Accounts.”

   You can make a new HSA contribution every year with no upper limit on how high your account value can grow. The only limit is how much you can contribute in a given year, which is $3000 for an individual and $5950 for a family. Money dispersed from this account, when used for medical and dental expenses, is tax free. What happens when you turn 65 and go on Medicare? You can convert your HSA account to an IRA, or let it stay in the HSA for medical expenses during your retirement.

   HSA accounts also have 100% deductibility for long-term care insurance. Yes, your entire LTC premium can be paid from your tax free HSA account. Dental, prescriptions, doctor visits including chiropractors and naturopaths, plus glasses — all of these items and many more can be paid from your HSA account. It just requires a new way of thinking about health insurance – a willingness to give up coverage for the little expenses in favor of tax benefits and lower premiums. However, Health Savings Accounts may not work well for a young family, where frequent doctor visits are the norm. For everyone else, they deserve a very close look.

Tom Russell is a health insurance broker based in Payson, Arizona,  with fifteen years of service to Arizona and Utah residents. He can be reached at (800) 745-3570  or online at www.TomRUSSELLinsurance.com