You can go for years faithfully paying premiums and not have a major illness or injury. That’s slanted in favor of the insurer. And, if you got a plan with a deductible because the low premiums looked good, you could pay for your own health care bills until that deductible has been met every year. So, who’s covered by that arrangement?
Having a policy that lets you start a Health Savings Account (HSA) could shift the balance in your favor, but November is the last month you can get HSA tax advantages for 2012. If you want a greater return on your investment in health insurance, here’s what an HSA-qualified policy can do.
From conception through old age, certain preventive health care practices, like checking blood pressure, cholesterol, etc., have been recommended as substantially maintaining well-being. Those services are covered by insurance companies every year whether you meet the plan’s deductible or not ? though only policies issued since March 23, 2010, must provide this benefit. As a result, these newer plans may be more expensive than older “grandfathered” plans.
Do you favor policies with deductibles because the premiums are on the low end? If that works for you, get the best tax advantages available to help you in years you end up paying for health care before the deductible has been met. With a policy that works with an HSA, you can deposit pre-tax money in your account, or you can deposit post-tax money and claim a tax deduction for it. HSA earnings are not subject to taxes, either.
Even if your employer funds an HSA for you, that money is yours whether or not you remain with that job. You can use HSA contributions, interest, and other earnings to help you pay for health care that you or your family need, or you can save HSA money for retirement. Once you sign up for Medicare, you won’t be allowed to contribute to your HSA, but you can keep using the balance to pay for health care without the withdrawals being taxed. You can also let your HSA investments continue to grow because you’re not required to liquidate an HSA as you must an IRA.
Once you’re retired, HSA money is available to spend on anything. You’ll have to pay taxes on money you withdraw to pay for something besides health care, but you’ll have been getting tax-free earnings for years by then.
An HSA-qualified policy evens the score. This is why I like the advantage an HSA gives me. In years when my health is good, I pay lower premiums and save with tax-free earnings to build my savings instead of the insurance company’s bank account. And, my HSA plan covers preventive services to keep me healthy, but it’s also there with major medical coverage in case I do need it someday.