Make Sure You Set Up That HSA

For individuals and families buying health insurance for themselves, the smart decision is to get a high deductible health plan and not to buy a plan with copayments for prescriptions and office visits. The reason is simple – it will cost you much less in the long run.

However, if you do this, you must set up and fund an HSA!

There is a lot of evidence right now that when someone has a copay to see a doctor, that they will see the doctor many more times than someone who has to pay for the service out of their pocket. Which means that person is more likely to see a doctor when it is really needed and they will end up avoiding more expensive medical care.

The big advantage of the high deductible health plan is savings and protection. It protects you from the large health care expenses and saves you money today on your premiums. But don’t be dollar wise and penny foolish and not get the routine care you need on a day to day basis.

One of the best ways to help you avoid making cost decisions for care you need is by setting up a Health Savings Account (HSA). My recommendation is take at least half of what you save by purchasing a high deductible plan and investing in your HSA. For my family its $100 a month, and that covers all of our routine care like pediatric visits and prescriptions. We have a debit card attached to the HSA, so its easy to use as well. After all of our treatments, we even have money left over at the end of the year – and the interest is tax free.

Having the money in the HSA will help you avoid the mistake of not going to the doctor when its needed and will help you spread out the expenses you will certainly face as you take on a greater share of your necessary medical expenses.

And if you don’t use the money, when you turn 65 the savings that are there are the same as the money in your IRA. So its your’s to use without penalty. But you can still take the money out tax-free for medical expenses – which will be one of your biggest expenses when you retire.

Happy Hunting!