How to Save Money on Insurance Premiums
If you are struggling with costly health insurance premiums, you may want to consider a High-Deductible Health Plan (HDHP), in combination with a Health Savings Account (HSA).
HDHPs are required by law to set a minimum deductible and a limit, or maximum, on out-of-pocket costs. Premiums for HDHPs are significantly lower due to higher out-of-pocket expenses. (Some HDHPs provide certain preventive care benefits either without a deductible or with a lower deductible.)
An HSA is an account that lets you set aside pre-tax dollars to pay for qualified medical expenses. This money can be used to help meet those out-of-pocket expenses.
Unspent HSA funds roll over from year to year. This allows you to build tax-free savings to pay for medical care later. Your funds may even earn interest, which is not subject to taxes.
The lower premium is great, but I still have to put money into the HSA.
How is this really helping me?
If you pay a higher premium for lower out-of-pocket expenses, and you do not use your coverage, your money is just gone. The money you contribute to an HSA remains available until funds are depleted.
What happens to your HSA when you retire or leave your job? The account stays open until all funds are depleted. At the age of 65, you can spend any remaining funds, any way you like, but if you aren’t spending it for a qualified medical expense it will be taxed as income at your then current tax rate.
Before you choose an HDHP/HSA combination, ask questions and do your homework. Make sure it’s a good fit for you and your family. You can get more details here.