If you are considering changing your health insurance
policy, you should be aware of the alternative of a
Health Savings Account (HCA).
Health Savings Accounts started to become available
(and legal) in 2004, allowing people with
high-deductible insurance policies to set aside
tax-free money to fund medical expenses up to the
maximum deductible amount.
If you don’t have to use the funds, it rolls over
every year. Once you reach age 65, you no longer are
required to use it for medical expenses, although you
certainly can; you can withdraw funds under the same
conditions as a regular IRA.
Although you will be penalized if you use the funds
for non-medical expenses prior to age 65, you can use
the money for vision care, alternative medicine or
treatment and dental care.
For 2008, an individual may fund up to $2,900 tax
free. The maximum deductible would be $1100 and the
maximum out-of-pocket cost would be $5,600.
For a family, the maximum tax-free contribution is
$5,800 with the maximum deductible of $2,200 and the
maximum out-of-pocket cost would be $11,200.
Health Savings Accounts are certainly a viable way to
shelter income while providing catastrophic insurance
coverage in light of the high cost of low-deductible
health insurance plans.
For healthy people, it deserves some research. Consult
with your insurance agent for all of the details
involving this approach to managing your insurance
needs.