MAGAZINE   November Magazine Contents Web Links Past Issues Try a Free Issue Customer Service Feedback GETTING STARTED Life Insurance Made Simple Smart Shopper's Guide to Auto Insurance Fill the Holes in Your Homeowners Insurance Buying Your Own Health Insurance Health Savings Account Answers Why You Need Long-Term Care Insurance MORE... INSURANCE TOOLS How much should I put in my flexible spending account? Estimate your medicare prescription drug savings How much life insurance do I need? How can I reduce mortgage insurance costs? HSA Q&A   Still have questions about HSAs? Share them in the Kiplinger.com Community.

INSURANCE
A New Way to Save on Premiums
(Page 4 of 4)
by Mary Beth Franklin & Kimberly Lankford

Michael Kitces, financial-planning director for Pinnacle Advisory Group in Columbia, Md., says higher-income workers of any age who can afford to cover medical expenses with other savings, rather than tapping their HSAs, could also benefit. Their HSAs can serve as another source of tax-deferred savings for retirement.

Depending on the specific details of the insurance policy and employer contributions to the HSA, those in poor health or without excess cash flow will probably be no worse off if they choose an HSA option, although they may end up spending all the money in their account each year.

On your own

For many self-employed people, early retirees and part-timers without benefits at work, an HSA will often prove the best choice. That's what Carl Blachowicz discovered when his wife, Debbie, retired from AT&T. As the owner of a one-man auto-repair business in Orlando, Carl didn't worry about insurance as long as Debbie was working: The couple paid about $80 a month for coverage for themselves and their two children. But when Debbie retired, the premium would have jumped to more than $1,200 to stay on the AT&T policy.

Then Blachowicz discovered a better way to protect the family. Debbie stayed on the AT&T policy -- for $440 a month -- while Carl and the kids shifted to a policy from Assurant Health that had a $5,000 deductible. Premiums cost $230 per month. Most of the savings goes into an HSA.

HSA contributions lower the family's tax bill, and because Carl is self-employed, he can also deduct 100% of his premiums. He currently keeps the HSA money in Assurant's fixed-rate account, which is earning 3% per year, and will switch to an investment account once he builds a bigger balance. "It's one of the better things I've done since I've been in business," he says.

--Research: Amy Esbenshade

SHOPPING SMART

In search of the right HSA

Companies that offer an HSA option will have chosen the insurance company and the home for the savings account for you. If you're shopping for a plan yourself, check out the HSA Insider for companies that write HSA-eligible policies. Assurant Health, Golden Rule and several Blue Cross and Blue Shield plans have already introduced HSA-eligible policies, and more insurers are expected to come on board in the next few months. You can get quotes for HSAs in most states through eHealthInsurance.com. (One caveat: If you're buying the insurance on your own, insurers may be able to reject you based on your medical condition -- just as they can do with any other individual health insurance. The rules vary by state.)

Once you have narrowed your policy choices, shop for the savings account. Some insurers offer the account as part of a package; others just sell insurance and you set up the HSA with a bank or financial institution. Currently, most companies limit your investment options to fixed-rate accounts, but a few let you invest in mutual funds, which could be a good choice if you plan to keep the money in the account for the long haul. If HSAs catch on with employees and balances grow, mutual fund companies will probably begin offering HSAs, and it's likely that employers will introduce savings accounts with options similar to the investment choices inside 401(k)s.

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