How You Can Benefit From a Health Savings Account
From the August issue of Kiplinger's Personal Finance
Anyone can lower health-insurance premiums by raising the deductible. If you choose a deductible of at least $1,150 for single coverage or $2,300 for family coverage, you can make a tax-deductible contribution of up to $3,000 (or $5,950 for family coverage) to a health savings account in 2009, which you can use tax-free for medical expenses in any year.
An HSA can be particularly beneficial for early retirees, who can cut their premiums substantially by raising the deductible (you can also contribute an extra $1,000 if you're 55 or older). For instance, a healthy 55-year-old man in Illinois can get a Humana HSA-eligible policy with a $5,200 deductible for $207 per month, or $179 with no drug benefit.
You can't contribute to an HSA after you sign up for Medicare, but you can use the money tax-free for medical expenses at any time, and you can use it penalty-free for anything after age 65. You can even use HSA money to cover premiums for Medicare parts A, B and D, and for Medicare Advantage plans (but not to pay medigap premiums). An HSA can also help pay qualified long-term-care premiums. (For special HSA rules if you lose your job, see Ask Kim.)
Looking for ways to cut health-insurance premiums? See Score Big Savings on Health Coverage and listen to Kiplinger's Contributing Editor Kimberly Lankford share tips for finding affordable coverage.