Help with Health Insurance Bills
Look into switching to medical coverage with a high deductible, and set up a health savings account.
From Kiplinger's Personal Finance magazine, March 2004
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Pamela Wimbish was one of the first people in the U.S. to take advantage of the new medicare law -- and she isn't even retired. Wimbish, 54, is self-employed as a furniture-manufacturers' representative in Aurora, Ill. Within days after the legislation took effect, she purchased a high-deductible health-insurance policy and set up a health savings account (HSA) through Fortis Health. "I don't mind paying out of pocket for an occasional visit to the doctor, in exchange for lower premiums," says Wimbish, who saves $245 a month in premiums with her high-deductible plan. "And I look for every opportunity I can find to save on taxes."
If you purchase your own medical coverage -- either because you're self-employed or because your employer doesn't offer insurance -- now's the time to switch to a high-deductible policy and set up an HSA. In Wimbish's case, she will contribute $2,550 -- the amount of her annual deductible -- to a Fortis HSA over the course of the year. Not only is that money tax-deductible, but it will also accumulate tax-free (the Fortis account pays a variable rate that's currently 3%). Wimbish can tap the money to pay for out-of-pocket medical expenses now and in the future. "I can roll over the balance each year, so it becomes another retirement account," she says.
Fortis and Golden Rule, a small company that was recently purchased by UnitedHealth Group, specialize in high-deductible policies for individuals who buy their own coverage. Many Blue Cross and Blue Shield plans also offer high-deductible policies. Within a few months, look for banks, credit unions, mutual funds and other financial-services companies to compete for your HSA deposits.
Singles can put as much as $2,600 into an HSA this year. The limit is $5,150 if you have a family policy, and you can add $500 in either case if you'll be at least 55 by year-end.
