A Healthy Menu
You could save a bundle on your insurance if you choose the right options.
By Kimberly Lankford, Contributing Editor
From Kiplinger's Personal Finance magazine, October 2005
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Saving with an HSA. If you can keep your money in the account for the long term and use cash for current medical expenses, you'll make the most of the HSA's tax advantages. "If you've maxed out your 401(k), an HSA is a good savings strategy," says Jon Kessler, chairman of WageWorks, which provides employer-sponsored spending and savings accounts.
Randy and Shari Saxton have built up more than $9,000 in their HSA since they opened the account two years ago. Randy's employer, McCook Boiler and Pump, of Tucson, contrib-utes $200 per month, and the Saxtons pitch in about $200 more.
The Saxtons have had few medical expenses and have made the most of cost-saving tools that cut down on the need for doctors' visits. Their tax-free stash will come in handy if daughters Alexia, 10, and Bridgett, 8, need braces in the next few years.
If you choose a high-deductible policy, shop around for your health savings account. Although many providers offer only money-market accounts, others will let you invest in mutual funds, too. "Once the average account balance hits several thousand dollars, you'll see much more aggressive brokerage and fund options," says Stephen Neeleman, chief executive officer of HealthEquity, an HSA administrator that plans to offer brokerage accounts by year-end.
High fees could offset your tax advantages, warns Kessler. Jim Colosimo shopped for HSA providers at HSA-Finder.com and found a plan with no set-up charge. He pays $5 per month and can invest in mutual funds as well as a money-market account (www.hsainsider.com is also a good resource).
Going solo. If your employer's coverage gets too expensive, you might get a better deal for yourself (or your family) with an individual policy -- if you're healthy and live in a state with a competitive health-insurance market.
Before moving east, Chris Ott, 29, was a self-employed lawyer in California. But when he took a job in Washington, D.C., he was shocked to find that his employer charged $200 per month for health insurance. The deductible was low and the coverage comprehensive, but with few medical expenses, Ott was primarily interested in catastrophic protection. "My first concern was the monthly payment," he says. "If I go to a doctor, it's for something pretty serious."
Ott shopped at eHealthInsurance.com and bought an Aetna policy with a $5,000 deductible that costs him $64 per month. If you're considering an individual policy, be aware of any exclusions for preexisting conditions, says Gary Claxton, of the Kaiser Family Foundation. -- Research: Joan Goldwasser