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Employee Benefits

How You Can Benefit From a Health Savings Account

From the August issue of Kiplinger's Personal FinanceAnyone can lower health-insurance premiums by raising the deductible.

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.

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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.

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