Familiarize yourself with health savings accounts

From the South Florida Sun-Sentinel
Humberto Cruz:
The Savings Game

They won't magically solve the problem of rising health-care costs, and they won't work for everyone. But more Americans should become familiar with health savings accounts, or HSAs for short.

Few are. A survey by the Kaiser Family Foundation in February found 45 percent of Americans had not even heard about HSAs, which have been available since 2004. Another 24 percent had heard about HSAs but did not know what they are.

HSAs are tax-advantaged accounts that allow people not yet eligible for Medicare to set aside money for future health-care expenses. To be eligible to open an account under government rules, your only health insurance must be a high-deductible policy. (For 2006, the deductible must be at least $1,050 for single coverage and $2,100 for family coverage. Nearly 3.2 million Americans were covered by HSA-eligible policies as of January, according to the industry group America's Health Insurance Plans).

The idea behind HSAs is that, by accepting a higher deductible, you can lower your premium. Then you set aside the money you save in the health savings account.

Proponents of HSAs say they encourage consumers to shop wisely for medical care and drive down costs. Opponents claim they benefit only the young, well off and healthy, and may discourage people on tight budgets to seek needed care.

Whatever your point of view, this is the problem: According to an annual estimate by Fidelity Investments, a 65-year-old couple retiring this year without employer-sponsored retiree health insurance needs $200,000 just to cover medical costs in retirement....for more of the story