How can I use my HSA to help me save on premiums?
Bob Hurley: The way that you save on your Health Insurance Premium when you get into a Health Savings Account arrangement which again is referred to as an HSA plan is that in order to get an HSA, you have to have a Higher Deductible Health Insurance Plan and so typically, your deductibles on your HSA eligible Health Insurance Plan are going to be in the $1500.00, $2000.00, $2500.00 range depending on whether you are buying a health insurance on your own or you are buying it for your entire family.
So by buying a Higher Deductible Plan, you lower your monthly premiums and often times, you can save hundreds of dollars a year on your premiums and the idea then is that you would use some of those savings and fund your Health Savings Account to have it there for you.
A second way that you can start to save really significant money through this HSA type of health insurance product is starting out in your HSA, you may want to buy a lower high deductible plan and forgive me for those words but basically, if the minimum to get a qualified plan is $1200.00 deductible plan, you may want to start with that $1200.00 deductible plan knowing that you don't have many savings in your Health Savings Account yet.
So in year one, you buy that lower deductible, high deductible plan and you start saving money. Now in year two, let's say you haven't spend any of that money you put into your Health Savings Account, so now you have a little savings built up to buffer any deductible amount that you might have on a health plan. In year two, you might want to increase your deductible on your health insurance plan to $2,000.00 because again, now you have got some savings in that account. By raising your deductible in year two to $2000.00, you save more money on your Health Insurance Premium, allowing you to put additional money into your health savings account.
So again, in year two now you are saving at a higher rate. Let's say that same scenario continues now in the year three. You have been able to save a lot of the money in your savings account. You are at a $2000.00 deductible. You’re now in year three, take that deductible up to $3000.00 and again, you can see the cycle that you are creating by doing so, you reduce your monthly premium on your health insurance so you get even more, you free up more money to go into your health savings account, you can accelerate your savings into your Health Savings Account and continue to build momentum into that very tax advantaged savings account for yourself.
So as you can see, by using this combination of products, the Health Insurance Plan with the saving account, you can really create some momentum in your savings on your Health Insurance Premiums and you can create momentum on your savings and as you obviously, build up your savings, the interest earnings on that account increases. So it's a very powerful tool and once you get comfortable with it, there is a lot of ways that you can continue to enhance your financial situation with regard to managing your healthcare.
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