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HSAs offer option for those without insurance

Updated: May 3, 2013 12:14PM

Originally published: April 4, 2005

Health Savings Accounts are the most promising way to deal with the issue of rising health care costs and the growing number of uninsured Americans. But too many people don’t understand what they are or where to sign up for them. Now there are some easy answers.

Health Savings Accounts are a concept that combines a high-deductible health insurance policy and a tax-favored savings account. Together they cover you against catastrophic medical expenses, while allowing you to choose your physician, and save the money you don’t spend paying for health care.

Here are the two parts of the program:

High deductible insurance: Instead of buying a health insurance policy with a $250 deductible, you’d buy a policy with a $2,500 deductible for a lot smaller monthly premium. But you must pay for the first $2,500 in medical expenses each year. Don’t panic about the high deductible. You’re growing money in a separate account to pay those first health care bills.

The health savings account: The money you save on insurance premiums each year goes into a tax-deductible savings/investment account. An individual can contribute and deduct up to $2,650 in HSA contributions per year, although you don’t need to put that maximum amount of money into the account to set it up. For families, the maximum tax-free contribution level is $5,250. And if you don’t spend it this year, the money rolls over to future years for medical expenses, and keeps growing tax free.

Why HSAs make sense

Big corporations were the first to adopt HSAs, because the plans offer lower premiums. But there have been very few HSA plans available to individuals, and they require a determined search, usually through an insurance broker. Until now.

This month, BlueCross/ BlueShield of Illinois is offering a new HSA package to residents of Illinois. It’s called the “Blue Edge Individual HSA,” and it combines a traditional BlueCross/BlueShield health and hospitalization insurance policy with an insured savings account offered by one of several financial institutions.

If you thought you couldn’t afford health insurance, this is the time to take a closer look. Here are some premium examples from the Blues’ plan:

A 40-year-old man in Chicago could have complete, 100 percent health care coverage above a $1,000 deductible for $150 per month. If he were willing to shoulder the burden of the first $5,000 in expenses, the premium would be just $100. Even if a medical disaster were to occur, his out-of-pocket expenses would be only $5,000, the amount of the deductible -- probably not enough to cause a forced bankruptcy.

Since the plans are both age and gender based, here’s an example of the costs for a 50-year-old Chicago woman. With a $1,000 deductible, she’d pay $236 a month. And with a $5,000 deductible, her monthly premium would be only $157.

A family of four -- parents in their 30s with two young children -- would pay roughly $381 a month to get complete coverage after a $2,000 family deductible. And with this plan, the family can choose its own physician and hospital within the huge Blue Cross network, with no approvals needed before accessing service.

To get individualized cost information, go to Fill in the blanks for your age, location, gender, and the deductible you’re willing to absorb. You can print out an application from the Web site or you can call (800) 654-7385 for more information.

A health examination may be required, depending on your answers to the questions on the application. Once you’ve been approved, you can set up your tax-deductible HSA savings account.

Other companies, such as Golden Rule, Humana and Unicare, offer similar HSA programs for individuals. But Blue Cross is the only plan that offers optional maternity coverage. And the others require clients to use physicians in their smaller networks, or pay additional costs above the deductible for out-of-network providers.

A boon to the uninsured

If you don’t have health insurance, you’re not alone. But join those who are embracing HSAs. Research from AHIP, the health insurance association, shows that 30 percent of the people who purchase an HSA plan were previously uninsured.

Don’t risk losing everything to an unexpected and uninsured medical disaster when the solution is now easily available. That’s the Savage Truth.

Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.

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