If you have a high deductible health plan (HDHP) which has a higher annual deductible than typical health plans. As of the writing of this article, to be an eligible individual and qualify for an HSA, you must meet the following requirements. If I want, I can put the entire allowable contribution in again each year so my savings account would really start to grow! Last year we had only $2,000 in expenses that we needed to pay for with the HSA money, leaving us $3,000 to start the next year with. For our family, we saved $4,000 in premiums so it almost entirely funded the $5,000 HSA. Individuals and families can qualify for an HSA by purchasing health coverage with a large deductible.

How does it work? In nearly every case I have run for people, they will win taking the HSA. Be sure to check current IRS requirements for HSA eligibility; If you are eligible to have a HSA, look closely at it. If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse's coverage does not cover you.

If you cannot be claimed as a dependent on someone else's tax return. 'You have no other major health coverage. Out-of-pocket expenses include co-payments and other amounts, but do not include premiums. A HDHP also must have a maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. You can use the money in the HSA to pay for medical expenses that are not paid under your health plan. The contributions into the HSA are tax deductible just like contributions to an IRA or 401K plan. Take those savings and put them into a HSA. Odds are this will save you a bunch on the premiums you pay. Let's say you choose a $5,000 deductible with 100% coverage after that. The same principle of taking the highest deductible you can afford applies. What if you are not eligible to have a HSA?

I have included a HSA worksheet at my web site for you to review Put in the numbers and see if it works for you. Think what would happen if we all watched medical expenses the same way we did when looking for value in a new car or home. Health insurance can often equal or surpass what you pay for a car or house payment on an annual basis. We did so because the money was ours, not the insurance company's or the government's. We made sure we were getting the best service for price for those health expenses. That $2,000 we spent was not wasted. So how does this promote competition?