About this time every year employers all over the nation unveil their latest, greatest insurance offerings for the coming year. They've worked over their brokers, agents, and consultants, dusted off a few old tricks and brought a couple new ones to the game.  They've frosted up this package with Betty Crocker's finest, served it up on their finest china, put it on a fork and are now playing the "airplane" game with you.

Now you're probably thinking, "what's this hillbilly talking about?"  Tell me, am I right?  You've got your enrollment package, your employer is patting him or herself on the back at what a great job they did at keeping your premium from rising, or at least rising too much and you're saying, yeh, but what about my co-pays, why do I have to pay more for drugs, what about my deductible?

Health Savings Accounts are still relatively new, having just come into law at the end of 2003.  And every year, more and more employers are beginning to offer them to their employees.  Sometimes as an option for employees and sometimes as the only option for employees.

For the past couple of years, at this very time of year my friends come to me with quizzical and dim looks on their faces and begin asking me about the high deductible health plans (HDHPs) and health savings accounts (HSAs).  My friends are fairly bright folks, but as you know, the subject of insurance is about as exciting as a flat keg of beer at a fraternity band party.

They don't mind asking me about it because they know I'm not going to try to sell them something or otherwise make them feel uneasy.  Now generally, I ask them to take a look at the information on this site because it is easy to read and it covers all the basics of HSAs.  Then I give them the advice below because otherwise the conversation would end pretty much after "Howz ya Mamma?"

First I tell ‘em they've got to get their arms around what they're spending out of their own pockets on their health care and then they need to balance that with what they could be saving with a high deductible health plan (HDHP) and health savings account (HSA).  "That's all well and good," they say, "but be more specific."

Here are my thoughts:

1.)  Add up the cost of your health care from last year and include all of your out-of-pocket expenses.  This should include premiums, co-pays for doctors, drug expenses, your deductible, how much you spent out of your flex.  The whole lot. Let me ask you a question.  Do you know what your monthly premium was this year?  Usually, when I ask my friends that question, they haven't the slightest idea.  They think the cost of a doctor visit is 45 bucks.

2.)  Adjust the figures you came up with above to allow for any increased expenses in your new plan.  This would include your premium, your deductible, your co-pay, your split after the deductible is met, increases in your drug plan, etc.  When you are doing this you can exclude any one-time medical events you may have had last year that you do not expect again in 2009.

3.)  There is a good calculator on this site you can use to figure out how much you can save if you in your HSA account of you go that route.  I suggest you try it out.

4.) Now think about the general health of your family and how high the high deductible is.  If it is $10,000 per year for example and you've got a chronic health issue that you know is going to cost you that much next year, the HSA option may not be for you (unless you have no other option).  On the other hand, if you have a chronic health issue and your deductible is say $1500 per year, the HDHP/HSA plan, if it is any good typically pays 100% of your medical expenses once your deductible is met.  If you and your dependants are generally healthy, HDHPs and HSAs can be a very good way for you to save and keep more of your hard earned money. 

5.)  Does the HDHP/HSA offered provide well-care for you and your family; physicals, mammograms, stuff like that?  If that was one of your bigger expenses last year and is included in the premium of your new HDHP, you can subtract that expense from the 2009 estimate you worked up above.

6.) If your employer is going to make contributions your HSA, deduct that from the 2009 estimate you worked up above.  It's free money for goodness sake, and you get to keep it if you change jobs before you need it for health care. 

7.)  HSAs are tax advantaged and are a great part of an overall savings plan.  In fact if you have one in addition to an IRA, fund the HSA first.  Like an IRA the funds in it grow tax free, but unlike an IRA, you can access the funds for any qualified medical expense anytime and when you withdraw for those expenses you pay no tax on the interest earned in your account up that point.

8.) I mentioned this above but it's worth its own bullet, and that is money put in your HSA by you, your mamma, your employer or any third party is yours.  So if you ever change jobs you keep what is in the HSA, regardless of who funded it.  If your new employer offers HDHPs or if you self-insure with an HDHP, you can continue to contribute to your HSA.

9.)  One of my favorite things about HSAs is that if you can afford to pay for your normal healthcare expenses out of your pocket (not out of the HSA), so long as you save the receipts for those expenses you can pay yourself back at anytime in the future.  That's is called "shoeboxing."  For example, if you contribute say $5,000 per year for 5 years (you are a great saver!) you'll have accumulated $25,000 plus interest in the account.  If during that time you had say $10,000 in qualifying medical expenses and saved the receipts you can basically "pay yourself back" tax-free.  Write yourself a check for $10,000 and use it to pay for your kid's education, pay down your mortgage, put it toward a car.  Your call. 

A great benefit of electing an HDHP and HSA is that it gives you the opportunity (it kind of forces you) to really try and understand what you're spending for healthcare.  The more you understand the smarter, more efficient healthcare shopper you can become.   Good luck and God bless.