Health Savings Accounts

We shouldn't be paying for ordinary expected medical items by insurance. It costs more and restricts our choice. We should prefer compensation for our work to be in higher wages rather than in medical insurance and we should ideally have our own insurance that fits our needs and that we don't lose if we change jobs.Trump's administration plans to lower insurance costs by increasing competition across state lines and allowing insurance pools outside of employers. And high deductible insurance that kicks in only when we run into serious problems is much cheaper. But medical prices are high and what do we do when we need that MRI or colonoscopy.

Enter Health Savings Accounts. Basically it's a bank account that you fund periodically and then draw on for medical expenses. One place you get the money is from what is saved from the lower high deductible insurance premiums. What's the point of that, you say. Aren't I coming out the same in the end? Not at all. Because what's in the HSA is your money, that stays in your account if you don't spend it and that builds up over time. So if you decide on getting only what you really think is necessary and shop around for the things you do want and follow good health practices, then the money you save goes to you and not the insurance company.

In addition it's not just a savings account, but it's more like an IRA since the money in the account is tax exempt. And as you accumulate more than you need to pay your medical expenses you can put the rest into something interest bearing like a mutual fund which is also tax exempt. So it's really a better way to save for the future than an IRA because you can take the money out for medical expenses without penalty. And when you do retire you can actually use the money for any purpose without penalty.

The other good thing is that you don't need to worry about restrictions from the insurance company as to how you use the money other than that it has to be used for health related items. There are some government restrictions like you can't use it to pay for the gym or buy toothpaste but generally they're pretty liberal so that for example dental and vision and taxi rides to the doctor visits are fine.

So the smart thing to do is to get your company to set up an HSA, give you a really high deductible medical policy and put the money saved from the lower premiums into the HSA. When you change jobs the HSA, and the money in it, goes with you because it's yours. And if you have to buy your own medical insurance, do the same thing. The banks that offer them usually don't charge you, they keep track of the fund and you get a debit card and a checkbook to make payments from the account. Generally even if you pay a bill with the HSA it's best to pass it through the insurance since you get the discounted price.

Generally the Democrats have been against HSA's and have tried to slow them down because they tend to move us away from a government controlled medical care system. However even though most people are not familiar with HSA's the numbers of people who have them are rapidly growing because it's such a good idea. You'll be hearing much more about them when Trump and his health care team take over.