October 23, 2012

High Deductible Health Plans & Health Savings Accounts

Participation in high-deductible health-care plans, or HDHPs is growing rapidly. According to Morningstar's director of personal finance, Christine Benz, "as health-care costs and insurance premiums have skyrocketed, HDHPs, combined with health-savings accounts, provide employers with a way to offload some of the burden to their employees. For self-employed individuals shouldering their own health-care costs, high-deductible plans might be the most (or only) affordable option." HDHPs charge lower premiums than more comprehensive insurance plans.  Participants can stash money in health-savings accounts (HSAs) to cover out-of-pocket costs of HDHPs. "Contributions to HSAs aren't subject to tax, investment earnings on the assets in the account aren't taxed from year to year, and withdrawals are tax-free, provided they're used on qualified health-care expenditures."  You can only contribute to an HSA if an HDHP is your primary insurance. "In 2012, a high-deductible plan is one with a deductible of at least $1,200 for individuals and $2,400 for families, with a maximum out-of-pocket expense of $6,050 for individuals and $12,100 for families." If you have a HDHP, check out your HSA options, focusing on fees and investment options. High fees and poor investment options (such as a money fund that pays virtually no interest) may exceed the tax advantages.  Learn more about HDHPs and HSAs at:

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