Give your HSA a checkup

Ironically, despite being one of the simplest health insurance options available, HSAs have battled confusion on all fronts, from insurance agents to accountants to consumers.

Insurance agents initially didn't know how to sell HSAs and feared the new program would cut into their lower-deductible health insurance products. Accountants had to learn the tax rules and annual limitations regarding tax-deductible HSA contributions. (For 2008, contribution limits are $2,900 for an individual HDHP and $5,800 for a family plan).

Some consumers may have confused the government-controlled contribution cap, which regulates the tax advantages of the HSA, with the unregulated premiums they pay to the insurance company.

As a result, they may be paying higher premiums than necessary.

Eric Tyson, co-author of "Taxes 2008 For Dummies," notes that an HSA is not a "get-out-of-premiums-free" card as some would believe.

"An HSA won't free you from the pain of having to pay a monthly premium, but they can lessen the pain," he says. "That's because the high-deductible policies required for HSAs have much lower premiums when compared to those of traditional insurance."

HSA checkup

While many people continue to enjoy the lower health insurance premiums associated with HSAs, others have seen their premium costs rise.

Long explains that many health insurers group (or "block") the health plans associated with an HSA together into a pool. As the holders of those plans age, claims start coming in, prompting the insurer to raise rates on the health plan.

That, in turn, prompts healthy people to leave the pool. Because no new applicants are coming in, the rates keep going up as the pool becomes smaller and its risk to the insurer grows.

"When rates go up, it's just like when your lawn service raises its rates; you might want to shop around to make sure you're getting the best deal," Long says. "It makes sense to re-shop your HSA rate every year or two."

So, what can you do if premiums skyrocket on the high-deductible health plan attached to your health savings account?

Considering the following options can lower your premiums and improve your coverage.

1. Shop around 

HSAs are growing and changing quickly as demand increases. It's a good idea to compare your high-deductible health plan against others every year or two to obtain the best rate and take advantage of new policy features of the HDHP.

But beware: If your health has declined, shopping around may be a bad idea. Instead, you may be better off sticking with the higher premiums of your current plan and increasing your deductible instead.


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