A modest proposal: Let your Health Savings Account make you money

Lately, it seems like you can't open the newspaper (or click through the paper online) without coming across a headline about health care reform. Who should run the programs, who should pay for them, who should be covered and to what extent?

But what if you could take control of the costs yourself? What if you could pay in to a health care plan, tax-free, and accumulate your own health insurance funds over time? The truth is you already can, but these resources may be threatened as the government and health care industries try to deal with a looming crisis. I have discussed this many times on my radio program, and I'll repeat it here: This would be a major mistake!


Created in 2003, Health Savings Accounts (HSAs) are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis. The funds contributed to the account are not subject to federal income tax at the time of deposit. If the funds are not spent they roll over and accumulate year over year. Only withdrawals for non-medical expenses are taxed and may provide tax advantage if taken after retirement age.

Much like a 401k, there is a limit to how much you can contribute to your HSA on a yearly basis. For 2009, you can contribute up to $3,000 as a single or $5,950 as a family. For those 55 or older an additional "catch-up contribution" can be made. Thus, for some up to $6,950/year can be contributed. 2009 contributions can be made till April 15, 2010.

But remember, this amount accumulates year after year if you don't dip into it, and each year you can then raise your health insurance deductible reducing your monthly health insurance payments. Imagine beginning your annual tax free contribution to your HSA when you are young and healthy. Maintain a healthy life-style, be a careful health consumer, and with a little bit of luck over time you can keep increasing your HSA, lower your deductible, and significantly reduce your health insurance cost. If you do have health care needs, the money is available and you will spend it more wisely.

Not sure you're ready to commit to an HSA? Another form of "consumer driven health care" gaining popularity is the health reimbursement account (HRA), which is similar to the HSA but is owned by the employer. Businesses set aside a certain amount of money each year to reimburse employees for health care. Unused funds in the HRA can be rolled into future years for reimbursement.

Health savings accounts allow people to save money in an account designated solely for health care expenses. Employers often pay into the accounts as part of a benefits package, but all money in the accounts is owned by the individual. These accounts are growing in popularity with about 8 million people nationwide enrolled in HSAs, up 31% since last year. Make sure you let your elected representatives know you that do not want any national health care reform to eliminate these kinds of health coverage, and keep an eye on WalletPop for more health savings tips from yours truly.

Dr. Ken Kronhaus hosts Good Day Health, a nationally syndicated weekend radio show heard on more than 150 stations across the country, and is featured Monday - Friday in the "Daily Dose" segment on Doug Stephan's Good Day, heard on more than 300 stations in morning drive. You can sign up for his free e-newsletter here. Dr. Kronhaus eceived his education at the University of Pennsylvania, obtaining an M.D. and Ph.D. in Cardiovascular Physiology and he is a spokesperson for the American Heart Association.