Dollars and Sense
Health savings accounts-rising costs
By DAVID UFFINGTON

With the ever-rising cost of health care premiums, many individuals and families are opting for higher deductibles combined with a Health Savings Account as a way to save money. HSAs are designed to offer those who have medical insurance with very high deductibles and no other coverage a way to put money aside for medical expenses and reduce taxes.

The benefits: + The dollars that go into an HSA are pre-tax, meaning that the amount comes off your income before you are taxed.

+ Once you open an account, it's yours to handle as you wish. If you want to move the money around to take advantage of higher interest rates, you're free to do that.

+ You can take out funds to pay medical bills without penalty. (However, you can't pay your premiums with the money.)

+ At age 65, you can roll over the funds without penalty.

+ You don't need to be employed. The funds for the HSA can come from your own savings or your unemployment benefits.

+ There are no income limits.

+ If you are age 55-64, you're allowed to make larger catch-up contributions.

+ High deductibles are $1,050 for individuals and $2,100 for families.

The drawbacks: + You're only allowed to contribute up to the lesser of your deductible or the limits that have been established. For individuals, that amount for 2006 is $2,700. For families it's $5,450.

+ If you take out money for anything other than medical expenses, you'll pay taxes on that amount plus a 10 percent penalty.

+ Once you reach age 65 and are eligible for Medicare, you can no longer make contributions to your HSA account.

To qualify for an HSA, you must:

--Have a High Deductible Health Plan for your medical coverage. For 2007, that amount is at least $1,100 for individuals, with a maximum out of pocket of $5,250, and $2,200 for families, with a maximum out of pocket of $10,500.

--Not be covered by any other insurance that isn't high deductible. (You're allowed to have dental, vision, disability and long-term-care insurance.)

--Not be covered by any Veterans benefits in the previous three months, or have Tricare coverage.

If you choose a high deductible as a way of saving money, the biggest possible drawback is if you don't put money into a Health Savings Account.

Write to David Uffington in care of King Features Weekly Service, P.O. Box 536475, Orlando, FL32853-6475 or send e-mail to letters.kfws@hearstsc.com.

(c) 2006 King Features Synd., Inc.