If you are a company setting up a new health plan or an individual getting a plan, you should consider getting a Health Savings Account (HSA). HSAs are the better cousins of Medical Savings Accounts (MSAs) and were formed on Jan 1 2004.   I’ve had my HSA since then and i will go over the benefits, why you should get one, and things you should think about.

You should consider doing this for 2006.

(note: I’m not a health administrator so check the facts of this post before you proceed)

About HSAs

Health Savings Accounts allow you to put away pre-tax dollars to fund future medical expenses.   Unlike its ugly cousin, the MSA, the HSA is NOT use it or lose it.   Any money you do not use can be rolled over to the next year.   That roll-over money can be used for any medical expenses over time.

You can put away up to $2700 in 2006 for an individual and $5450 for a family.   Tax free.   This is a big savings … especially for those of you in

Silicon Valley

who have a higher tax bracket.   

You can invest your HSA in a variety of different options.   Unfortunately, since this is a fairly new space, there are not a ton of choices yet — but still enough to make it worth it.   Some good places:

– HSA Bank – interest bearing account

– First HSA – interest bearing account

– Health Savings Administrators – allows you to invest in Vanguard funds

– a good list of other plans are at: http://www.health–savings–accounts.com/admins.htm 

Most of these services provide a debit card for purchases or an easy-to-use reimbursement form.   

High deductible plan

You can only use an HSA with a high-deductible plan.   Let’s say your deductible is $3000 — that means you pay for ALL medical expenses out of your own pocket (usually through your HSA tax-free account) up to $3000 for the year.   Anything beyond that is paid for by your insurance firm.   And this usually does not include prescription drugs.  And sometimes the plans have some added benefits (like a once-a-year $20 physical).   

And you’d be surprised what happens when you pay for your healthcare yourself … you quickly move to the front of the line, generally get better care, and usually even get things cheaper.   Cheaper?  Cheaper than insurance companies that bargain for everything??   Absolutely.

He’s why.   If you do to the doctor for your yearly visit you might want a cardiogram (a test that gives a good baseline of your heart).   This is a really good idea to get done.   now most doctors already have one of these machines and they have their medical assistants already trained to give you the quick test.   So the real cost of a doctor giving you the test is just electricity and a tiny bit of time (5 minutes) from someone of their staff.   So you frequently can get free things like cardiograms thrown in with your physical.  Especially since you are paying right away and the doctor does not have to worry about forms processing to the insurance company.

So if you are healthy and have healthy employees, then this is a good deal for you.   in fact HSAs will likely help you attract healthier employees because they will be more likely to opt in and work for you.

And, of course, with a high deductible plan you can go to any doctor you want.  Anyone. 

Spending your money

If you are like me, you don’t have a lot of medical expenses.   But when you do, you want a convenient way to spend the money.  I’ve found the easier way is to get an HSA with a debit card (most of them have one).   This makes everything really easy.   Charge your doctor, dentist, optometrist, etc.   even a lot of things you buy at the pharmacy are HSA-related.   In fact, if you use an online pharmacy (like Drugstore.com) they’ll ask for two credit cards — your HSA-related items will get charged to your tax free account and your other items will get charged to your normal card.

And you’d be surprised what is covered …

HSAs are best for start-ups

I’ve found that most people in

Silicon Valley

start-ups tend to be healthy.   Even though they work insane hours, they tend to have a fairly active life (biking to work and such).   

Full covering health insurance plans discriminate against your healthy employees in favor of your unhealthy ones.   For your avg 30-something in

California

, a high-deductible plan is about $80/mo where your common PPO is about $250/mo.   that means your company saves $170/mo (or $2040/year) … money you can give directly to the employee, contribute directly to their HSA account, or use in other productive ways.

And the HSA is a great benefit.  Like a 401K, it follows the individual for the rest of her life — so she gets to keep the benefit now.

Overall, if you are getting your own health insurance plan or getting one for your company, I highly recommend a HSA.   I think you’ll find that it is a strong option worth considering