Pay yourself, not an insurance company

Pay yourself instead

There is a great deal of discussion about the Affordable Care Act. Individuals are required to enroll in a health insurance plan or face additional taxes from the government. Instead of paying more taxes to the government, or extra money to your health insurance provider, put your money where it can work for you.

Stepping away from the traditional, low-deductible health insurance plan can be empowering. You can meet all federal health insurance requirements while using your funds in a way that protects and benefits you financially.

Consider how a traditional health insurance company uses your premium payments. As you see it, they collect a large fee from you each month. If you need to file a claim, you submit a request to pay for your medical needs and they pay your provider. However, the insurance company is actually benefiting from your premiums as they reap the benefits of your dollars, or they pool your money to help cover others with higher medical expenses. According to the Insurance Information Institute, the United States insurance industry’s overall net premium value for 2014 was $1.1 trillion.

Pairing an HSA with a qualified health plan allows you to use the money that you would have spent on a higher premium and contribute that into your account. Those dollars are there for whenever you need to pay for qualified medical expenses, whether you need a prescription filled or to pay for medical care. The funds are available to you, and they are under your control.

As the IRS notes, you are able to claim a tax deduction every year for the after-tax contributions made to your HSA. You can take these deductions even if you do not itemize them on an IRS Form 1040 each year.

As you add funds to your account, they grow in value. Unlike other types of investments or interest bearing accounts, these funds are tax-free as long as distributions are for qualified medical expenses.

Investing? How and where?

HSAs do not have to be complicated investments that you have to manage on your own. They can be relatively easy to manage when you have the right HSA provider on your side. You could use your account much like a traditional savings account. Or, you could use a company with an investment platform and invest your HSA dollars into mutual funds. Some HSA providers make this simple by providing access to web-based investment advisory services and work with you to build your investments for a small fee.

Another option is to establish an HSA through a provider that allows you to manage the investments yourself. This is a good strategy for those that are experienced in finance and desire to monitor the markets, make key decisions and use expert insight to grow their funds.

The bottom line: You can continue giving more of your money to your health insurance company where they build their wealth using your premiums. Or, you could contribute those funds directly into your own HSA and build your wealth. You can reduce out-of-pocket expenses while having more control over your own money. Pay yourself instead.

Nothing in this communication is intended as legal, tax, financial or medical advice. Always consult a professional when making life changing decisions.