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Health savings accounts 'a great deal'

Dr. James Arient was an early adopter when it came to health savings accounts, tax-advantaged accounts that help individuals and families save for medical expenses. Health savings accounts have been available as an alternative to traditional insurance policies since 2003 but he started saving for one earlier.

"I look at it as a wealth-preservation tactic," said Dr. Arient of Naperville, Ill. "It's catastrophe insurance that protects you from being wiped out in case of illness or injury."

The retired dentist is willing to assume more risk by carrying a high-deductible health insurance plan in exchange for a large lifetime of benefits, a tax-free savings account to pay medical expenses and the flexibility to use leftover funds for retirement.

"I retired early and needed a good health insurance plan to last until 65 when Medicare kicks in," he said. "There was no way to look at health savings accounts and see them as anything but a great deal. Premiums are lower than traditional health insurance. The money you contribute is tax-free, and if you don't use the funds, you can use them like an IRA once you reach age 65.

"Dentistry was good to me, so I could afford the $5,000 deductible," he continued. "Spending that much on health expenses wouldn't ruin my retirement. If something happens to me health-wise, I won't wipe out my net worth."

In an uncertain economy, a growing number of small business owners are turning to health savings accounts, said Martin Trussell, senior vice president of First Horizon Msaver, a company that offers individual and group HSA-qualified health plans, account set-up services, administration and support for ADA members, their families and staff. First Horizon Msaver is endorsed by ADA Business Resources.

By utilizing an HSA, Mr. Trussell said that employers can reduce their premium costs by as much as 30 percent. However, employees take on a higher level of responsibility and risk for medical expenses than with a traditional insurance policy. For example, an employee may not think twice about a doctor visit that costs him or her just $10 (while the insurance company pays the remaining $65). With a high-deductible plan, the employee pays the full $75 out of pocket.

"Employers are beginning to recognize that high-deductible health plans are good approaches to controlling health care costs," said Mr. Trussell. "We're seeing a lot of small business owners dropping health insurance because it's gotten too expensive. Those who have adopted health savings accounts are finding it possible to continue to offer coverage to their employees through this type of plan."

Contributions to health savings accounts are tax-deductible, a tremendous benefit for those seeking tax breaks. If savings are used for qualified medical expenses, the entire amount can be withdrawn free of taxes. Qualified medical expenses include medical doctors, dental and optical care, chiropractic care and long-term care. Unqualified expenses include cosmetic surgery, health club dues, nonprescription drugs and medicines, and funeral expenses.

In 2009, contributions to an HSA are only permitted if the health insurance accompanying it has a deductible of at least $1,150 for individual coverage or $2,300 for family coverage. The current contribution limit per year is $3,000 for individual coverage or $5,950 for family coverage. Those 55 and older can also contribute an additional $1,000 each year until he or she enrolls in Medicare.

With First Horizon Msaver, ADA members have dedicated representatives at their service.

"Our insurance counselors only work with high-deductible health plans, and they specialize in individuals and small groups like dental practices," said Mr. Trussell. "First Horizon Msaver finds the high-deductible health plan, puts coverage in place, then signs the individual up with a health savings account. Customer service is available, too, so once the health savings account is in place, users can call Msaver and get a knowledgeable person on the line for questions about their account."

For more information about health savings accounts, contact 1-866-257-2652.