John Ingrisano here, with some thoughts on health insurance.

If you’re going into business, one of the big questions you must answer is, “What should I do about my health care benefits?” For me, an HSA was the answer.

As a small-business owner in good health, I was paying more than $4,400 a year in medical insurance premiums, with a huge deductible and big co-pays. This year, my premiums are around $1,700, and I get to pay my deductible with pre-tax dollars.

I did it by switching to an HSA (Health Savings Account). HSAs are the new kids on the block, introduced back in 2004. When I first started reading about them, I figured they’re too good to be true. They’re not. In fact, they’re one of the best deals to come down the pike in ages for self-employeds and small-business owners.

Available to everyone not covered under another plan – individuals as well as business owners – they combine tax-deferred savings accounts (that can be converted to IRAs at retirement) with high-deductible health insurance.

Here’s how they work: You buy an HSA-approved, high-deductible medical insurance policy. Your deductible must be at least $1,000 for singles, $2,000 for families; the maximum is $5,000 and $10,000.

Then find a bank or credit union that will set up an HSA account, which works the same as an IRA. Most pay an embarrassingly nominal interest rate, but you can also put your money into mutual funds. (Caution: The few package deals I encountered either had overpriced insurance or accounts with high fees, so I built my own plan, getting my insurance from Anthem (formerly Blue Cross/Blue Shield) and my account from the HSA Bank in Sheboygan, Wisconsin. That’s not an endorsement; just where I found the best deal for me.)

The best part: Under current law, you can contribute — and deduct from taxable income – deposits for 2007 up to $2,850 for singles and $5,650 for families. These numbers will go up for the 2008 tax year.

Your HSA comes with a checkbook or debit card. The money can be used for everything from Acupuncture to X-rays, as well as bandages, dental treatment, eyeglasses, weight loss programs, and more.

When you turn 65 and become eligible for Medicare, your HSA converts to an IRA, so the money left can go to toward retirement.

In short, an HSA can be one heck of a deal. Still, HSAs are only slowly catching on. Two reasons: First, few insurers or banks have figured out how to work together. Second, no one is sure how to really make money from HSA sales.

On the insurance side, HSAs can cut deeply into insurance company pockets. High-deductible policies are not big money makers for them. Plus, few agents have an incentive to discuss them. It took me about a dozen phone calls and a few hours online to get the details. In all fairness, part of the problem is that few companies know what to do with them or how to set them up. You’re pretty much on your own

Is an HSA right for everyone? Of course not. If you already have a good health care plan, may have trouble getting insured for health reasons, or generally have high medical bills, you may be better off sticking with what you have.

Still, do some homework, just to make sure. If an HSA meets your needs, you could shave thousands of dollars off your medical insurance bills, reduce your income taxes, pay your deductibles with pre-tax dollars, and even build long-term equity.

What about you? I don’t claim to be an expert on HSAs, so I’d like your input and feedback and experiences as well. Also, if you have an HSA and you like it, tell the rest of us about the provider and other details.

Thanks. As always, work hard, make money, have fun.

– JRIngrisano
The Freestyle Entrepreneur

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