HSAs as a "Get Rich Slowly" Stategy
If you remain relatively healthy, you may end up spending very little of the money you have contributed to your HSA over the years. A recent Forbes Magazine article reports that "A 40-year-old person putting $5,150 a year into an HSA returning 5% and making no use of the account would end up at age 65 with $268,000." This is money that normally would have gone to the insurance company in the form of higher premiums, and to the IRS.
If you wait until age 65 to start making withdrawals, you may spend the money without restriction. You simply pay ordinary income taxes. If you decide you need to spend your HSA money on non-medically-related items before the age of 65, you pay a 10% penalty in addition to the income tax. For a much more detailed explanation of HSAs, please refer to the IRS Bulletin of January 12, 2004.
In any given year, there is a high likelihood that the deductible will not be met, so consumers will be motivated to shop around for the best price when considering non-emergency medical procedures. This will subject medical care providers to the same market pressures as all other providers of consumer goods and services. Theoretically, the ensuing competition could actually help bring down the cost of heath care in the long run. In fact, many providers are already willing to discount their services by as much as 50% for their "cash" paying HSA clients - you just have to ask!
Click here to request a quote for qualified plans from Assurant Health (formerly Fortis Health) and Golden Rule via email, or to order a free HSA multimedia CDROM. For an instant quote, simply call 800-834-1378 between 8:00 AM and 6:00 PM MST M-F.
