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Figuring out how to handle potential health-care costs is one of the biggest financial challenges you'll ever face. Whether you're in perfect health or have serious medical conditions, the threat of huge medical bills looms large over even the most financially secure workers. With the unemployment rate high, many out-of-work Americans are dealing with the loss of their employer-provided health insurance.

Yet even those with secure jobs aren't immune from the ever-rising cost of medical care. Increasingly, employers and workers alike are moving toward high-deductible health insurance plans combined with health savings accounts to try to cut costs. HDHPs and HSAs aren't perfect solutions, but in many cases, they give you both flexibility and savings over traditional health insurance -- if you're prepared to take more responsibility for your medical care.

What's the deal?
Traditional health insurance policies tend to have low upfront costs and fairly low out-of-pocket maximums for any given year. For instance, a typical plan might charge you a $25 copayment for an office visit, with your insurance picking up any amount that your doctor charges above that.

HDHPs offer a very different way of handling health-care costs. With HDHPs, which insurers such as Aetna (NYSE: AET  ) and Humana (NYSE: HUM  ) offer, you're on the hook for a fairly large upfront deductible before your insurance pays its first dollar -- typically $1,200 for individual coverage and $2,400 for families. Out-of-pocket maximums can range to as much as $11,900 per year.

Needless to say, if you're used to paying in convenient $25 chunks, coming up with $2,400 takes some getting used to. That's where HSAs come in. Health savings accounts let you save pre-tax money toward future medical expenses, and that money grows tax-free within the account. The general idea is that because HDHP insurance premiums are less than traditional policies, you can contribute the difference to an HSA and still come out ahead.

But what many employers are doing is facilitating a move to HDHPs by making employer contributions to HSAs. That way, employers can cut their own costs of providing valuable benefits to their workers. A couple of years ago, Whole Foods (Nasdaq: WFM  ) CEO John Mackey argued that HDHPs and HSAs could be a key component of fixing the health care system.

A Wall Street opportunity
Just as financial institutions jumped on the IRA bandwagon when the popular retirement accounts first became available, HSAs represent an investment opportunity. Bank of America (NYSE: BAC  ) , Wells Fargo (NYSE: WFC  ) , and JPMorgan Chase (NYSE: JPM  ) are among the big banks promoting HSAs. In addition, brokerage firm Fidelity administers HSAs as part of its benefits packages to client employers, and even insurance company UnitedHealth Group (NYSE: UNH  ) offers HSAs through its OptumHealth Bank subsidiary.

But the real question is whether HDHPs and HSAs are a good deal for you. Unfortunately, there's no right answer that fits everyone. Here's why:

  • If you're in good health, then you'll save a bundle with lower premiums and potentially end up with leftover money in your HSA. Unlike with the flex plans that many workers are familiar with, you can carry forward your HSA money for use in future years.
  • If you have large medical bills, then you'll be on the hook for the full out-of-pocket maximum. That might end up being much more than you save on premiums.
  • For those in between, some will save while others will end up worse off under HDHPs.

When you're considering an HDHP, you have to look closely at the reduction in cost under the policy, taking into account any money your employer will kick in on your behalf as well as the tax savings that an HSA will give you. Then, as long as you're prepared for much higher out-of-pocket costs if something happens, you can make whichever choice saves you more money.

Stay healthy
Healthcare is hard to manage. But with the right tools at your disposal, you can do your best to keep it affordable. If your employer offers an HDHP, be sure to consider it along with all your other options.

If you're fortunate enough to have an HSA that lets you invest in stocks, you'll want only the best. These 13 high-yielding dividend payers give you the income you need to pay doctors' bills while giving you some growth opportunities as well.

Fool contributor Dan Caplinger wishes you health, wealth, and (Foolish) wisdom. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of UnitedHealth Group, JPMorgan Chase, Whole Foods, and Bank of America. The Fool owns shares of and has created a ratio put spread position on Wells Fargo. Motley Fool newsletter services have recommended buying shares of Whole Foods and UnitedHealth Group, as well as creating a diagonal call position in UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy is like an apple a day.

Read/Post Comments (4) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 15, 2011, at 12:12 PM, ballengerm wrote:

    I just switched to a Blue Cross Blue Shield HDHP with a $3500 deductible. This plan is 100% coverage after the deductible, so my out of pocket maximum is also $3500.

    I don't currently have an HSA set up. I was thinking I would just wrap my health expense savings up into my existing general purpose emergency fund. I might look into an HSA that lets me invest in stocks, though. Does anyone have any recommendations?

  • Report this Comment On September 15, 2011, at 1:36 PM, DukeTG wrote:

    My employer based HSA contracts with JPMorgan Chase to handle HSA investments, but they require a $2000 minimum balance before you can invest. So far I haven't reached that point, so I can't comment on how good they are, but I'm pretty sure they limit investments to 401k like mutual funds, not individual stocks.

  • Report this Comment On September 15, 2011, at 3:01 PM, BMFPitt wrote:

    I am under the impression that HDHPs will become effectively illegal in 2014. Can someone point me to a definitive statement otherwise?

  • Report this Comment On September 15, 2011, at 3:10 PM, FutureMonkey wrote:

    The best way to save money on health care is to exercise, eat right, and get enough sleep. After that I'm a big fan of my high deductible HSA

    I've had a $3000/yr deductible policy that I just switched to a $5000/yr deductible policy after getting enough into the account. Basically my family is self-insured for the majority of our year to year health care, while having a strong backstop to prevent bankruptcy stemming from catastrophic illness or injury. I have not considered my HSA as an investment vehicle, but exercise, healthy diet, and sleep is definitely the best investment you can ever make.


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