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Take an active role in your health care and insurance! Evaluate the plans available to you and make sure you’re choosing the best option.

Are you a healthy person who has an emergency fund (so that you can cover unexpected health care costs)? Consider a lower premium higher deductible plan and reduce what’s taken out of your paycheck.  There’s also a newer kind of health plan called a “Consumer Driven Health Plan” (or a similar name depending on your insurance company or employer).  In essence, it is a high deductible plan where you pay very little in premiums but will be responsible for more out of pocket costs, but it has the added benefit of a Health Savings Plan or HSA.  An HSA is a savings account at a bank but you set the contribution amount and the contributions come out of your paycheck and reduce your taxable income.  Since it’s a bank account in your name, even if you leave the company, the account comes with you.  Plus, you can alter your contributions throughout the year.  If you start out low but realize you have a surgery coming up, you can decide to increase your contributions for the rest of the year. The other great thing about an HSA is that the money rolls over from year to year!  This means that you could maximize your contributions (because there are annual limits set by the government), reduce taxes, and save up money for future health care expenses!  This is my second year under this type of plan and I am loving it.  Your employer may also entice you with their own contributions to your HSA because these plans are cheaper for them, too.

But if you know you go to the doctor often or have chronic health issues, make sure your have a higher premium plan with a lower deductible. You’ll save money in the long run if you know you use your health insurance a lot.  While you can’t contribute to an HSA with this type of plan, many companies offer a Flexible Spending Account or FSA.  This account is more stringent though.  You can only set the contribution amount once a year when you enroll and whatever you have leftover at the end of the year is forfeited.  Basically, use it or lose it!  In this case you’ll want to err on the conservative lower contribution side to ensure you don’t have any leftover funds.  Unlike an HSA, the money doesn’t come with you if you leave your job/insurance, but it still does get taken out pre-tax so it reduces your taxable income.

I know I was guilty of health insurance ignorance for many years but being informed and involved in the decision will make a difference in your finances!  If you are healthy and can drop down to a lower premium plan, you will have more money in your budget for savings or debt repayment.

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