"It's a fairly long list of things that [an HSA account] can be used for," said Modugno. "It's easy to keep track of . . . Before, it was really hard to keep your records straight."
Modugno said no one in his family has chronic health conditions. This year, the family used much of their HSA savings on braces for three of the children and a hernia operation for their 1-year-old.
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Health Savings Accounts: Three Scenarios
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Transcript: Cara Jareb, senior benefits consultant for Watson Wyatt Worldwide, will be online to answer questions about health savings accounts and health insurance open season.
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Selection Time (The Washington Post, Oct 26, 2004)
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The ABCs of Health Insurance (The Washington Post, Oct 26, 2004)
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Full Coverage: Insurance Journalist Goes Shopping (The Washington Post, Oct 26, 2004)
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Options for Individual Coverage (The Washington Post, Oct 26, 2004)
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"Health insurance is very, very expensive," said Modugno. "This is just another benefit that we're taking advantage of to ease some of our tax burdens to carry the deductibles for health care."
The Paynes pay about $321 a month for health insurance through Indiana-based Medical Savings Health Plan.
HSAs offer some features that make them more attractive than MSAs to older adults. People over 55 are allowed to invest $500 more annually in their HSAs than younger adults, helping them build a larger safety net for unexpected health problems or a nest egg for retirement. The additional amount they're permitted to invest will grow by $100 a year through 2009. MSAs, like the one Payne had before switching, did not offer such a "catch up" provision.
Payne and his wife deposited $3,862 into their HSA this year. He said that the coverage -- and the savings component -- are ideal for them. When they reach age 65, the fund can be used for nonmedical purchases without penalty, though they would have to pay income taxes on such expenses.
Still, Payne said, it's comforting to have the money there.
The HSA plan "allows me to put away a considerable amount of money for those emergencies," Payne said. "We've built up a pretty good reserve." •
