If you're in business for yourself, you've probably already discovered that individual health insurance is extremely cost-prohibitive. You may think paying outrageous fees is your only option, or even that you can't afford health coverage at all. But there is an affordable alternative ? health savings accounts.



What Are Health Savings Accounts?

A health savings account (HSA) is an insurance policy that was actually designed with the self-employed and the small business owner in mind. According to Mark Baker, HSA specialist for Golden Rule Insurance Company, ?An HSA is a higher deductible health insurance plan that is coupled with a tax advantage savings account.?

The Bad and Good:

? You start with a high deductible. Not an attractive feature but it gets better.

? Your high deductible results in significantly lower premiums.

? The money you save, you can keep tax-free in your HSA. When you encounter any kind of medical expense, you can use that tax-free money towards your deductible.

How it works:

Let's say you're in a car wreck and wind up getting saddled with tens of thousands of dollars in medical expenses:

? Even though your deductible with an HSA is high, say three thousand dollars, the money you've saved (tax free) in your HSA will likely cover it.

? When your deductible is met, your insurance takes over payments for its percentage of all your covered expenses. Explains Baker, "Every plan is different, but the most common scenario is that once your deductible is paid, you're covered for the remainder of the year." You can even use the pre-tax money in your account towards dental and vision expenses, or out-of-pocket costs, like filling prescriptions.

? As long as you have a Health Savings Account, that money remains tax-deferred in your account for any medical expenses you encounter. If, at the end of the year, you find you haven't spent what's there, don't worry ? it rolls over. In fact, it can just sit there and earn interest until you do need it. Baker says his company is now paying a 4% interest rate on their clients? HSAs.

The difference between purchasing individual healthcare and investing in an HSA is similar to the difference between renting a home and buying one. Like paying your landlord to live in his home, paying your insurance company premiums for a plan with a lower deductible means your money is gone, whether or not you ever use the policy. And buying a home means a higher up-front cost with the deposit, but lets you build equity with every payment. Just like putting money in your HSA - whether or not you use it, it's still yours. And when you do need it, it's there for you.

Your family deserves better insurance than your lucky rabbit's foot affords. If individual health care plans are out of your small business' budget range, health savings accounts may provide a very viable option, so you can have peace of mind in knowing that you're all covered... just in case.