Signing up for an HSA/HDHP

Before you open an HSA, you need to be covered by a qualified HDHP. Your employer or other group association may offer qualifying group coverage, or you may be able to buy individual coverage on your own. In fact, if you’re uninsured and can’t afford to buy traditional health insurance, you may want to consider buying an HDHP as a way to limit your exposure to catastrophic medical costs.

Once you’re enrolled in the HDHP, it’s time to open your HSA. Any institution that currently meets the IRS standards for being an IRA trustee or custodian can be an HSA trustee or custodian. These are generally financial services firms including banks, brokerage firms, insurance companies, and mutual fund companies. The custodian or trustee you work with sets the administrative fees that apply and determines what interest rate, if any, you’ll earn on the investments you can make through the account.

You can shop around for the lowest fees and the highest interest rate or most attractive investment choices, but keep in mind that some companies that offer HDHPs may also coordinate with specific HSAs. In those cases, it may be harder for you to use a different plan custodian and take advantage of employer contributions to your HSA, if your employer makes them.

Word to the wise
HSA-eligible high deductible health plans may have higher premiums than HDHPs that aren’t HSA-eligible. So if you’re considering a high deductible plan simply to keep your health costs down, it’s important to compare not only the premiums but also the other costs the HDHP may cover.

While HSA-qualified HDHPs only provide first-dollar coverage for some types of preventive care, non-HSA high deductible plans may provide other types of coverage as well, such as coverage for prescription drugs. So it’s important to compare the costs of each individual plan in light of your particular insurance needs.

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