Dear Dave,

I just realized our insurance has a health savings account (HSA) option. We’ve considered dropping this insurance soon and going to a cheaper Christian medical sharing program. We’ve got about $19,000 in debt between credit cards and a car payment, and we’re on Baby Step 2 of your plan. Our thought was to fund the HSA for a period of time as a means of saving, cancel that policy, then go over to a medical sharing program we found that costs $600 a month less. After that, we would start paying down debt again. What do you think?  

- Amy

Dear Amy,

There are two components to an HSA, the insurance component and the savings component. You don’t have to participate in the savings component. The insurance component is simply a large deductible, 100 percent coverage after the deductible, cheaper-premium health insurance plan. If I were in Baby Step 2, I would not do the savings component. I would only do the insurance component, or I’d do the medical sharing program.

I’m not sure why you’d need to jump back and forth if you’re going to permanently move to a medical sharing program. I get the idea of saving money, but what you’re talking about isn’t something I’d recommend for someone who’s in debt. I wouldn’t fund a savings account of several thousand dollars only for medical when you’re not even on Baby Step 3, which is saving an emergency fund of three to six months of expenses. That money needs to be used to pay off debt first.

It’s not the end of the world if you don’t fund the HSA portion of your current insurance plan. If you went with a medical sharing program, and just saved up a large emergency fund, the only thing you’d really lose out on is the tax deduction associated with an HSA.

Good question.

- Dave
