I can still remember the number. It's been over a year, but it's kind of burned into my brain. One thousand, three hundred, sixty-five.

Dollars. Per month.

That's what the letter I was holding said it would cost to continue our health insurance with my husband's old company after he left.

I was amazed and a little horrified. Surely, no, surely that couldn't be right. $1,365 a month? For health insurance? That's way more than our mortgage! Are they serious?

Oh, yes, they were serious. While employing my husband, the company was willing to pick up most of our insurance premium. But that stopped at the end of the month. It was $1,365 or the highway.

Fortunately for us, my husband had a new job with new health insurance.

But that number still echoes in my head. What if he ever loses his job? Given the choice between $1,365 a month and no insurance, there would be no choice. We'd have to go without insurance.

And, unfortunately, that's what many singles and young families are doing.

Those who work at a job that doesn't offer benefits, work part-time or are between jobs, often find that the cost of individual health insurance almost makes it a non-option.

Even those who have benefits often cringe at the amount they pay in insurance premiums each month, but do it anyway because there's no other alternative.

Thankfully, now there is an alternative.

A New Idea

It's called an HSA — a Health Savings Account — and, according to Christian financial expert Dave Ramsey, HSAs "could be the answer to the health care crisis we have in America."

Wait, you wonder. Savings accounts? Haven't I heard of those before? Probably not.

While there have been different "accounts" before (flexible savings, medical savings, etc.), HSAs are relatively new — only passed into law in 2003 and only now starting to gain widespread popularity.

And HSAs are gaining in popularity for two big reasons — they save most people money and they are easy.

So what exactly is an HSA and how is it different from what most folks have now?

"Well, it's health insurance," says Steve M., an architect from Bartlesville, Okla. who has had an HSA for three years. "But it's health insurance with a twist."

What is an HSA?

Basically, an HSA is a tax-free savings account you use to pay for health costs.

It's similar to an IRA or a 401(k), but for medical expenses — and for use right now, not retirement. You put money (up to a cap) into the HSA account tax-free. The money grows in the account tax-free. Then you withdraw money from your account for medical expenses. (Different HSAs use different methods, but many allow you to carry either a check card or checks to pay for medical expenses directly — no paperwork. You just swipe your card and the expense is paid directly from your account.) As long as you only use the money for medical expenses, it stays tax-free.

Along with the account, you must get an HDHP. I know, I know, too many initials. But stick with me. An HDHP is a high deductible health plan — or what Steve calls his, "catastrophic health insurance."

Here's the gist. You stop (if you even had insurance in the first place) paying high premiums on a policy that covers pieces of every little medical thing that you do.

Instead, you get a policy with a high deductible (a "deductible" is insurance-speak for "the amount that you have to pay out before we'll kick in for expenses"). That means that you pay for everyday medical care — check-ups, eye glasses, teeth cleaning, etc. — out of your HSA, with no help from an insurance company. But, in the meantime, you're saving by not paying high monthly premiums (remember my $1,365 a month?). Then, if an emergency hits, or you just have a high medical expense year, the insurance will pay once you reach your deductible.

What is that deductible? Well, that depends. The U.S. government says that for 2007 your minimum HDHP deductible, if you want an HSA, can be $1,100 for a single or $2,200 for a family. But that's just the minimum. You can choose a policy with a higher deductible, which decreases your cost.

Steve chose a plan with a $4,000 annual deductible. He explains it like this: "It's almost as if that health insurance policy doesn't really exist. It's just there for emergencies. But, I know that the most I'm ever out for medical expenses is $4,000. That, in itself, offers some peace of mind."

More Pros of an HSA

Besides saving oodles in premiums cost, there are a few other bonuses to the HSA.

First, the money rolls over from year to year. Say you put $1000 into your account, but only use $750. The extra $250 rolls over to the next year. That may seem like common sense, but it wasn't a part of past savings accounts.

Steve, who has rolled over money every year, really appreciates this. "I have no use-it-or-lose-it with this account," he says. "My goal is to build it up so that I don't have to worry about a major expense coming along."

A second bonus is that the money is yours, not your employer's or the insurance company's. If you set up your own HSA, outside of an employer, the money is yours. If your employer sets up your HSA and funds it as a benefit to you, the money is still yours.

"If I quit my job tomorrow, that money goes with me," Steve says.

Finally, there are no income stipulations on who can qualify for an HSA. As long as you are under 65, not someone's dependent and don't have any other medical insurance, you can get an HSA.

Is this really going to save me money?

For those who don't have insurance, HSAs seem an obvious choice. Not only are you covered for emergencies, but your medical expenses can now be tax-free.

For those of us who have traditional insurance, though, the jump might be a little intimidating. You might think, I really like just having copays at the doctor. If I give up my traditional insurance, won't I have to pay the whole thing?

Well, yes, you will. But think about it this way. Right now, you're paying for your health insurance, copays, out-of-pockets and "uncovered" expenses — all with money that has been taxed.

With an HSA, you may pay the full cost of an office visit, but you're paying significantly lower premiums and your medical expenses are tax-free. (State Farm and Dave Ramsey both have a cost comparison of HSAs vs. traditional plans.)

In the traditional system, chances are you pay for more than you get. "If you're a healthy person and don't go to the doctor every time little Johnny has a minor case of the sniffles, you are getting hosed under the old program. You're paying for everybody else who is not controlling their utilization," said Kent Utsey, president of American Health Resources, a Chicago-based HSA management firm.

HSAs put you in control. You decide what to spend and, according to Steve, it makes you a better consumer: "I think, 'Okay, is this the best prescription for me or is there another one out there that may be a little cheaper but will do the same thing?', which is something I think we should be doing."

What Now?

If you are interested in starting your own HSA, you might start by shopping around insurance companies, banks or financial service groups in your area. Dave Ramsey provides his list of "Endorsed Local Providers" on his website.

If your employer offers health insurance benefits, but not an HSA, you might mention your interest to your benefits department. According to a survey by Watson Wyatt Worldwide, only 8 percent of big companies offered HSAs in 2005, but another 18 percent planned to add them in 2006 and 47 percent were considering them.

Part of the beauty of HSAs, though, is that you don't have to depend on a large corporation for your health care anymore.

As Steve puts it, "It's a win-win situation for everyone."

* * *

Want some really detailed information about HSAs? Check out the U.S. Treasury's webpage on the topic or a PDF compiled by The Council for Affordable Health Insurance.