Getting the most out of an HSA plan

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(Money Magazine) -- If you are in a high-deductible health plan linked to a health savings account, you'll have to start thinking about your insurance in a whole new way. Not only must you get your head around network rules, but you have to plan for surprises, manage your cash flow and even make investing decisions. Among the questions you'll grapple with:

How much should I set aside for medical expenses?

Ideally, you'll want enough to meet your annual deductible and then some - remember, when you get sick or hurt, your medical costs may not fall neatly within a single calendar year. (You may also have costs, such as co-insurance, above the deductible.) You can contribute only $2,900 a year to your HSA, or $5,800 if you have a family plan.

So if you have a deductible higher than that, you may also want to set aside money outside the HSA in the first few years. And if you would have trouble finding the money to cover a worst-case scenario, stick with a traditional plan if you can.

How do I get my money into and out of an HSA?

When you join an eligible plan, you'll have to set up an account with an HSA administrator, which works a lot like a bank. (In fact, it often is a bank.) Your employer might pick one for you. Your company can deduct money from your paycheck and deposit it into your account, and you may get a Visa or MasterCard debit card you can use to pay for medical expenses.

Even if your company set you up with one HSA administrator, you may want to switch. Compare accounts at vimo.com/hsa. There's a good reason to shop around: Administrators charge varying fees for transactions and for maintaining your account. Some even nick you if you fall below a certain balance.

Should I always use my HSA for health expenses?

Maybe not. If you can pay for, say, a doctor's visit without dipping into your HSA, that tax-free money can keep compounding, says Tracey Baker, a financial planner and co-author of Navigating Your Health Benefits for Dummies.

How should I invest it?

Investment options have expanded quickly since HSAs first hit the market. Today you can put the money into everything from a savings account to mutual funds and stocks. Any money you might need in the next few years - at least your deductible - should go into a savings or money-market account, says Baker.

Once your account builds up, you can invest additional money in the riskier stuff. As you would with an IRA or a 401(k), diversify and pay attention to expenses and fees.

Worried about your investments? Get a makeover from Money Magazine. E-mail us at makeover@moneymail.com.