Wednesday, September 7, 2011
Sunday, May 29, 2011
Medical Health Savings Plan account or HSA offers significant tax savings in pension premiums and
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Opening a Health Savings Account today in partnership with an HSA qualified health insurance policy is what anyone should wisely consider as a smart alternative to continue paying for a traditional health insurance plan. Medical Insurance is the newest form of an investment vehicle that offers any person or business tremendous financial & tax benefits. Once you see the picture, understanding HSA health savings plans is very easy. Please read on and take an opportunity to become informed right now.
Since first being signed into law in December 2003 by the Federal Government, Health Savings Account (s) (HSA medical insurance plans) are already a proven success & the number of people switching to HSAs from traditional health plans is growing greatly each year. HSAs are here to stay & a few million people have already come on board. Health Savings Account Plans are literally available today to any person over 18 in the United States. HSAs offer significant financial benefits including tax, premium, & retirement savings for you, your family, and/or your business. Knowledge is power when it comes to your finances!
A Health Savings Account enables you to:
1) Have access to a wide PPO network and in most cases provides the coverage to allow you to continue seeing your current doctors & specialists.
2) Lower your health insurance premium by 25% - 50%. to accomplish this, be sure to fully compare health insurance plans. One can typically save between 80 to 250 dollars per month when they change their plan over from a traditional health insurance plan to an HSA qualified high deductible health savings plan. Now make sure to forget any preconceived notions you may have about having a high deductible. Do not pay attention to what you may have heard. Don't be deceived! Although you'll now have high deductible insurance, there are safety nets that will be there to catch you if & when the need arises.
After your HSA is setup, the first step to take is to place money you save from having a lower monthly premium and place it into your new Health Savings Account each month. Realize that doing this really doesn't cost you anything; you are simply transferring the money you have just saved into a new location.
3) Next, enjoy IRS created triple tax advantages (see the "a-b-c" listed below) that HSAs uniquely offer. Reduce your annual out-of-pocket income taxes up to $1800 or more. You'll save EVERY year on taxes from here on out. Below are your three main tax-saving pillars.
a) HSA Contributions (deposits into your HSA account) are 100% tax free
b) The interest on all of your account investment gains are also 100% tax free. The choice of investments is yours and range anywhere from low-interest, virtually zero risk bank rates to the widest range of stocks, bonds, & mutual funds. The level of risk is entirely up to you and you can modify it anytime.
c) Make 100% tax-free withdrawals for any HSA Eligible Expenses.
While your funds grow tax free, you are now building a significant retirement account of up to several hundred thousand dollars. If you must use the money to cover any part of your deductible, you can make a tax free withdrawal and use the funds. These benefits & factors discussed above diminish the impact of having a high deductible plan. Furthermore, realistically there will often be periods of time where your money is solely growing because you have no medical expenses.
Here is another benefit. The Internal Revenue Service (IRS) rule says that at age 65 the money from your Health Savings Account can be withdrawn penalty-free for any reason, not only for qualified medical expenses. At that time you will pay only regular income taxes if you do not use the funds for medical expenses. The good thing however is that your income during retirement generally goes way down. Your tax rate will follow & you'll be paying lower income taxes. Of course the funds may continue to be used entirely tax free for HSA eligible expenses.
Finally, take comfort as that the funds in your HSA-account are always yours without exception, and they rollover 100% from year to year. You are permitted to even do a one time rollover from an IRA into a Health Savings Account without any penalty, if you choose.
And yes ... you may continue fully contributing to your IRA every year while still making the maximum allowed HSA contributions. Having both types of retirement accounts is the ultimate scenario, but if you can only contribute to one type... I would certainly recommend the Health Savings Account. This is because HSAs unlike IRAs are more than solely a retirement savings vehicle.
The straight truth is that many people are still rather unclear about HSA Health Savings Plans and what they truly accomplish. Too often, an individual or business's insurance broker has not kept them properly up-to-date on all the benefits available to them. Remember that although every agent & broker is obligated by a legal fiduciary duty to serve his or her client's best interest at all times, this duty is typically not policed or enforced by the Department of Insurance. It is not that the agents/brokers lack competency. But truly, what incentives do they really have to educate their clients on HSAs if doing so will lower their commissions? Not much of one. But who loses....YOU!
Last but not least, although the health insurance companies are legally obligated to offer HSA health savings plans in their product lines, they are not going out of their way to promote & publicize the full advantages of HSA plans. Doing so would also lower THEIR profits.
You are probably now realizing that as an insurance consumer, you really must take matters into your own hands and become accurately informed. Despite what you may have heard, HSAs are actually beneficial to anyone, not just the wealthy, or only people nearing retirement age. Regardless of income level, if you pay for health insurance, you owe it to yourself to consider and compare the benefits of an HSA health savings plan versus the more traditional health plan you are probably accustomed to. The expert advisers at HSA Health Savings are on a mission as millions of folks and their families are missing out on the tremendous financial benefits that are so readily attainable RIGHT NOW. We are thrilled because the benefits of health savings plans can literally transform the financial portfolio of people just like YOU.
Drew Devore is a licensed insurance broker & Health Savings Account advisor at HSAHealthSavings. Drew does not charge any fees ever to advocate for you and provide consulting services. Unlike most insurance agencies, his company provides a comprehensive, zero cost policy review every year in order to make sure you always are on the health insurance plan that best fits your needs and budget (because health plans change often and new ones come out frequently). Our goal is to keep your health plan current. Also, the insurance carriers are very partial to selling only their own company's plans so it really is not wise nor does it save you any money at all to purchase insurance directly from a carrier. You will benefit from having an advocate from [http://www.hsa-health-savings.com] To speak with Drew or another expert advisor about HSAs or other related insurance topics, you may visit us by clicking Health Savings Account [http://www.hsa-health-savings.com] or by calling us Toll Free 1-877-888-9771.
Saturday, May 28, 2011
How to determine if a health savings account is right For You
Health savings accounts or HSA becomes an increasingly popular tool for many people to save money, reduce their annual tax burden and pay for their medical expenses. Like the IRA, individuals wishing to enroll in the programs you can make HSA maximum amount of money to their HSAs each year and then invest this money at a high percentage of production vehicles, such as stocks and bonds.
However, while HSAs provide excellent money and develop strong savings accounts, there are certain requirements that participants will have to be comfortable with in order to make their HSA. For most people HSAs financial are reasonable, which helps protect the movements of their money in designing also eggs slot for future medical expenses.
Here are a few things that everyone needs to think about when considering open HSA:
Healthy persons will benefit more
HSAs can be used by anybody to pay for eligible medical expenses and increasing wealth. However, in order to obtain an HSA, you must register in the forms of participants high deductible health insurance. Because of these high-deductible health insurance plans, participants will pay less premiums for their health insurance each month, but off-plan will be increased. Health insurance provider to start paying for eligible medical expenses, annual deductibles participants had to be met for the first time.
When a participant HSA is healthy, it will have a minimum annual health care costs. However, if the person concerned has any health conditions that require the attention and care, the individual will have to pay more out patients vis-à-vis his or her health before the beginning of the provider of health insurance, including medical expenses.
Deduction for HSA may vary on the basis of a specific program, which the participant chooses. This is why it is important that people choose plan of deduction are convenient payment. Then because they contribute money to the HSA, these contributions can help pay for medical expenses until the deduction meet each year.
Depending on the health situation of the HSA can continue to be a unique participants to help them save money, even if they have ongoing health conditions requiring attention due to the participants Save money every month off the cost of their premium payments. If they invest that monthly savings on high interest vehicles, you can increase the means used to pay off without effort.
Health savings account allows you to save on future health care costs
Money that people contribute to the HSA can be invested to all types of investments, which desires the individual. In many cases people choose their savings in high-yielding interest vehicles, such as the stocks CDs or money market account, which means that the funds will grow tax-free. These funds can be used in future to pay for qualifying medical expenses. In principle, persons who participate in a health savings account are making reasonable financial elections, which will benefit them.
However, if the person has an accident and needs funds to health savings account immediately, the individual will have the feel to withdraw money and using it to pay for the event. Individuals who are permanent medical conditions also may have for the convenience of using the money regularly pay towards deductible health insurance.
Everyone taking a health savings account enrollment also keep in mind that the funds they deposit to savings for health can be used to pay for something-costs not only treatment. Therefore, participant health savings account may increase savings in his or her tax-free as long as you want. Savings will be taxed only if they are to be withdrawn to pay for-eligible expenditure.
More control over the State of health
Another advantage of enrollment in health savings account is that the participants will have increased control over how they spend their medical dollars. Health savings account funds are limited and completely controlled by the owner of the account. Therefore, participants tend to pay special attention to medical services, they receive and what are these prices. As participants in the shop for the best price, are in better control of their medical expenses and services.
However, if a person is susceptible to many medical research and services performed and was unlikely to have a think about the price of the service or the service, individuals can pay more money than he or she due to the high deductible. Therefore, health savings account is often preferable for persons, which are discriminatory in terms of their health care costs and services.
For more information about establishing a health savings account for the year 2010, people should talk with a qualified health insurance or health savings account a classifier, as it is important that the participants are fully aware of the requirements and features of a health savings account. Savings accounts, health financial are reasonable and care options for many people and, when used optimally, you can save thousands of dollars each year participants off the cost of health care, while also helping them to develop their property.
By the Wiley Long -President, HSA for America -the nation's leading independent insurance company specializing in individual and family HSA insurance plans that working with savings accounts, health.
Saturday, May 21, 2011
Health savings accounts, should be available for all Americans
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All Americans should have the right to save for current and future healthcare expenses with pre-tax dollars. Health Savings Accounts provide some Americans with precisely that opportunity, but it is too limited in its scope to benefit the majority of the US. I love the concept of Health Savings Accounts (HSA), if you're not familiar with them they are savings accounts in which money can be put away for future medical expenses on a pre-tax basis. In order to be eligible for an HSA you must be covered under a qualifying high deductible health insurance plan (HDHP). These are health insurance policies that typically cost less because they require their holders pay a high deductible (typically greater than $1000 annually). Unfortunately, the eligibility requirement to participate in a health savings account precludes the majority of the population from receiving a privilege that should be as basic as saving for one's own retirement.
In a recent response from my Congressman, he suggested I consider using a sister product, the Flexible Spending Account (FSA). Although beneficial, the benefits of an FSA fall short of the benefits in an HSA; primarily because the balance of unused money in an FSA expires annually where an HSA rolls over from year to year. This is a monumental difference. With an HSA I have a means to cover current and future medical expenses which can accumulate to a retirement vehicle which becomes available for any purpose at age 65. The rollover benefit becomes an even greater benefit when you consider the funds in Health Savings Account are eligible to pay the premiums on Cobra. Contributing to an HSA provides financial resources to use should one lose their job. Americans can use their HSA to pay the necessary 102% of their health premiums through COBRA or they may roll the money into a less expensive high deductible health plan (HDHP) with the resources to meet the high deductible.
Let's look at a couple of case studies.
Dick and Jane
Dick and Jane are engaged. Jane has been submitting $2600 into and HSA for the past five years. During that time she has only consumed $1600 in health care costs that means Jane has been able to build up a health nest egg of $11,400. After they are married Dick begins carrying Jane as a dependent on his health care plan which does not qualify as a high deductible health care plan. Under current laws, Jane would be forced to discontinue contributing to her HSA, but it if all Americans were eligible for this savings incentive she wouldn't have that problem. Instead they could increase their contribution $5,150. After a year, Dick may lose his job, but the family has been able to save $16,550. Their healthcare nest egg provides Dick and Jane with additional options. They may select to continue their current coverage through COBRA or they can select an alternate health care option. If COBRA were to cost $400 a month they can utilize their HSA funds. With these funds they would have the means of paying for coverage for 41 months. They could also choose to purchase independent health coverage. Their $16,550 nest egg minimizes their risk on a high deductible healthcare plan. They could conceivable absorb a $10,000 deductible and reduce their monthly payment to about $200, or half the cost of their cobra payment.
Scott and Laura
In the scenario of Scott and Laura, Scott is a severe asthmatic. His condition leads to a hospital stay about once a year costing about $3000. He must also have continuing medication at a monthly cost of $112. Scott and Laura are both on her employer's group health plan. They pay $112/month with a $500 deductible and a 20% coinsurance. Their annual healthcare responsibility is approximately $2610 with insurance or approximately $4340 without insurance. Their insurance saves them approximately $1700 annually from paying full price on their medical care. Their FSA saves them about 20% (their tax bracket) on their prescription charges. Because Scott and Laura will lose the money in the FSA if they don't spend it by the end of the year, they only save the cost of Scott's prescriptions. Now, if Laura loses her job their healthcare future becomes much less secure because Laura's plan was not HSA eligible, they do not any residual savings from their health care expenses nor were they granted guaranteed tax savings from their medical expenses. If they keep the medical insurance they clearly need through COBRA they now need to pay $400/month. These annual premiums total $4000 alone meaning that Scott and Laura only save about $340 a year by having health insurance. This does not include the cost of any of the co pays. Keeping the insurance could increase their medical expenses to about $6000 a year or $550/month at a time when the family income has been reduced. Scott and Laura have a very difficult choice to make in regards to their healthcare. Should they continue with coverage or should they let the family health insurance lapse?
Had they been able to contribute to an HSA, their scenario may have looked a little different. Scott and Laura would still have the same policy but chose to contribute the maximum allowable to their HSA. From the $5150 they withdrew $2610 for healthcare expenses leaving $2540 to accumulate over for the next year. Over the course of 5 years they have accumulated $12700 in the HSA. If Laura loses her job their options look much more promising. They can more easily absorb costs of COBRA and provide for the costs of their existing coverage for their entire 18 month term of eligibility. By making wise decisions in time of plenty, Scott and Laura would be able to prevent financial devastation or public dependence in the future and still provide the means to maintain their health needs. All health consumers should have the option to participate in an HSA and receive the corresponding tax benefits. The opportunity to participate in an HSA should not be tied to a high deductible health insurance plan. As it is written an HDHP with an HSA discriminates against most Americans, namely, consumers whose employers don't offer a qualified high deductible healthcare plan and those who may have regular health needs which require a more generous health plan including young families who may need maternity or well child care.
Ironically, those ineligible to participate are doubly discriminated against. Not only do they lose the opportunity to financially prepare for the future healthcare needs, but it actually results in having higher healthcare costs. Here's how:
1. High deductible health care plans often attract the healthiest segment of society, and when you remove the healthy consumers from the general insurance pool, rates rise to cover the lost revenue and higher payout per consumer.
2. Non participants must pay deductibles and uncovered health care from post tax dollars or they must try to forecast their annual health expenses through a flexible spending account (FSA). If they underestimate, they are again paying for expenses with post-tax dollars and if they overestimate they lose the unspent balance.
3. Individuals who have continuing healthcare needs are at the mercy of their employer for continued coverage. The loss of employment often means the loss of health care and can bring great personal risk and financial hardship.
By eliminating the requirement that an individual have a HDHP plan, you open the door for many more participants. These are people who need to hedge against risk in their health and financial well-being. When you allow people to pay their insurance premiums with their HSA, you grant them a means of planning for their health future, without discriminating based on their health care needs. Nationally, you increase the savings rate, sending more money into banks, and driving down your uninsured among the unemployed. Fewer people are dependent on government healthcare subsidies because they were able to plan during times of plenty. You open a door for increased retirement savings and, by giving people access to their funds when healthcare is needed, you limit some of the draw on government resources because they don't end up on state sponsored plans.
All Americans should have the right to save for current and future healthcare expenses with pre-tax dollars.
Marla Finnigan is a health insurance broker who seeks to further the availability of healthcare within the United States. She would like to see coverage become more affordable, individuals more informed, and to maintain the United States' position as the lead innovator in health related advancements. She has a BA in English Literature from the University of Arizona and an MBA from Brigham Young University.
Monday, May 16, 2011
Health savings accounts, provide affordable health insurance solutions
Millions of Americans have recently been faced with the task of finding their own inexpensive health care plans for themselves and their families after they have lost their jobs. Already in 2009 alone, estimated that 7 million Americans who have lost work due to the recession will have to pay COBRA health insurance premiums in order to maintain their health insurance plans.
The good news for those millions of recently unemployed persons is that the new Government Act-American recovery and Reinvestment Act (ARRA)-which was put into place in many countries to help these individuals and their families of ensure pay for COBRA health care. However, the ARRA and COBRA provides only temporary financial exemption and, for many, the programmes are to end. Health savings accounts may be feasible solutions to health care for such workers.
Working with COBRA
COBRA is a program that allows employees who lost their job through no fault of their own to continue with the same health care plans, which they were assisted by their employers. COBRA program is temporary and, while the workers are able to maintain their same health insurance plans, employees have to pay more premiums for their health insurance plans, COBRA than they paid, while they were employed.
Historically, COBRA premiums were difficult for laid-off workers afford on their own. Yet because many workers were able to quickly find reemployment after they are laid off many employees chose to use the option as a temporary solution and COBRA health insurance when they were between the tasks.
However, with the current difficult economic conditions, it was not possible for many workers to find reemployment, which means that the obligation to pay high premiums COBRA for an extended period of time-or optional completely make health insurance. Therefore, when COBRA programs are short-term solution to help workers obtain affective through loss of temporary employment, are not capable of providing an affordable or long-term health insurance.
American recovery and Reinvestment Act
In order to help workers more easily afford COBRA (and retain health care coverage) of the Federal Government instated American recovery and Reinvestment Act (ARRA), which has been adopted by some States.
Under the ARRA for workers who lost their jobs during the recession are only required to pay 35 percent of their COBRA health insurance premiums, while the Federal Government pays the remaining 65 percent. This Act is adopted on the basis of a State by State and was an effective short-term solution for millions of Americans. However, COBRA coverage State lasts from six to only nine months, depending on the individual. The Federal COBRA coverage lasts for a maximum of 18 months, in most cases.
For many Americans are currently enrolled in COBRA COBRA health insurance programs and/or ARRA financial support is about to expire. The Americans, who are still unemployed are now challenged to find affordable health care plans for themselves and their families. This is particularly important for them to enroll in the new health insurance program before their COBRA benefits expire, so as to be able to maintain health care coverage for the entire time.
Health savings account options
For people who have lost their job health savings account is generally the solution very affordable and effective health insurance. Health savings accounts are used by people in all industries and financial economy situation, including owners of small businesses, companies, the unemployed, families financial-, savvy employees and more.
Health savings account is similar to the IRA, including those set aside money into health savings account, which then can invest in a high proportion of suitable stocks, bonds, money markets and more. Money, that person shall treat health savings account and tax-free may increase. When a person must pay for the certification of expenditure related to health, he or she can withdraw money from a health savings account to pay for it without paying tax.
It is one of the many benefits of health savings account, that person can use funds from their accounts as they wish. However, if they pay money for expenditure related to health care, will pay taxes on the funds you withdraw it. When they leave the funds in their health savings accounts, money can grow completely tax-free for life.
In order to establish a health savings account, people need to open an account a qualifying high-deductible health insurance. Health savings accounts can be used by individuals and families. There is also the maximum annual contribution for the individual and family health savings accounts, which are subject to change each year.
Health savings accounts are not only affordable health insurance solutions for individuals who have accounts COBRA, which are about to expire, but they are also the perfect solution for many laid-off workers. For many people the health savings accounts are more affordable and financially plans smart solutions than COBRA health insurance. Individuals should talk with an adviser to insurance to find solutions the right insurance for themselves and their families.
By Wiley Long – President, HSA for America-the nation's leading independent insurance company specializing in individual and family HSA insurance plans that working with savings accounts, health.
Saturday, April 9, 2011
Health savings account-a health insurance Plan that is containing cost and promoting health
Small business health insurance premium increases each year, are deeply incised Dr. Bradshaw practice income. Chiropractor health conscious, she rarely used individual health insurance for medical care. "My staff is healthy and are truly interested in health benefits for call emergency service. We all eat healthfully, develop, and to do proactive things to keep us from getting sick. " Dr. Bradshaw heard that health savings account can provide a satisfactory solution, which will offer lower cost health insurance covering catastrophic care and at the same time provide options to improve or sustaining health.
The cost of the premium health plans have been overwhelming for employers and individuals
"None of my staff took expensive prescription medicines so demand and abandoned several years ago to save money," acknowledges Dr. Bradshaw. "Even so, premiums and copays continue to advance and all of us continue to pay a lot of out-of-pocket costs for eye care and things like our dental."
Nobody wants to get sick. But there is a real fear of not having adequate insurance protection financial ruin from medical costs. People stay jobs just so they have health benefits. Companies constantly switch health plans or drop certain benefits so you can remain viable.
Investing in our own wellness seems to be well
What we are willing to pay and how to get sick? More companies recognize the value of healthy employees and spend thousands in wellness initiatives in order to save on health expenditure. There are those who delight in their health and their diligent election spend their own money on programs to reduce stress, fitness, healthy eating and alternative medicine. For these people is medical insurance plan invests in their health.
HSA saves you money and health
Again in 2003, our Federal Government shared health savings accounts (HSA). Associated with high much less expensive deductible medical insurance plan, strengthen tax funds could be used in the HSA for medical expenses but also for the promotion of health expenditure, such as dental care, chiropractic adjustment and treatment of acupuncture. Any funds that are not used roll-over for the next year to collect tax-free interest. After reaching the age of 65 years, the funds left in HSA works very similarly, IRA and may be used for medical expenses-.
Sensible personal and small business medical insurance plans
Dr. Bradshaw Saw immediately the benefits of health savings account. This was the best solution for individual medical insurance and its benefits for small businesses. Its employees loved having control of their health care dollars and choice of practitioners.
Now stwierdzila, "it would also be a great personal health insurance plan for my patients, who may use their HSA to pay for chiropractic services. What sensible Wellness plan. "
Copyright 2008 Dr. Andrea Brockman T-Horizons, LLC All rights reserved
Dr. Andrea Brockman is the CEO of T-Horizons, LLC; company-wide brokerage specializing in health savings account compatible health insurance plans for individuals, small businesses and health. It is also President of OraMedica International, LLC; A company dedicated to educating the public, health professionals and workers with chronic disease, connections, dental pain, obesity, stress and pregnancy complications.
Save money on health includes decisions based on knowledge, proactive health and adequate health insurance. More on the strengthening of consumer driven health plans tax visit http://www.oramedica.com
Monday, September 27, 2010
Health Savings Accounts - An American Innovation in Health Insurance
INTRODUCTON - The term "health insurance" is commonly used in the United States to describe any program that helps pay for medical expenses, whether through privately purchased insurance, social insurance or a non-insurance social welfare program funded by the government. Synonyms for this usage include "health coverage," "health care coverage" and "health benefits" and "medical insurance." In a more technical sense, the term is used to describe any form of insurance that provides protection against injury or illness.
In America, the health insurance industry has changed rapidly during the last few decades. In the 1970's most people who had health insurance had indemnity insurance. Indemnity insurance is often called fee-forservice. It is the traditional health insurance in which the medical provider (usually a doctor or hospital) is paid a fee for each service provided to the patient covered under the policy. An important category associated with the indemnity plans is that of consumer driven health care (CDHC). Consumer-directed health plans allow individuals and families to have greater control over their health care, including when and how they access care, what types of care they receive and how much they spend on health care services.
These plans are however associated with higher deductibles that the insured have to pay from their pocket before they can claim insurance money. Consumer driven health care plans include Health Reimbursement Plans (HRAs), Flexible Spending Accounts (FSAs), high deductible health plans (HDHps), Archer Medical Savings Accounts (MSAs) and Health Savings Accounts (HSAs). Of these, the Health Savings Accounts are the most recent and they have witnessed rapid growth during the last decade.
WHAT IS A HEALTH SAVINGS ACCOUNT?
A Health Savings Account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States. The funds contributed to the account are not subject to federal income tax at the time of deposit. These may be used to pay for qualified medical expenses at any time without federal tax liability.
Another feature is that the funds contributed to Health Savings Account roll over and accumulate year over year if not spent. These can be withdrawn by the employees at the time of retirement without any tax liabilities. Withdrawals for qualified expenses and interest earned are also not subject to federal income taxes. According to the U.S. Treasury Office, 'A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care.
HSA's enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.' Thus the Health Savings Account is an effort to increase the efficiency of the American health care system and to encourage people to be more responsible and prudent towards their health care needs. It falls in the category of consumer driven health care plans.
Origin of Health Savings Account
The Health Savings Account was established under the Medicare Prescription Drug, Improvement, and Modernization Act passed by the U.S. Congress in June 2003, by the Senate in July 2003 and signed by President Bush on December 8, 2003.
Eligibility -
The following individuals are eligible to open a Health Savings Account -
- Those who are covered by a High Deductible Health Plan (HDHP).
- Those not covered by other health insurance plans.
- Those not enrolled in Medicare4.
Also there are no income limits on who may contribute to an HAS and there is no requirement of having earned income to contribute to an HAS. However HAS's can't be set up by those who are dependent on someone else's tax return. Also HSA's cannot be set up independently by children.
What is a High Deductible Health plan (HDHP)?
Enrollment in a High Deductible Health Plan (HDHP) is a necessary qualification for anyone wishing to open a Health Savings Account. In fact the HDHPs got a boost by the Medicare Modernization Act which introduced the HSAs. A High Deductible Health Plan is a health insurance plan which has a certain deductible threshold. This limit must be crossed before the insured person can claim insurance money. It does not cover first dollar medical expenses. So an individual has to himself pay the initial expenses that are called out-of-pocket costs.
In a number of HDHPs costs of immunization and preventive health care are excluded from the deductible which means that the individual is reimbursed for them. HDHPs can be taken both by individuals (self employed as well as employed) and employers. In 2008, HDHPs are being offered by insurance companies in America with deductibles ranging from a minimum of $1,100 for Self and $2,200 for Self and Family coverage. The maximum amount out-of-pocket limits for HDHPs is $5,600 for self and $11,200 for Self and Family enrollment. These deductible limits are called IRS limits as they are set by the Internal Revenue Service (IRS). In HDHPs the relation between the deductibles and the premium paid by the insured is inversely propotional i.e. higher the deductible, lower the premium and vice versa. The major purported advantages of HDHPs are that they will a) lower health care costs by causing patients to be more cost-conscious, and b) make insurance premiums more affordable for the uninsured. The logic is that when the patients are fully covered (i.e. have health plans with low deductibles), they tend to be less health conscious and also less cost conscious when going for treatment.
Opening a Health Savings Account
An individual can sign up for HSAs with banks, credit unions, insurance companies and other approved companies. However not all insurance companies offer HSAqualified health insurance plans so it is important to use an insurance company that offers this type of qualified insurance plan. The employer may also set up a plan for the employees. However, the account is always owned by the individual. Direct online enrollment in HSA-qualified health insurance is available in all states except Hawaii, Massachusetts, Minnesota, New Jersey, New York, Rhode Island, Vermont and Washington.
Contributions to the Health Savings Account
Contributions to HSAs can be made by an individual who owns the account, by an employer or by any other person. When made by the employer, the contribution is not included in the income of the employee. When made by an employee, it is treated as exempted from federal tax. For 2008, the maximum amount that can be contributed (and deducted) to an HSA from all sources is:
$2,900 (self-only coverage)
$5,800 (family coverage)
These limits are set by the U.S. Congress through statutes and they are indexed annually for inflation. For individuals above 55 years of age, there is a special catch up provision that allows them to deposit additional $800 for 2008 and $900 for 2009. The actual maximum amount an individual can contribute also depends on the number of months he is covered by an HDHP (pro-rated basis) as of the first day of a month. For eg If you have family HDHP coverage from January 1,2008 until June 30, 2008, then cease having HDHP coverage, you are allowed an HSA contribution of 6/12 of $5,800, or $2,900 for 2008. If you have family HDHP coverage from January 1,2008 until June 30, 2008, and have self-only HDHP coverage from July 1, 2008 to December 31, 2008, you are allowed an HSA contribution of 6/12 x $5,800 plus 6/12 of $2,900, or $4,350 for 2008. If an individual opens an HDHP on the first day of a month, then he can contribute to HSA on the first day itself. However, if he/she opens an account on any other day than the first, then he can contribute to the HSA from the next month onwards. Contributions can be made as late as April 15 of the following year. Contributions to the HSA in excess of the contribution limits must be withdrawn by the individual or be subject to an excise tax. The individual must pay income tax on the excess withdrawn amount.
Contributions by the Employer
The employer can make contributions to the employee's HAS account under a salary reduction plan known as Section 125 plan. It is also called a cafeteria plan. The contributions made under the cafeteria plan are made on a pre-tax basis i.e. they are excluded from the employee's income. The employer must make the contribution on a comparable basis. Comparable contributions are contributions to all HSAs of an employer which are 1) the same amount or 2) the same percentage of the annual deductible. However, part time employees who work for less than 30 hours a week can be treated separately. The employer can also categorize employees into those who opt for self coverage only and those who opt for a family coverage. The employer can automatically make contributions to the HSAs on the behalf of the employee unless the employee specifically chooses not to have such contributions by the employer.
Withdrawals from the HSAs
The HSA is owned by the employee and he/she can make qualified expenses from it whenever required. He/She also decides how much to contribute to it, how much to withdraw for qualified expenses, which company will hold the account and what type of investments will be made to grow the account. Another feature is that the funds remain in the account and role over from year to year. There are no use it or lose it rules. The HSA participants do not have to obtain advance approval from their HSA trustee or their medical insurer to withdraw funds, and the funds are not subject to income taxation if made for 'qualified medical expenses'. Qualified medical expenses include costs for services and items covered by the health plan but subject to cost sharing such as a deductible and coinsurance, or co-payments, as well as many other expenses not covered under medical plans, such as dental, vision and chiropractic care; durable medical equipment such as eyeglasses and hearing aids; and transportation expenses related to medical care. Nonprescription, over-the-counter medications are also eligible. However, qualified medical expense must be incurred on or after the HSA was established.
Tax free distributions can be taken from the HSA for the qualified medical expenses of the person covered by the HDHP, the spouse (even if not covered) of the individual and any dependent (even if not covered) of the individual.12 The HSA account can also be used to pay previous year's qualified expenses subject to the condition that those expenses were incurred after the HSA was set up. The individual must preserve the receipts for expenses met from the HSA as they may be needed to prove that the withdrawals from the HSA were made for qualified medical expenses and not otherwise used. Also the individual may have to produce the receipts before the insurance company to prove that the deductible limit was met. If a withdrawal is made for unqualified medical expenses, then the amount withdrawn is considered taxable (it is added to the individuals income) and is also subject to an additional 10 percent penalty. Normally the money also cannot be used for paying medical insurance premiums. However, in certain circumstances, exceptions are allowed.
These are -
1) to pay for any health plan coverage while receiving federal or state unemployment benefits.
2) COBRA continuation coverage after leaving employment with a company that offers health insurance coverage.
3) Qualified long-term care insurance.
4) Medicare premiums and out-of-pocket expenses, including deductibles, co-pays, and coinsurance for: Part A (hospital and inpatient services), Part B (physician and outpatient services), Part C (Medicare HMO and PPO plans) and Part D (prescription drugs).
However, if an individual dies, becomes disabled or reaches the age of 65, then withdrawals from the Health Savings Account are considered exempted from income tax and additional 10 percent penalty irrespective of the purpose for which those withdrawals are made. There are different methods through which funds can be withdrawn from the HSAs. Some HSAs provide account holders with debit cards, some with cheques and some have options for a reimbursement process similar to medical insurance.
Growth of HSAs
Ever since the Health Savings Accounts came into being in January 2004, there has been a phenomenal growth in their numbers. From around 1 million enrollees in March 2005, the number has grown to 6.1 million enrollees in January 2008.14 This represents an increase of 1.6 million since January 2007, 2.9 million since January 2006 and 5.1 million since March 2005. This growth has been visible across all segments. However, the growth in large groups and small groups has been much higher than in the individual category. According to the projections made by the U.S. Treasury Department, the number of HSA policy holders will increase to 14 million by 2010. These 14 million policies will provide cover to 25 to 30 million U.S. citizens.
In the Individual Market, 1.5 million people were covered by HSA/HDHPs purchased as on January 2008. Based on the number of covered lives, 27 percent of newly purchased individual policies (defined as those purchased during the most recent full month or quarter) were enrolled in HSA/HDHP coverage. In the small group market, enrollment stood at 1.8 million as of January 2008. In this group 31 percent of all new enrollments were in the HSA/HDHP category. The large group category had the largest enrollment with 2.8 million enrollees as of January 2008. In this category, six percent of all new enrollments were in the HSA/HDHP category.
Benefits of HSAs
The proponents of HSAs envisage a number of benefits from them. First and foremost it is believed that as they have a high deductible threshold, the insured will be more health conscious. Also they will be more cost conscious. The high deductibles will encourage people to be more careful about their health and health care expenses and will make them shop for bargains and be more vigilant against excesses in the health care industry. This, it is believed, will reduce the growing cost of health care and increase the efficiency of the health care system in the United States. HSA-eligible plans typically provide enrollee decision support tools that include, to some extent, information on the cost of health care services and the quality of health care providers. Experts suggest that reliable information about the cost of particular health care services and the quality of specific health care providers would help enrollees become more actively engaged in making health care purchasing decisions. These tools may be provided by health insurance carriers to all health insurance plan enrollees, but are likely to be more important to enrollees of HSA-eligible plans who have a greater financial incentive to make informed decisions about the quality and costs of health care providers and services.
It is believed that lower premiums associated with HSAs/HDHPs will enable more people to enroll for medical insurance. This will mean that lower income groups who do not have access to medicare will be able to open HSAs. No doubt higher deductibles are associated with HSA eligible HDHPs, but it is estimated that tax savings under HSAs and lower premiums will make them less expensive than other insurance plans. The funds put in the HSA can be rolled over from year to year. There are no use it or lose it rules. This leads to a growth in savings of the account holder. The funds can be accumulated tax free for future medical expenses if the holder so desires. Also the savings in the HSA can be grown through investments.
The nature of such investments is decided by the insured. The earnings on savings in the HSA are also exempt from income tax. The holder can withdraw his savings in the HSA after turning 65 years old without paying any taxes or penalties. The account holder has complete control over his/her account. He/She is the owner of the account right from its inception. A person can withdraw money as and when required without any gatekeeper. Also the owner decides how much to put in his/her account, how much to spend and how much to save for the future. The HSAs are portable in nature. This means that if the holder changes his/her job, becomes unemployed or moves to another location, he/she can still retain the account.
Also if the account holder so desires he can transfer his Health Saving Account from one managing agency to another. Thus portability is an advantage of HSAs. Another advantage is that most HSA plans provide first-dollar coverage for preventive care. This is true of virtually all HSA plans offered by large employers and over 95% of the plans offered by small employers. It was also true of over half (59%) of the plans which were purchased by individuals.
All of the plans offering first-dollar preventive care benefits included annual physicals, immunizations, well-baby and wellchild care, mammograms and Pap tests; 90% included prostate cancer screenings and 80% included colon cancer screenings. Some analysts believe that HSAs are more beneficial for the young and healthy as they do not have to pay frequent out of pocket costs. On the other hand, they have to pay lower premiums for HDHPs which help them meet unforeseen contingencies.
Health Savings Accounts are also advantageous for the employers. The benefits of choosing a health Savings Account over a traditional health insurance plan can directly affect the bottom line of an employer's benefit budget. For instance Health Savings Accounts are dependent on a high deductible insurance policy, which lowers the premiums of the employee's plan. Also all contributions to the Health Savings Account are pre-tax, thus lowering the gross payroll and reducing the amount of taxes the employer must pay.
Criticism of HSAs
The opponents of Health Savings Accounts contend that they would do more harm than good to America's health insurance system. Some consumer organizations, such as Consumers Union, and many medical organizations, such as the American Public Health Association, have rejected HSAs because, in their opinion, they benefit only healthy, younger people and make the health care system more expensive for everyone else. According to Stanford economist Victor Fuchs, "The main effect of putting more of it on the consumer is to reduce the social redistributive element of insurance.
Some others believe that HSAs remove healthy people from the insurance pool and it makes premiums rise for everyone left. HSAs encourage people to look out for themselves more and spread the risk around less. Another concern is that the money people save in HSAs will be inadequate. Some people believe that HSAs do not allow for enough savings to cover costs. Even the person who contributes the maximum and never takes any money out would not be able to cover health care costs in retirement if inflation continues in the health care industry.
Opponents of HSAs, also include distinguished figures like state Insurance Commissioner John Garamendi, who called them a "dangerous prescription" that will destabilize the health insurance marketplace and make things even worse for the uninsured. Another criticism is that they benefit the rich more than the poor. Those who earn more will be able to get bigger tax breaks than those who earn less. Critics point out that higher deductibles along with insurance premiums will take away a large share of the earnings of the low income groups. Also lower income groups will not benefit substantially from tax breaks as they are already paying little or no taxes. On the other hand tax breaks on savings in HSAs and on further income from those HSA savings will cost billions of dollars of tax money to the exchequer.
The Treasury Department has estimated HSAs would cost the government $156 billion over a decade. Critics say that this could rise substantially. Several surveys have been conducted regarding the efficacy of the HSAs and some have found that the account holders are not particularly satisfied with the HSA scheme and many are even ignorant about the working of the HSAs. One such survey conducted in 2007 of American employees by the human resources consulting firm Towers Perrin showed satisfaction with account based health plans (ABHPs) was low. People were not happy with them in general compared with people with more traditional health care. Respondants said they were not comfortable with the risk and did not understand how it works.
According to the Commonwealth Fund, early experience with HAS eligible high-deductible health plans reveals low satisfaction, high out of- pocket costs, and cost-related access problems. Another survey conducted with the Employee Benefits Research Institute found that people enrolled in HSA-eligible high-deductible health plans were much less satisfied with many aspects of their health care than adults in more comprehensive plans People in these plans allocate substantial amounts of income to their health care, especially those who have poorer health or lower incomes. The survey also found that adults in high-deductible health plans are far more likely to delay or avoid getting needed care, or to skip medications, because of the cost. Problems are particularly pronounced among those with poorer health or lower incomes.
Political leaders have also been vocal about their criticism of the HSAs. Congressman John Conyers, Jr. issued the following statement criticizing the HSAs "The President's health care plan is not about covering the uninsured, making health insurance affordable, or even driving down the cost of health care. Its real purpose is to make it easier for businesses to dump their health insurance burden onto workers, give tax breaks to the wealthy, and boost the profits of banks and financial brokers. The health care policies concocted at the behest of special interests do nothing to help the average American. In many cases, they can make health care even more inaccessible." In fact a report of the U.S. governments Accountability office, published on April 1, 2008 says that the rate of enrollment in the HSAs is greater for higher income individuals than for lower income ones.
A study titled "Health Savings Accounts and High Deductible Health Plans: Are They an Option for Low-Income Families? By Catherine Hoffman and Jennifer Tolbert which was sponsored by the Kaiser Family Foundation reported the following key findings regarding the HSAs:
a) Premiums for HSA-qualified health plans may be lower than for traditional insurance, but these plans shift more of the financial risk to individuals and families through higher deductibles.
b) Premiums and out-of-pocket costs for HSA-qualified health plans would consume a substantial portion of a low-income family's budget.
c) Most low-income individuals and families do not face high enough tax liability to benefit in a significant way from tax deductions associated with HSAs.
d) People with chronic conditions, disabilities, and others with high cost medical needs may face even greater out-of-pocket costs under HSA-qualified health plans.
e) Cost-sharing reduces the use of health care, especially primary and preventive services, and low-income individuals and those who are sicker are particularly sensitive to cost-sharing increases.
f) Health savings accounts and high deductible plans are unlikely to substantially increase health insurance coverage among the uninsured.
Choosing a Health Plan
Despite the advantages offered by the HSA, it may not be suitable for everyone. While choosing an insurance plan, an individual must consider the following factors:
1. The premiums to be paid.
2. Coverage/benefits available under the scheme.
3. Various exclusions and limitations.
4. Portability.
5. Out-of-pocket costs like coinsurance, co-pays, and deductibles.
6. Access to doctors, hospitals, and other providers.
7. How much and sometimes how one pays for care.
8. Any existing health issue or physical disability.
9. Type of tax savings available.
The plan you choose should according to your requirements and financial ability.
BIBLIOGRAPHY
1 Questions and Answers about Health Insurance- A Consumer Guide' published jointly by the Agency for Healthcare Research and Quality (AHRQ)and America's Health Insurance Plans (AHIP)
2 http://www.en.wikipedia.org/wiki/Health_savings_account
3 2002 AHIP Survey of Health Insurance Plans
4 "How High Is Too High? Implications of High-Deductible Health Plans" Davis, Karen; Michelle Doty and Alice Ho. The Commonwealth Fund, April 2005
5 http://www.fdhc.state.fl.us/schs/pdf/hsa_tri-fold_brochure.pdf
6 HSA/HDHP CENSUS 2008 by Hannah Yoo, Center for Policy and Research, America's Health Insurance Plans
7"HEALTH SAVINGS ACCOUNTS Early Enrollee Experiences with Accounts and Eligible Health Plans" John E. Dicken Director, Health Care.
8 Thomas Wilder and Hannah Yoo, "A Survey of Preventive Benefits in Health Savings Account (HSA)Plans, July 2007," America's Health Insurance Plans, November 2007
9 Gladwell, Malcolm, "The Moral Hazard Myth", The New Yorker (29-08-2005)
10 2008 Benchmark Survey HAS Bank
11. Employer Health Benefits 2007 Annual Survey, Kaiser Family Foundation
12. Health Savings Accounts and High Deductible Health Plans: Are They An Option for Low-Income Families?Catherine Hoffman and Jennifer Tolbert for Kaiser Family Foundation, October 2006
13. Medicare Prescription Drug, Improvement, and Modernization Act of 2003
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