Archive for Health Savings Account
November 19, 2008 at 5:58 am · Filed under Health Savings Account
Health care costs are continuing to rise and health insurance premiums are unaffordable for many Americans. Health Savings Accounts (HSAs) often offer an affordable alternative for many self employed and individuals who purchase their own health insurance plans.
What is health insurance designed to do? I believe it is intended to limit your financial exposure should an unforeseen event occur that affects your health. Ask yourself the following question and you will see what I mean. What would automobile insurance cost if it covered regular maintenance such as oil changes, tires, etc.? Clearly, the premiums would be much higher. Automobile insurance is designed to limit your exposure to risk.
Many people use there health insurance frequently by running to the doctor’s office for something as simple as a common cold. They make their copayment and the visit is included in their monthly premium. This easy and unlimited access to a doctor for what I would suggest are non essential visits are what drives up the premium.
An excellent alternative is the Health Savings Account (HSAs) which blend a higher deductible with a tax savings that allows you and the insurance carrier to share the risk while still limiting your exposure to a known amount. Many of these plans will cover an annual physical for no cost and every thing else is paid by you at the contracted rate until you reach your deductible.
Let me explain. If a doctor charges $120 for a visit but your insurance carrier has a contracted rate of $55, then you will only pay $55 for the visit. Since most plans have a $20 or $30 copy, this is really not costing you much more but you are saving about 30% to 60% on your monthly premium. Once the deductible is met the carrier then pays 100% of future expenses.
Here is an example of the potential premium savings. A 45 year old male for a traditional plan with a $20 copy and $500 deductible would pay $507 a month. For the same client the HSA would only cost $139 a month for a plan with a $1,200 deductible. This tremendous savings more than makes up for the higher deductible and even if the maximum deductible was met, it would still save him lots of money.
For more information on these accounts and other plans, contact www.mrinsurancofmaryland.com or call us on 866-654-4844.
http://mrinsuranceofmaryland.com/health-plan-blog/category/79
November 17, 2008 at 7:10 am · Filed under Health Savings Account
Health savings accounts (HSAs) were introduced in 2004 and allow individuals to pay for medical services upfront through funds they deposit tax-free into a personal account. A required insurance policy then kicks in for catastrophic expenses. Any unused funds build up from year-to-year and collect interest in the process.
But do health savings accounts make financial sense? Recent guidelines issued by the Internal Revenue Service put HSAs on equal footing with Individual Retirement Accounts from a tax perspective. But HSAs offer benefits IRAs simply cannot, say researchers.
“Put simply, no other account has the tax advantages that HSAs do,” says Roy Ramthun, co-author of a new report from the Flint Hills Center for Public Policy and a Visiting Fellow at the Council for Affordable Health Insurance. “Throughout the life of an HSA its owners can withdraw funds for medical care tax-free. Because of this, taxpayers should consider fully funding their HSAs first, before other types of retirement accounts.”
For example:
* Medical care in retirement can be extremely expensive and demands adequate planning and saving; Fidelity Investments, for example, estimates that “an average 65-year-old should plan for at least $551 monthly or $6,631 annually in healthcare expenses.”
* For a couple retiring in 2008, that can add up to $225,000 over the rest of their lifetimes after taking into account all the expenses Medicare covers; even worse, that figure does not include long-term care expenses.
* The number is not likely to drop any time soon, either; in fact, over the past several years the average annual increase has held steady at roughly six percent.
“With health care costs continuing to outpace wage increases and companies trimming retiree health benefits,” said Fidelity Executive Vice President Brad Kimler in a recent release, “financing health care has to be central to retirement planning.”
The beauty of HSAs is that they can be used to pay Medicare premiums, out-of-pocket expenses, long-term care insurance premiums, and many long-term care expenses, say researchers. Even better, HSAs can do all of this tax-free. However, if you don’t end up incurring these types of expenses, you can still use your HSA funds for other purposes and pay only regular income tax on your withdrawals after age 65.
Source: Roy Ramthun and Matthew Hisrich, “What can a health savings account do for you?: The tax, savings, and health spending advantages of HSAs,” Flint Hills Center for Public Policy, October 28, 2008.
For text:
http://www.flinthills.org/component/option,com_docman/task,doc_download/gid,1048/
For more on Health Issues:
http://www.ncpa.org/sub/dpd/index.php?Article_Category=16
http://www.ncpa.org/sub/dpd/index.php?Article_ID=17243
November 10, 2008 at 8:03 am · Filed under Health Savings Account
Rising medical costs and tight budgets have more Americans examining their health-care options. Health savings accounts are relatively new and gaining ground in workplaces nationwide.
Health savings accounts are matched with a health plan with a higher deductible and lower premiums than traditional medical plans.
They allow workers or employers to contribute money pre-tax into an account for medical expenses without being subject to federal income tax at the time of the deposit.
Independent insurance agent Bryan Wampler of Florence sells the plans and is enrolled in one himself.
The benefit for the worker is unused money can be invested to grow and be used at a future date. For a business owner it lowers the health-care expense.
“They’d be nuts not do it,” he said. “I was kicking myself for not having done it years ago.”
One client, an area manufacturer, has 85 percent of its employees on high-deductible plans with HSAs, Wampler said.
HSAs came into being four years ago as part of the Medicare reform legislation and are designed to replace medical savings accounts.
Experts say the attractiveness of HSA-affiliated plans depends in large part on whether someone is willing to pay a greater deductible to see premiums savings later.
“One size doesn’t fit everybody,” Wampler said.
The average individual-plan deductible in an HSA-related plan can reach $2,000, versus $560 in a Preferred Provider Organization, says Bianca DiJulio, who co-authored a recent study on workplace health coverage for the Kaiser Family Foundation, a nonprofit that examines health issues.
“People often don’t have the assets to pay those high deductibles,” DiJulio said, pointing out a potential pitfall of HSA-affiliated plans.
But there are advantages, too, she notes.
Money not spent in a given year rolls over to the next. All deposits belong to the policyholder, regardless of who made them. Investment earnings are tax-sheltered until money is withdrawn.
Unlike medical savings accounts, HSAs are available to businesses of all sizes. Medical Savings Accounts were limited to the self-employed and employers with 50 or fewer people.
“We know generally that health care is getting more expensive. Both employers and employees are struggling to afford health insurance,” DiJulio said.
The Kaiser study found the number of small-business employees enrolled in consumer-directed plans like those offering HSAs grew from 8 percent to 13 percent in 2008.
The study defines small businesses as those having at least three and less than 200 employees. Overall, the percentage of workers using consumer-directed plans grew from 5 percent last year to 8 percent this year.
The HSA-related plans’ tax benefits are attractive to smaller businesses competing with major corporations in recruiting and retaining employees, says Ron Aldridge, state director of the National Federation of Independent Business, a trade group for small business owners.
“You can purchase your own insurance with an HSA,” he said. “If you were to close your business or leave that business, you can take that account with you.”
But some of the state’s larger employers are turning to such plans, too.
Entergy Inc., which provides power in Mississippi and other states, says 3,400, or 28 percent, of the work force use HSA-related plans, said Chris Smith, a company communications specialist in benefits.
“Certainly, a lot more people over time have taken to it,” he said. “The health savings account belongs to you, and the money that you don’t use (can) grow, tax-free. It’s not a use-it-or-lose-it program.”
He said Entergy has offered the plan for about three years, explaining it’s important to give its workers flexibility in health coverage, especially in a line of work that can be potentially hazardous.
But Mississippi remains a state with fairly low enrollment in HSA-related plans.
Some 23,422 people, or 1.5 percent, enrolled in private health insurance plans use HSA-related offerings, according to America’s Health Insurance Plans’ Center for Policy Research.
That places the state near the bottom in terms of HSA usage. Neighboring Louisiana, by contrast, reports 9 percent enrollment, one of the higher such percentage rates in the country.
Mississippi has been slower to embrace HSA plans because the state is still growing its number of competing health insurance providers on the heels of a bitter tort-reform fight among lawmakers several years ago, Wampler said.
Plus, not all existing carriers offer them or are familiar with them, Wampler said.
“The marketplace dictates a lot of it,” he said.
Wampler adds successfully utilizing an HSA plan will require some changes in how workers view their health-care coverage.
For too many the co-pay is a deciding factor, Wampler said. Some people go to the doctor even when they’re not seriously ill.
“We’ve got a generation of hypochondriacs,” he said. But with an HSA plan, the co-pay doesn’t kick in until after a deductible is met.
Older people typically will see bigger savings from the plans, Wampler said, because they’re more likely to need regular doctor-office visits or develop serious illnesses.
Those who work for themselves may not benefit as greatly from HSA plans as more traditional plans, Aldridge said.
“If I’m a sole proprietor, I don’t get other tax benefits that corporations get,” he said. “I’m paying a 15.3 percent self-employment tax” on top of what’s being paid for health-care coverage.
Even the consumer-centered structure of the plans can work against them, DiJulio said, because someone with a major illness may not have the time or energy to “shop around” for the most cost-effective treatment.
She said the relative newness of the plans is another reason why HSAs still lag behind PPOs and other traditional plans.
But, with health care constantly on workers’ and employers’ minds, particularly when businesses everywhere are looking to save, HSAs could be primed to gain a greater foothold in the marketplace over the next few years.
“Employers are figuring out whether they want to offer the plan to their employees,” DiJulio said, “and employees are having to decide whether they want to take on the higher deductible.”
http://www.clarionledger.com/article/20081109/BIZ/811090342/1005
November 8, 2008 at 1:52 am · Filed under Health Savings Account
I first learned about Health Savings Accounts a year ago when Microsoft offered them for the first time.
It took me awhile to get my head wrapped around the idea. Stay with me here; it’s a bit convoluted because it’s such a departure from how most people use health insurance money.
I immediately liked the concept: Put pre-tax money in a portable interest bearing account that you can use towards your medical costs. Money you don’t use in any given year accrues interest, and through time you get a sweet pot of money growing for medical costs.
However, for some inexplicable reason, we procrastinated and continued with the same health insurance model we had always had while at Microsoft.
When Bear went to new employer last Spring, we again procrastinated.
So when the Annual Enrollment package came in the mail a few weeks ago from Employer, we decided that’s it, we are nailing this and getting it done.
Basically, it’s a totally departure from conventional health insurance.
Conventional health insurance consists of paying a monthly cost, plus deductible and/or co-pays, and once you spend that money that’s it, it’s an expense and it’s gone.
However, with a Health Savings Account, you get to put that money to work for you instead of for an insurance company.
How?
Think of a Health Savings Account like your 401(k):
1) You get to put pre-tax dollars in it.
2) It bears interest.
3) It’s portable, meaning it is not tied to any employer; it’s an actual account with an actual brokerage, just like your 401(k) is.
4) Unlike 401(k)s you also are not taxed on withdrawals (although withdrawals must be only for medical purposes).
Health Savings Account are partnered with a health insurance plan. The health insurance plan cost is being picked up by employer, and we will use our Health Savings Account for the health costs we incur using the plan.
The maximum contribution to Health Savings Account?
$5300.
The maximum our deductible would be any given year?
$4200
So you can see the beauty of this if you are healthy and don’t visit doctors very often: You get to keep most of your health insurance costs in your Health Savings Account for future use.
The associated health insurance covers 100% of preventative visits (e.g. annual exams), so it’s a total win/win.
Bear and I got very excited yesterday afternoon as we finished the consultation with the benefits rep: We now see this as another ‘leg’ to our retirement strategy: Through time we will accrue money in this account that we can use for later health needs.
Even if something catastrophic happens in any given year, we are still ahead, because the plan picks up 90% cost after $4200 in a calendar year up to a certain amount, after which it pays 100%.
I hope this plan gets adopted by more and more companies, because it’s a true partnership between consumer and provider.
It’s truly an empowering approach to health care that rewards responsible behavior on the part of the consumer.
http://financialfitness.blogspot.com/2008/11/health-savings-accounts-why-you-want.html
