The Insurance Review - March 2010
HEALTH SAVINGS ACCOUNTS
By Roland L. Enz - President, California Plus Insurance
For many years now a national debate has stemmed around health care. Now, with the current administration attempting to push health care reform down our throats, both sides of the debate have become very vocal. The Democrats, pushing forward with Ted Kennedy’s vision of a national health care program, has come up against a growing national unrest and skepticism of cost and government’s involvement in your health care ($800 Billion added to our already blown out-of-proportion national debt – get real). Years ago, when the national debt was a whooping $3,500 per every man, woman and child in the United States, it terrified me. Now, can you imagine, our debt load per every man, women and child is a horrific $45,000 each and growing.
Our electorate does not get it, and why should they? Legislators are so out of touch with reality that they can not relate to those of us that are actually on the front line of our economy. Our electorate should concentrate on refining the system and working toward the reduction of costs – not “free” health care for all. All of us should take a page out of the State of Massachusetts and their state-endorsed health care program. Obviously, the citizens of Massachusetts had a concern, and that concern was addressed by the defeat of the democratic candidate by Republican Scott Brown. At issue was the involvement of the federal government in their successful state-ran health care program.
Health care insurance premiums are out of control. Today, those of us with coverage are paying more for less. Cost containment is an issue that has to be addressed. One way that you can help contain those costs is to partner with your health care provider by enrolling in a High Deductible Health Plan and then starting a Health Savings Account. Health Savings Accounts are not for everyone, but if you and your family are in reasonable good health, this concept just might be right up your financial alley. The program can be written individually or part of a group plan if you are enrolled in one through your employer.
A Health Savings Account is a tax-advantaged medical savings account available to tax payers in the United States. You have to be enrolled in a High Deductible Health Plan, but that is the cost savings component of the equation. Deductibles of $1,800 per person and $3,600 per family (as an example) or more will drive your health care premiums down. In catastrophic situations, the maximum out-of-pocket expense can be less than that of a traditional health care plan. The High Deductible Health Plan (HDHP) can cover 100% after the deductible involving no coinsurance.
After you are enrolled in a HDHP, you will be directed to open a savings account, which you will deposit funds equal to your deductible. This part of the program is probably the most interesting and possibly provides the greatest benefit to you and your family. Excess funds, up to a limit prescribed by law, are allowed to be deposited into this account. Your bank will provide you with a Health Savings Account (HSA) debit card, which you will use to pay your health care costs, up to the deductible limit. If and when you exhaust your annual savings account, your health provider covers the balance.
If you participate in a group plan, your savings account is owned by you and not the company. The funds contributed to the account are not subject to federal income tax at the time of deposit. Your funds will roll over and accumulate year after year if not spent. Health Savings Accounts are treated very much like an Individual Retirement Account (IRA) and withdrawals for non-medical expenses are treated the same. There are tax advantages if the money in your HSA is not taken until after you reach retirement age, and there are penalties if money is withdrawn early for non-medical use. This type of account can be a key component of cost reduction in your health care budget.
Health Savings Accounts encourage saving for future health care expenses. This will allow you to receive needed health care without a gate keeper (insurance company) determining what benefits are allowed and makes you responsible for your own health care choices (and costs) through the purchase of a required High Deductible Health Plan.
Funds in a Health Savings Account can be invested in a manner similar to investments made to an IRA account. Investment earnings are sheltered from taxation until the money is withdrawn. Health Savings Accounts can be rolled over from one fund to another, but cannot be rolled over into an IRA or a 401(k). The Tax Relief and Health Care Act of 2006 allows a one-time rollover of an IRA asset to be used to fund up to one year’s maximum Health Savings Account contribution (this is a good way to get your HSA started). When a person dies, the funds in their Health Savings Account are transferred to the beneficiary. If the beneficiary is a surviving spouse, the transfer is tax free.
As you can see, this is not a plan that works for everyone, but if you fall into this category and if you understand the concept, it might behoove you to look into this type of health care plan. You should not only talk with your insurance agent, but also discuss this subject with your accountant. A Health Savings Account just might be a good fit for your financial planning program.
Maybe together, without the federal government’s help, we can all work towards solving this current health care crisis and get Americans back to thinking about the really important things – like job creation, innovation and investments! These are the real issues that need to be addressed for our country’s long-term success and security. If you have any insurance-related comments or questions, please feel free to contact me through California Plus Insurance Service, Inc. in Modesto, California at 1-800-699-7101.