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Archive for the ‘Health Savings Account’ Category

The most successful healthcare reform that has taken place started in 2004 – Health Savings Accounts. This is a special account kind of like an IRA, where anyone with a qualifying high-deductible health insurance plan can put aside pre-tax money to cover future medical expenses.

Health Savings Accounts encourage people to save for their future, and when they do need to tap into the money to pay for medical expenses they have much greater incentive to be careful how they spend that money. It is this consumerism that facilitates price among providers, which helps keeps costs down for everyone.

HSA plans have become very popular, in part because they are much less expensive than conventional copay plans. So many people are concerned that these high-deductible plans and Health Savings Accounts will not be available after healthcare reform passes.

Since there is no final bill yet at this time, we can only speculate what will happen. But it does look like yes, Health Savings Accounts and high deductible health insurance plans will probably still be available under Obamacare.

The first clue that these plans will still be available is the minimum benefit levels defined in the Baucus proposal in the Senate. The bronze benefit package would allow an out-of-pocket limit up to the HSA current law limit ($5950 for individuals and $11,900 for families in 2010).

The bill also makes some changes to how distributions from Health Savings Accounts are handled. Distributions from a Health Savings Account that are not used to cover medical expenses will be subject to a 20 percent additional tax penalty, instead of 10 percent as it now stands. Not that big of an issue if you use your Health Savings Account as it is intended.

So we can see they seem to be thinking about Health Savings Accounts. But here’s the possible catch. All qualified health insurance plans “would be required to provide primary care and first dollar coverage for physician services and prescription drugs.”

Under current law, an HSA-qualified health insurance plan cannot offer first dollar coverage, other than for certain preventive benefits. So currently a plan cannot comply with the requirements in the Senate bill, and also be HSA-qualified.

Both the House and Senate bills give authority to work out this issue to an appointed official. In the House it is the “Health Choices Commissioner.” The Senate Finance Committee (Baucus) proposal gives authority to the secretary of Health and Human Services.

So while there is no certainty at this point, we are expectant that not only will Health Savings Accounts be part of the package if healthcare reform is passed, but will become more popular than ever due to the much lower premiums, the tax benefits, and the long-term saving opportunities.

Regardless of how healthcare reform works out, remember that most of new laws would not actually go into effect until 2013. So it still makes sense to get and fund an HSA plan right now. Anyone who has a qualified HSA health insurance plan in place by December 1st can make a 2009 contribution, and cut their April 15th tax bill by up to $1900 or more.

Health Savings Accounts allow you to set up a tax-deductible account to pay for medical expenses that are not covered by your health insurance. These include expenses to cover your deductible, and other medical expenses like dental and eyeglasses. But many don’t realize that HSA funds can be used to pay for virtually any type of medical service, as long as it pertains to the treatment or prevention of a specific health condition.

Because money withdrawn from a health savings account to pay medical expenses is tax-free, anyone who has an HSA can funnel all alternative medical expenses through their HSA and get a tax write-off. This could include biofeedback, naturopathy, Ayurvedic medicine, aromatherapy, magnetic healing, reflexology, and the list goes on.

People who use complementary therapies are often very health conscious, and go to traditional physicians less often. So it does not make sense for them to be paying a high premium for a traditional health insurance plan with a co-pay, particularly when their medical treatments are not covered anyway. Instead, many are choosing a low cost high-deductible HSA plan.

Alternative Therapies Becoming Mainstream

Many hospitals are now offering complementary treatments. The website for the Memorial Sloan-Keating Cancer Center states that complementary therapies are used to “help alleviate stress, reduce pain and anxiety, manage symptoms, and promote a feeling of well-being.”

Some group health insurance plans are beginning to cover more complementary expenses, but there is still very little coverage for these expenses in individual or family plans. Those that cover chiropractic limit coverage to 12 – 20 visits per year, and a few will cover a limited amount of acupuncture. But very few if any cover hypnotherapy, Reiki, iridology, or faith healers.

Why Complementary Medicine

The conventional medicine practiced by most MDs is called allopathic medicine. The philosophy of this system is to treat disease and injury using counteractive methods. For instance, if you have a fever you may take aspirin to make it go down, if your cholesterol is elevated you may take a statin to reduce it, if you have heartburn you may take an antacid. The thinking is mostly focused on removing the symptoms of disease, and the primary treatment modalities are surgery and prescription drugs.

But there are other ways to look at things. Naturopathic medicine is based on the belief in the body’s own healing powers, which can be strengthened through the use of certain foods, vitamins, herbs, or other “natural” treatments. Traditional Chinese Medicine (TCM) is based on ancient Chinese theories about the balance of yin and yang. Ayurvedic medicine is based on principles of movement, metabolism, and structure.

Part of the growing use of complementary therapies is a reaction to the costs, side effects, and philosophy of conventional allopathic medicine. Physicians get much of their continuing education from the pharmaceutical industry, and they work in an environment where the insurers and the patients are both looking for a quick fix. The result is that the average 60 year old is now taking 5 regular medications, yet there is little expectation that those drugs will ever cure the health problems for which they’re being used. Many consumers see this, and instead are using other methods to try to get to the root of their illness.

What is Considered a “Qualified HSA Expense”

Qualified medical expenses have been partially defined in IRS Publication 502, and through various federal court rulings. There is no definitive list, but there are really very few restrictions as long as the procedure is for the treatment or prevention of a specific health condition. For instance, you could not use your HSA funds to pay for a relaxing massage for your own personal pleasure. But if your doctor recommends you get a massage for specific medical reasons, this is considered a qualified expense. Yoga would not normally be considered a qualified medical expense, but it would be if it was recommended as a physical therapy following some sort of accident.

Some may question why the government would give a tax deduction for someone to use some crazy energy vibration machine to cure their cancer. But this is as it should be. No one but you should be able to decide what type of treatment you will use for your own illnesses. By empowering individuals to manage their health as they see fit, HSAs encourage personal responsibility and help loosen the monopoly on healthcare that conventional medicine has had for the past few decades.

Do you understand health savings accounts (HSA)? These plans actually consist of two important parts, and they can benefit many people. But HSA health plans are not for everybody!

One is a higher deductible major medical insurance policy. The other one is the actual savings account.

The idea here is that the health insurance policy will cover the big bills. If the account gets funded, it provides the money to cover many bills that would not be included in a major medical policy, or it can pay bills until the deductible is reached.

There are some key advantages to having an H.S.A., but these will not benefit everybody. First look at some of the benefits. Then it will be easier to decide if you should be an H.S.A., PPO, or HMO!

The contributions the savings account will not be taxed if they are within current IRS limits. This means that a family can put away pre-tax income to use for health expenses. This makes that money go further.

Cash in the account will roll over if it doesn’t get spent. Hopefully, this gives a family or individual the opportunity to set aside enough money to help them with medical expenses. Some accounts even earn interest just like regular savings accounts.

In addition, the account may be used to pay for some health care costs that would not even be covered by major medical insurance. Some examples may be dental care, eyeglasses, or vitamins. Make sure you consult current tax rules and specific plans to see how the money can be spent.

Because the actual H.S.A. major medical comes with a larger yearly deductible, so the rates should be lower. Some insurers relax underwriting rules a bit for higher deducible insurance so there is also a chance that more people would be accepted. For those who are accepted, but may have some minor health conditions, there may be a better chance they will only have to pay standard rates.

By now, you may have figured out that some people can realize a big benefit from this type of plan. If you need an additional tax deduction, this is a great way to get it while saving for future health expenses. An H.S.A. also allows you to control your costs by paying less for major medical while saving for future expenses in a way that gives you tax advantages.

A health savings account can combine with a higher deductible major medical plan to benefit a disciplined saver who can benefit from tax deductions. The cash account will keep growing, so it can continue to grow from year to year. At retirement age, the money can be withdrawn with no penalty.

As mentioned before, these plans do not work out that well for everybody. The actual cash account can only help if there is actually cash there. If a plan member never makes deposits, there will not be any cash in the account when bills need to get paid, and there will not be any tax deductions!