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November 29, 2005
Setting up a Health Savings Account Now can Lower Your Health Costs and Tax Burden in 2006
By setting up a health savings account before January 1, individuals may be able to save thousands of dollars in health expenses and taxes in 2006.
Health savings accounts enable individuals to set up tax-favored accounts that can be used to pay for medical expenses that are not covered by their health insurance. Individuals are eligible for an HSA only if they have a qualifying high deductible health insurance plan with an annual deductible of at least $1,100 for individual plans, or $2,100 for family plans. Because these plans have higher deductibles, premiums are usually at least 30% lower than typical PPO plans.
Any money deposited in the HSA is tax deductible. For 2006 there is a contribution limit of $2,700 for individuals, and $5,450 for a family. Funds can be withdrawn from the account tax-free at any time to pay medical expenses, including doctor visits, prescription drugs, dental, eyeglasses, and even over-the-counter medications like aspirin. Money that is not withdrawn for medical expenses grows tax-deferred like an IRA, and can be withdrawn penalty-free at age 65 for any reason.
Experts recommend having your Health Savings Account in place by January 1 in order to maximize your tax benefits. “Contribution limits are pro-rated based on the total number of months during the year in which you have a qualifying health plan”, says Wiley Long, president of HSA for America, an online health insurance agency specializing in HSA-qualified plans. “Additionally, most insurance companies offer a one-year rate guarantee, so by getting coverage in place before January 1st, people will not only be able to maximize their tax deductions but they may also be able to lock in 2005 rates for the next 12 months”.
Long gave an example of a family that reduced their premium from $458 per month to $305, saving them $1836 in premiums over the course of a year. “If they deposit $5,450 in their health savings account, they may save another $1,526 in federal income taxes. People are realizing that the lower premiums combined with the tax savings can reduce their total health costs by 50% or more.”
Long recommends that individuals and families interested in lowering their health insurance costs should take action immediately, since it can take two to three weeks to get a new plan in place.
Posted by Wiley Long at 12:11 PM | Comments (0)
November 27, 2005
More turn to Health Savings Accounts as Insurance costs rise
Health savings accounts aren't yet a household term. But unless the nation's medical-affordability crisis is solved, that could change.
Nearly two years after the accounts were authorized by federal legislation, roughly 1 million Americans have opened one, with growth estimated to top 30 million by 2015, according to researcher Celent Communications. If that forecast pans out, one in six Americans with medical insurance at that time would have a health savings account.
The accounts make sense for people like Neal Van Zutphen, partner in a Mesa financial-planning firm who is responsible for his own medical coverage and can afford modest health costs as long as he's insured for catastrophic items.
"I'd rather pay the upfront deductibles to make sure the big stuff is covered," he said.
Health savings accounts can be set up with a bank, insurer, mutual-fund firm or other financial outfit to pay for current or future health-related costs until insurance kicks in. Cash not used in a given year isn't forfeited but remains in the account and grows tax-sheltered. Contributions are tax-deductible, and withdrawals come out tax-free if used for qualified medical expenses, which exclude elective cosmetic procedures but include most other things.
Along with mainstream medical costs, "You can use an HSA for dental, over-the-counter drugs, vision, acupuncture, chiropractors, medical-related travel and a lot more," said Craig Shelley, an Arizona native who now serves as senior vice president for American Community Mutual Insurance Co. in Livonia, Mich.
Many types of preventative care, such as mammograms, pap smears and annual check-ups, are paid for by the underlying insurance and don't require consumer expenditures.
These accounts aim to encourage use of high-deductible medical insurance policies, which feature relatively affordable premiums but which require consumers to pay more in front-end costs before insurance kicks in.
In fact, you can't establish an account without obtaining high-deductible coverage.
With these accounts, the assumption is consumers will shop for health care more carefully in hopes supply and demand factors will reign in medical inflation.
"The premise of the HSA concept is that consumer-driven health care is the answer," Celent analysts Alenka Grealish and Matthew Josefowicz wrote in a recent report. "Once consumers are responsible for payment, they will shop around and select the low-cost provider."
As Shelley sees it, medical inflation will continue to spiral out of control until consumers get more involved.
"The typical consumer has no knowledge or sense of what the real costs are," he said.
Insurers such as Aetna, Assurant, Cigna, Golden Rule, United Health, WellPoint/Anthem and American Community Mutual offer policies compatible with health savings accounts. They require a minimum deductible of $1,000 for individuals and $2,000 for families, with those amounts rising to $1,050 and $2,100, respectively, in 2006.
Policies can be obtained through work or on your own.
Other firms offer the savings and investment accounts such as JPMorgan Chase, Wells Fargo, US Bank, M&I Bank, Fidelity Investments and Vanguard Group.
The National Association of Health Underwriters (www.nahu.org) provides an Internet link to find agents who can help set up an account.
The accounts are flexible and portable, which means you retain access to the money even if you change jobs.
Also, eligibility is lenient, unless you're claimed by someone else as a dependent or covered by programs such as Medicare. No income restrictions apply, but you must be younger than 65. As with other insurance, pre-existing medical conditions might be excluded.
The tax winkles somewhat resemble those of Individual Retirement Accounts and 401(k) plans. Before age 65, non-medical withdrawals are taxed as ordinary income and a 10 percent tax penalty applies. After age 65, the penalty disappears but a tax bite remains.
Account holders face a maximum out-of-pocket expense of $5,100 (individuals) or $10,200 (families) this year, with those figures rising to $5,250 and $10,500 in 2006.
Assuming you're able to contribute more to an account than you spend over time, the balance can be used to meet post-65 medical costs or as a supplementary retirement fund, Van Zutphen said.
Critics say that not everyone needs a health savings account or should have one. If you already have other medical insurance and you're satisfied, especially if your employer helps to subsidize it, you should stick with that program. The accounts also don't make much sense if you couldn't afford to meet high deductibles using current savings.
"If you don't have enough emergency funds, it's not an appropriate tool," Van Zutphen said.
But Shelley says that the accounts can work for just about anyone, especially people who expect to build up cash quickly. In fact, some financial firms offer lines of credit against future account contributions that can get around potential high-deductible problems in early years.
"We've trained people to believe low-deductible, low co-pay is the best insurance," Shelley said. "But if you do the math, it comes out differently."
Posted by Wiley Long at 09:17 AM | Comments (0)
November 25, 2005
HSA Bank emerges as leader in Health Savings Accounts
HSA Bank has been one of the more popular Health Savings Account Administrators at HSA for America. They were one of the first to offer full investment options, and now run all their broker services through Harris Direct, a well-respected discount broker.
Business must be going well, as this week they just put out a press release announcing the hiring of three Regional Vice Presidents, and a Vice-President – National Broker.
HSA Bank serves customers in every state in the nation and was one of the first financial institutions nationwide to offer health savings accounts. They seem to have their act together in what is still a young and rapidly growing sector of the financial industry.
You can find more HSA Administrators at HSA for America.
Posted by Wiley Long at 10:17 AM | Comments (0)
November 23, 2005
Credit Union Tech Talk Hosting Health Savings Account Webinar
Credit Union Tech Talk hosts HSA webinar on December 1st at 1:00 pm CST, entitled “Offering Health Savings Accounts for Your Employees and Members.”
Currently only about 125 of the nations 9,100 credit unions offer Health Savings Accounts to their members according to the October issue of Inside Consumer Directed Care magazine. Credit Union Tech Talk hopes to improve those numbers with their HSA webinar.
What You Will Learn:
- How to offer HSAs
- What are your credit unions responsibilities
- The pros and the cons of offerings HSAs
- Best practices from credit unions currently offering HSAs
- Pitfalls to avoid in starting a program
- Why this market is exploding
Who Should Attend: CEOs, CFOs, Marketing Directors, and Human Resources Staff.
“We are pleased to have Tim Morales of HSA Clearing as our speaker” said Tom Wright, editor and publisher of Credit Union Tech Talk, “HSA Clearing has shown many financial institutions across the country the right way to set up and offer a Health Savings Account program to their members.”
Posted by Wiley Long at 10:49 AM | Comments (0)
November 21, 2005
House GOP may alter Medicaid to include Health Savings Accounts
Republican members of the House of Delegates signaled Sunday that they will pursue reforms in the coming year to the sprawling health insurance bureaucracy that serves indigent, disabled and elderly Virginians.
The delegates made no final decisions on specific Medicaid overhauls, but Republican leaders signaled a strong interest in health savings accounts.
Under that system, Medicaid recipients would receive dollars to purchase high deductible health insurance or catastrophic-only plans. Additional money would be placed in a separate account for routine health care, and the recipient would decide how best to spend those funds. The annual amount available to each individual could vary based on income, age or medical history.
Virginia would need permission to adopt such a plan from the federal government, which helps fund Medicaid. Florida and South Carolina have already gotten permission to experiment with health care accounts.
“We’ve got a broken system, and we need to fix it,” said House Speaker William J. Howell, R-Stafford. “You’ve got more and more people eligible that are not necessarily using their services in the most efficient, most economical way, and we just need to redesign the whole system.”
For example, Howell said, too many Medicaid recipients depend on emergency rooms for routine health care even though it is the most costly way to receive treatment.
Del. Phillip A. Hamilton, R-Newport News, the leader of a task force that will develop the new legislation, sounded a more cautious note, saying he does not believe the state’s health care system is fraught with waste.
“We have a well-managed Medicaid program but there’s nothing wrong with modernizing it, seeing if there are some better ways to be more efficient and more effective,” Hamilton said.
Hamilton said his group also is considering measures that would expand the number of recipients under managed care programs and create an electronic reimbursement system to speed up payments to doctors who treat Medicaid patients.
Hamilton said he hopes to have final recommendations before Christmas.
Posted by Wiley Long at 05:52 PM | Comments (0)
November 18, 2005
Will Health Savings Accounts reduce costs or undermine system?
Health savings accounts will change the landscape of medical finances, experts say.
Some say they will push more people into high-deductible policies, where they'll pay more attention to their spending.
"Health Savings Accounts will revolutionize the U.S. health care and health insurance industries," says John C. Goodman , founder of the National Center for Policy Analysis, a Dallas-based think tank, and author of Patient Power.
Not everyone is enamored of the accounts.
"We're opposed to the concept of it," says Edwin Park, senior health policy analyst at the Center on Budget and Policy Priorities in Washington , which studies the effects of government programs and policies on low- and moderate-income people.
HSAs are similar to consumer-directed health plans, which many employers are trying as an alternative to managed care in their attempts to cut health benefit costs.
"This gives employees the opportunity to control their health care spending and choose a plan where they can manage some of their own health care dollars," Mr. Goodman says.
"If you assume responsibility for managing your own health care dollars," he says, "you have to think about how you spend them. You don't want to rush off to the emergency room for every little sniffle."
Also, he says, "I think this will completely replace the flexible spending account, because those accounts are 'use it or lose it,' while this account is 'use it or save it.' It does roll over, and you can continue it right up to the day you die."
Experts predict that accounts such as HSAs will dominate the health insurance market in less than five years, Mr. Goodman says.
The accounts could undermine comprehensive health insurance offered by employers, the budget and policy priorities center says.
"Healthy, affluent workers would have a strong incentive to opt out of comprehensive health insurance plans in favor of the new accounts," it says. "They would receive a large tax break, and they would not be much affected by switching to a high deductible health insurance policy, since they generally use fewer health services."
If large numbers of those healthy workers pull out of comprehensive plans, the pool of workers left would be older and sicker, causing their premiums to rise significantly, Mr. Park says.
"We think they're bad policy on the health care side," he says. "They are going to undermine the traditional employer-based health care system."
Mr. Goodman disagrees.
"Expanding HSAs will dramatically improve health care by reducing the need for managed care rationing, allowing workers to save for health needs in retirement, containing medical inflation by giving consumers incentive to forgo unneeded care, and eliminating waste and bureaucracy by giving patients a stake in the savings," he says.
HSAs have caught the eye of employers.
"Many more employers than we had expected are very interested in the health savings accounts," says Susan Relland, health policy legal counsel at the American Benefits Council in Washington, an employers' group. "We're seeing general trends toward consumer-directed health plans, and this is the perfect vehicle to do that."
Posted by Wiley Long at 09:24 AM | Comments (2)
November 16, 2005
Health Savings Accounts are catching on
Nearly half of U.S. businesses recently surveyed said they now have in place next-generation health plans like health savings accounts or would soon offer them.
Of 316 employers polled, 43 percent said they currently offer their workforce a so-called consumer-driven health plan (22 percent), or will be offering one in the next two years (21 percent), according to a survey released Tuesday by the Deloitte Center for Health Solutions.
Another 51 percent of businesses said they are reviewing consumer-driven plans and may offer one in the near future if the plans have employee appeal and appear to save money.
The survey also showed that, while the newer HSAs are catching on in the marketplace, health reimbursement accounts, which debuted about three years ago, remain the most popular among employers.
Sixty-three percent of respondents said they offer their staff an HRA, compared to 31 percent who have signed on to an HSA.
"By offering consumer-driven health plans, businesses believe they will reduce spending by making employees smarter shoppers for health care," said Tommy G. Thompson, independent chairman of the Deloitte Center for Health Solutions. "These plans are increasingly attractive as health care costs continue to threaten companies' bottom lines."
Get an HSA health insurance quote at HSA for America.
Posted by Wiley Long at 01:46 PM | Comments (0)
November 14, 2005
Taking Back Healthcare with Health Savings Accounts
Hank McKinnell, chairman of Pfizer pharmaceuticals, challenges Americans to take back control of their health from a system dominated by third parties. He says Health savings accounts will provide incentives for consumers to shop wisely for health care services, since their incidental bills are paid from their HSA accounts.
Another approach is to provide low-income workers a tax credit to purchase their own health insurance, similar to the tax-exemption on health insurance the middle-class workers have.
Furthermore, McKinnell offers some remarkable facts about prescription drugs for those who wonder why they cost so much in the United States.
- Prices of innovative drugs have actually fallen over the long term, and prescription drugs do not constitute a larger share of health care resources than they have in the past.
- In 1993, the average wholesale price of 10 best-selling drugs was $44 per month's supply; now, nine of the 10 drugs have gone off patent, and have fallen to about $11 per month.
- While Americans pay higher prices for name-brand drugs than consumers in other developed countries, they pay lower prices for generic drugs.
The central theme of McKinnell's book, is that individual patients, not bureaucracies, are the key to reforming health care.
Find more HSA information at HSA for America
Posted by Wiley Long at 06:40 PM | Comments (0)
November 10, 2005
Health Savings Accounts at HSA Bank
HSA Bank has been one of the more popular Health Savings Account Administrators we recommend. They were one of the first to offer full investment options, and now run all their broker services through Harris Direct, a well-respected discount broker.
Business must be going well, as today they just put out a press release announcing the hiring of three Regional Vice Presidents, and a Vice-President – National Broker.
HSA Bank serves customers in every state in the nation and was one of the first financial institutions nationwide to offer health savings accounts. They seem to have their act together in what is still a young and rapidly growing sector of the financial industry.
Learn all about HSA Bank and other HSA Administrators at HSA for America.
Posted by Wiley Long at 09:05 AM | Comments (0)
November 08, 2005
Doctor options for Health Savings Account holders
Concierge doctors are continuing to grow in prominence. For a yearly retainer, patients receive a higher level of service from these physicians, sometimes known as “boutique” doctors. Most concierge doctors charge an annual retainer fee of $1,500 to $2,000. This amount could of course be paid for from your health savings account.
Most then offer same-day or next-day appointments, 24-hour telephone access to the doctor, and some even offer home visits and delivery of medications. The extra fees allow these doctors to slash their case loads, and provide their fewer patients much more time and attention.
Since HSA holders mainly have health insurance for larger unexpected bills like unexpected hospitalization or surgery, there may not be as much incentive for them to go to an in-network PPO doctor for doctor visits and checkups. An HSA gives them the option of receiving a very high level of personal care, and getting a tax write-off on all of it.
Find out more about Health Savings Accounts at HSA for America
Posted by Wiley Long at 02:52 PM | Comments (0)
November 06, 2005
Employer Sponsored Health Insurance or Health Savings Accounts
An advisory commission appointed by the president to examine tax reform issued its report this past week. One of the things they addressed was employer-sponsored health insurance. Currently, employers and the self-employed get a 100% tax write-off for the premiums they pay for health insurance. No one else does.
This tax break is the largest that the federal government provides, estimated to amount to $141 billion in 2006. Because of this tax advantage, employers are more likely to provide increased benefits and reduce the amount they pay in wages. The panel estimated that an across-the-board tax cute of approximately 14% could be funded if this tax break, offered to just certain individuals and corporations, were eliminated.
Their recommendations, however, are not that harsh. They suggest that individuals should be able to write off $5000 for health insurance costs, and families should be allowed up to $11,500 write off for health insurance expenses. This would be whether they get their health insurance from their employer, or buy it on their own.
This would of course be a much fairer system than the current one, and would have the added benefit of encouraging individuals to own their own health insurance (that they could take with them if they changed jobs), rather than being tied to an employer-sponsored plan.
It will be interesting to watch the politicians fight this one out.
Find out about the High Deductible Health Insurance advantage at HSA for America
Posted by Wiley Long at 04:17 PM | Comments (0)
November 04, 2005
Health Savings Account Contributions in 2006
The IRS has issued the official maximum contribution levels for health savings accounts in 2006. For taxpayers with self-only coverage, the maximum 2006 contribution is $2,700; for family coverage, the maximum is $5,450.
The maximum annual out-of-pocket amounts for HDHP self-coverage has increased to $5,250 and the maximum annual out-of-pocket amount for HDHP family coverage is twice that, $10,500. For 2006, the minimum deductible for HDHPs increases to $1,050 for self-only coverage and $2,100 for family coverage.
Here is the Treasury's press release:
October 28, 2005
js-2996
Indexed Amounts for Health Savings Accounts
The Treasury Department and IRS today issued new guidance on the maximum contribution levels for Health Savings Accounts (HSAs) and out-of-pocket spending limits for high deductible Health Plans (HDHPs) that must be used in conjunction with HSAs. These amounts have been indexed for cost-of-living adjustments for 2006 and are included in Revenue Procedure 200r-70, which announces changes in several indexed amounts for purposes of the federal income tax.
The new levels are as follows:
New Annual Contribution Levels for HSAs:
- For 2006, the maximum annual HSA contribution for an eligible individual with self-only coverage is $2,700. (Note: for any individual, the maximum contribution is the lesser of the indexed amount or the deductible of the HDHP.)
- For family coverage the maximum HSA contribution is $5,450.
- Catch up contribution for individual who are 55 or older is increased by statute to $700 for 2006.
- Both the HSA contribution and catch up contribution apply pro rate based on the number of months of the year a taxpayer is an eligible individual.
New Amounts for Out-of-Pocket Spending on HSA-Compatible HDHPs:
- The maximum annual out-of-pocket amounts for HDHP self-coverage increase to $5,250 and the maximum annual out-of-pocket amount for HDHP family coverage is twice that, $10,500.
Minimum Deductible Amounts for HSA-Compatible HDHPs:
- For 2006, the minimum deductible for HDHPs increases to $1,050 for self-only coverage and $2,100 for family coverage.
Note that a fiscal year HDHP that satisfies the requirements for an HSA-compatible HDHP on the first day of its fiscal year may apply that deductible for the entire fiscal year.
Complete Health Savings Account information can be found at HSA for America
Posted by Wiley Long at 10:09 AM | Comments (0)
November 02, 2005
The Health Savings Account impact on Consumerism
With the increase in Health Savings Account owners, consumerism is quickly impacting the family doctor. Clinics such as MinuteClinic, FastCare, and MEDspot are opening up in busy retail locations such as Target and CVS Pharmacy. These health clinics are typically staffed by nurse practitioners, who are legally able to prescribe medication and perform basic health care functions without direct supervision by a doctor. Average cost is about $40 for a visit, compared to $85 for a typical doctor’s office visit. Waiting time is typically 15 minutes or less.
As more people obtain health savings accounts, and begin paying for their own doctor visits, these places will continue to become more popular. This will of course put competitive pressure on traditional doctor offices, and thus will lower prices and improve service for everyone. Oh the beauty of a free-market economy.
You can get an HSA instant quote at HSA for America to find the right HSA Insurance plan for you!
Posted by Wiley Long at 03:12 PM | Comments (0)