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December 28, 2006
Health Savings Accounts Are Paying Off
For more than a dozen years, National Center for Policy Analysis president John Goodman has been touting tax favored Health Savings Accounts (HSAs), achieving only modest success before the Bush administration embraced the concept in 2003 and the GOP-controlled Congress paved the way for insurers to offer HSA plans, says Christopher Lee in the Washington Post.
Now the dividends are beginning to pay off:
- About 3 million people are already enrolled in the new HSA plans.
- Another 3 million are in similar plans in which employers contribute to tax-favored medical spending accounts for their workers.
- A recent RAND Corp. survey found that employers reported saving at least 10 percent on health costs, and plan participants appeared to trim health spending between 2 and 15 percent.
Sen. Charles E. Grassley (R-Iowa), who, as chairman of the Senate Finance Committee, supported the 2003 Health Savings Account legislation that cleared a legal path for the new plans, said that he was a convert to the idea years before, in part because of Goodman's tireless advocacy campaign.
"It was a long slog, but he made it and it paid off," Grassley said. "I think it's going to be one of the big directions that health care is going to move in."
And that change in direction couldn't come at a better time, says Goodman. "We are on a health-care spending path that's unsustainable," he said. "Someone is going to have to choose between health care and other uses of money. If you want someone else to make those choices for you, you can join an HMO. But if you want to make those choices yourself, Health Savings Accounts give you the financial ability to make them."
Visit http://www.health--savings--accounts.com to learn more about Health Savings Accounts and how you can find the right plan for you.
Posted by Wiley Long at 11:57 AM | Comments (0)
December 26, 2006
Tax-free IRA Rollover Creates Health Savings Account Opportunity
The recently passed "Tax Relief and Health Care Act of 2006" has several provisions that make it easier to open and fund a Health Savings Account (HSA), including the option of a one-time tax-free rollover from an IRA into the HSA. This change has already caused a great increase in interest among the self-employed and other individuals who purchase their own health insurance.
We have been getting a tremendous number of inquiries from people who want to know how they can fund their account with money from their IRA.
HSA-qualified health insurance plans have high deductibles of $1,100 or more. By doing a tax-free rollover from their IRA, individuals can immediately fund their Health Savings Account so that the deductible can be covered 100%. That basically removes the risk of going with a high-deductible plan.
Health savings accounts are special tax-favored savings accounts that anyone with a qualified high-deductible health insurance plan can open and fund. Any money put in the account is tax deductible, and can be used tax-free to pay for future medical expenses. If the money is not withdrawn, it continues to grow tax-deferred like an IRA. HSAs first became available in January 2004, and today nearly five million people are covered by an HSA-qualified health insurance plan.
HSA plans have much lower premiums than traditional co-pay plans, but they do have a higher deductible. Medical expenses that someone incurs before they meet their deductible can be paid for from the HSA, but if they've just opened their HSA they may not have had enough time to accumulate much money in it. The tax-free IRA rollover solves that problem. I expect that by sometime in 2007 sales of HSA plans will eclipse co-pay plans as the preferred type of health insurance among individuals purchasing their own plans.
Both IRAs and HSAs are special tax-favored accounts that can be funded with tax-free money, and that grow tax-deferred. But HSAs have an additional tax advantage over IRAs: if the money is withdrawn to pay for qualified medical expenses, taxes never need to be paid on those funds. This makes HSAs a much preferred way to save for future medical expenses.
According to Fidelity Investments, the average couple retiring in 2006 will need $200,000 to cover medical expenses, not even counting dental, over-the-counter medications, or long-term care. And that amount is going up every year. Those who have an HSA could have thousands of additional dollars available to them to cover these expenses in their retirement years.
To help people who are buying their own health insurance understand these changes, HSA for America is hosting weekly teleseminars throughout the rest of 2006. If someone can get their coverage in place before December 31, they can lock in 2006 rates for the next 6 - 24 months.
Please visit http://www.health--savings--accounts.com for complete information.
Posted by Wiley Long at 10:47 AM | Comments (1)
December 22, 2006
Aetna Introduces New Health Savings Account Options in Tennessee
Aetna health insurance announced they have begun offering health insurance plans throughout the state of Tennessee. With the new Aetna Advantage Health Savings Account Plans for Individuals and Families, consumers will be able to purchase health insurance directly from Aetna or through independent insurance agents or brokers. The plans offer affordable, comprehensive health coverage for a broad array of commonly used health care services, and provide online information tools to help consumers make informed health care decisions and lead healthy lifestyles.
Individuals may choose from among five standard PPO plans, two high-deductible health plans compatible with Health Savings Accounts, two hospital plans and an optional dental PPO plan. Each Aetna Advantage Plan is also available on a child-only basis, so that parents can obtain health coverage for their children, even if no other family members enroll in the plan.
“More than 820,000 people in Tennessee are without health insurance – that’s 14 percent of the state’s population,”1 said Steve Wohlwend, general manager of Aetna Small & Middle Market Business in Aetna’s Southeast Region. “Aetna already has a strong presence in the state of Tennessee, with approximately 187,000 members and a network of 113 hospitals and more than 19,000 physicians. We are committed to helping uninsured and under-insured residents find high-quality, affordable health care options that address their needs.”
According to Laurie Brubaker, head of Aetna Individual Markets, “People’s changing priorities and life circumstances determine the type of health care coverage they need. That is why we designed Aetna Advantage Plans to address the unique needs that arise during particular stages in life such as graduating from college, getting married, raising a family, becoming a sole proprietor of a business, being between jobs or retiring early."
HSA-Compatible Plans, Hospital Plans and Dental Plan Available
Aetna Health Insurance is offering two high-deductible PPO plans that are compatible with the Aetna HealthFund® Health Savings Account (HSA). These plans offer members lower premiums in exchange for higher annual deductibles, along with the advantage of an HSA. HSAs are tax-advantaged accounts used to pay for qualified medical expenses. HSA contributions are tax deductible and earn interest tax free. HSAs are portable, and unused balances can be carried forward from year to year, allowing consumers to plan and save for future health care expenses.
For those individuals on limited budgets who are able to purchase only the essentials, Aetna offers two “hospital” plans, which provide members with lower priced coverage for basic health care services. These plans provide limited coverage for preventive care – including gynecological, well-child care and physical exams – as well as inpatient hospital coverage coupled with limited benefits for outpatient surgery, skilled nursing or home health care services.
Members have the option to enroll in the Aetna Advantage™ Dental PPO Max Plan at the time of their medical election. The Dental PPO Max Plan allows members to receive quality dental care from participating dentists and nonparticipating dentists. Participating dentists have agreed to provide services at a negotiated rate for both covered services as well as noncovered services such as cosmetic tooth whitening and orthodontic care. This means members generally pay lower out-of-pocket costs.
Learn more about all the Health Savings Account plans available in you state by visiting: http://www.health--savings--accounts.com
Posted by Wiley Long at 08:13 AM | Comments (0)
December 20, 2006
Health Savings Accounts are the Right Choice
More than 3 million Americans today are covered by Health Savings Account (HSA) plans and that number is expected to soar to between 25 and 30 million by 2010, according to the U.S. Treasury Department.
Health Savings Accounts are the right choice when it comes to your health insurance because you save more than enough money on the premium and taxes to pay the higher deductible. Then, with a family, everyone contributes to the annual deductible so there's absolutely no reason to chose anything but an HSA.
Golden Rule health insurance has played a key role in the consumer-driven market for more than a decade. A United Healthcare company since 2003, Golden Rule pioneered the concept of high-deductible health plans paired with tax-advantaged savings accounts in the individual market back in the early 1990s when it introduced the first Medical Savings Account (MSA) plan. With the passage of federal legislation late in 2003, millions of consumers with HSA plans throughout the country are saving on a tax-advantaged basis for current and future health expenses.
At Golden Rule today, more than 40% of our customers are covered by HSA plans. These customers had accrued more than $170 million dollars in their Health Savings Accounts by 2006 and the average account balance exceeded $2,400 – strong evidence that HSAs are working the way Congress intended.
To help enhance the long-term savings potential and make HSAs easier to use, Golden Rule recently began offering its HSA customers a broad selection of high-quality mutual fund investment options as well as an innovative debit card and online account management and bill paying through Exante Bank.
With Exante Bank serving as custodian, Golden Rule HSA customers earn four- to five-percent interest on their FDIC-insured accounts. Once the balance in their HSA reaches $2,000, they now have the option to invest any amount in excess of $2,000 in a choice of eight no-load mutual funds, all of which have a Morningstar rating of four stars or higher.
New online account-management tools also enable customers to monitor and change their investments at any time, check balances, pay bills and withdraw funds. The customer, at no charge, can set up automated recurring mutual fund purchases to occur whenever the account balance exceeds $2,000.
Moreover, the Exante MasterCard Prepaid Debit Card provides customers with multiple ways to access their HSA funds, including use at participating pharmacies and doctors’ offices or through ATM withdrawals. In addition to the debit card and online bill-paying features, customers can use wire transfers and a more traditional checkbook if they choose.
Learn more about how to get your own Health Savings Account at: http://www.health--savings--accounts.com
Posted by Wiley Long at 02:07 PM | Comments (0)
December 18, 2006
A History Lesson in Health Savings Accounts
Health insurance dates back to the late 1600s in England, although it began as disability insurance. In the United States, health insurance - better known then as sickness insurance - came about in the late 1800s. At that time most people were treated in their homes.
Along with the discovery of penicillin and other medical advancements, the need for health insurance grew rapidly. Instead of just being treated in the home, there was a bigger demand for hospital treatment. The health industry blossomed, but along with it came increasing medical costs.
As a society, we historically tend to help the few in need. For example, farmers from surrounding areas would get together to rebuild a neighbor's barn if it burned down. This not only helped the farmer in immediate need but also created the expectation that if someone helped his neighbor, he would get help if a loss happened to him.
Health insurance works on this same neighbor-helping-neighbor principle. A health insurance company may insure a million people and assumes that 10 percent to 15 percent of them incur about 90 percent of the medical costs. By pooling together the insurance premiums from all their customers, the insurance company ensures there is enough money to pay medical claims from the few customers in need at any given time.
Health care and health insurance have developed over the years, offering us choices on how to apply the neighbor-helping-neighbor principle to medical costs. Those choices include low deductibles, benefit-rich plans, doctor office co-pays, prescription co-pays, Health Maintenance Organizations, Preferred Provider Organizations and the newer high-deductible plans. With double-digit increases in health-premium costs nearly every year, the trend has been moving toward higher deductible plans to reduce premium rates.
In August 1996, the Kennedy-Kasselbaum bill was passed, which brought about the four-year trial phase for medical savings accounts. The accounts are now permanent plans known as Health Savings Accounts. These health insurance plans are high-deductible plans with a twist. They integrate a savings account with the health insurance plan and offer added tax-saving benefits.
How does a health savings account work? By taking a high-deductible plan instead of a low-deductible plan, you are going to reduce your premium substantially. The concept of an HSA is to take some of the premium savings and put it into your account. This money can earn interest and grow tax-deferred. You have access to that money (it is yours, not the insurance company's) for any medical expenses you are eligible for according to the Internal Revenue Service.
Besides regular health care costs, HSA eligible medical expenses include hearing, dental and vision expenses. Any money that you put into the account over the course of the year - within IRS limits - can be deducted from your gross income, reducing your taxable income. This deduction is available whether you use the health savings account money or not.
When you withdraw money from your account for IRS-allowed medical expenses, the withdrawal is not taxed. If you do not use the money in your account, it just rolls over to the next year. This is not the old flexible spending account approach that "if you don't use it, you lose it."
The health savings account concept allows consumers to take more control of their health care expenditures. Instead of giving precious dollars of earned income to the insurance companies that they invest and make money on, you are keeping a larger portion of the premium and investing it yourself for your own medical expenses.
Health insurance companies charge premiums based on a lot of risk factors. One of these risk factors is the amount of your deductible. With a low deductible, the insurance company charges a higher rate because the risk of your using the health insurance is much greater. If you do not use the health insurance, the insurance company still keeps your premium. By choosing a higher deductible, the risk of you using the benefits is reduced dramatically. This means that if you do not need the insurance benefits, you have kept the money in your own pocket.
Let's face it. The original purpose of health insurance was not to pay for doctor visits or one or two prescription drugs. It was designed for the catastrophic losses that could bankrupt you.
We do not expect our auto insurance to pay for oil changes, tires or brake jobs, so neither should we expect our health insurance to pay for all the little things. By getting back to the original purpose of health insurance we can help control the premiums, reduce the yearly rate increases and keep more money in our own pockets.
Is a health savings account for everybody? No. But it does make sense if you have earned income, want to reduce premiums on your health insurance, want to help control premium increases, are age 18 to 64 and would rather keep some of your premium dollars in your own pocket rather than giving it to the insurance companies.
Posted by Wiley Long at 03:11 PM | Comments (0)
December 14, 2006
Health Savings Accounts The Cure for Health Insurance
One of the problems with American health care, as David Gratzer notes in "The Cure," is precisely a payment system that takes the patient out of the equation. In the early 1960s, the average American paid out of pocket one of every two dollars that he spent on health care; today the figure is one dollar in seven. The inevitable effect is hugely wasteful spending and inflated hospital bills. In fact, per-patient costs have gone up almost exactly in inverse proportion to the share of spending borne by the consumer. Can Health Savings Accounts be the answer to these problems?
About 10 years ago, I broke my leg skiing. After I came out of surgery, with a cast stretching from my ankle to the top of my leg, an orderly asked me whether I had ever used crutches before. I hadn't, so he showed me what to do, swinging through them from one end of the room to the other. The whole lesson lasted about 90 seconds. When I got my hospital bill, I saw that I had been charged $150 for "gait training on crutches." I did what all insured Americans do: I forwarded the bill to my insurance company. Why should I care? I wasn't paying for it.
Since then, I have purchased a Health Savings Account and my whole attitude toward healthcare has changed. Dr. Gratzer cites a remarkable Rand Corp. study that tracked health-care spending by 2,000 families over eight years. The families who got free health care spent 40% more than the families with cost-sharing arrangements. And yet the health outcomes for the two groups were the same. The lesson: Market-based health insurance systems, such as Health Savings Accounts, cut out inefficiencies and lower costs without compromising quality.
Find out more about Health Savings Accounts at: http://www.health--savings--accounts.com
Posted by Wiley Long at 08:58 AM | Comments (0)
December 12, 2006
Organize your Health Savings Account Expenses with HSA Tracker
A new tool called HSA Tracker has been introduced for Health Savings Account owners. Health care expenses paid with a Health Savings Account qualify for a deduction by the IRS. HSA Tracker enables users to document their health-related expenses by linking the expense to a diagnosis and doctor's prescription. The HSA Tracker also helps users discover what expenses are allowed as deductions by the IRS. HSA Tracker is free to anyone in the U.S.
By signing up for a free account at www.doclopedia.com, Health Savings Account owners are able to input expenses relating to doctor visits, prescriptions, diagnostic tests, and durable goods into their account. Doclopedia will store the material and list it by health care provider, IRS category, and medical diagnosis. The HSA Tracker features a drop down window with categories of items allowed for deduction by the IRS, prompting health savings account holders with items that are allowed for deduction by the IRS.
Users will be able to generate reports based on the HSA information they have entered, which will be especially helpful at tax time. Doclopedia also enables users to record their health care history, and provides access to a free market for health care goods and services. Doclopedia is free for consumers.
"In order to qualify for deduction the funds in Health Savings Accounts have to be spent on health care. Since medical records are legally protected, banks cannot legally provide any documentation regarding these expenses. Doclopedia introduced the HSA Tracker so that Health Savings Account owners could easily document their health care expenses, link them to their medical problems, and easily prepare a report for tax time" said Dan Lieberman, M.D., CEO of Doclopedia. "Many Health Savings Account holders don't know the IRS requirements for deduction, and are going to get an unpleasant surprise at tax time. The HSA tracker is available now, for free, and is a useful tool for every HSA account holder. There's nothing else like it on the market."
Find a High Deductible Health Insurance Plan for your Health Savings Account at: http://www.health--savings--accounts.com
Posted by Wiley Long at 09:29 AM | Comments (0)
December 10, 2006
Congress Expands Health Savings Accounts in Final Days
Congress has just given final approval to the "Tax Relief and Health Care Act of 2006" which includes provisions to expand Health Savings Accounts (HSAs).
"HSAs are still relatively new, but we are already seeing them quickly grow in popularity in the early stages of their existence," said Ways and Means Chairman Bill Thomas (R-CA). "The adjustments in this bill will make HSAs more attractive as Americans consider their health insurance options."
The newly enacted provisions would make several improvements to the already-successful HSA program. Here is a summary of the new provisions:
Expands Funding Sources for HSAs
* Allows an employee a one-time opportunity to roll over unused funds from an existing Flexible Spending Account (FSA) and/or Health Reimbursement Arrangement (HRA) to deposit in their Health Savings Account. Under this bill, employees would have the ability to start an HSA by making a one-time tax-free transfer of FSA and HRA amounts in their accounts as of September 21, 2006 to an HSA which would belong to the employee. The transfer must be made before January 1, 2012.
* Allows one-time transfers from Individual Retirement Accounts (IRAs) to Health Savings Accounts. The bill allows taxpayers to make a one-time distribution from an IRA to an HSA so HSA funds are immediately available to meet family health needs. The "roll-over" cannot exceed the HSA contribution limit for the year and is subject to the recapture taxes applicable to the part year coverage provision described below.
Expands the Annual Limits on HSA Contributions
* Repeals the annual deductible limitation on HSA contributions. The bill allows individuals with HSA-qualified health insurance plans that have deductibles below the annual contribution limits (currently $2,700 for self-only coverage and $5,450 for family coverage) to contribute up to these maximum amounts each year. Currently, contributions are limited to the policy deductible if below the annual contribution limits.
* Allows full-year contributions for part-year coverage. The bill would permit taxpayers whose HSA-qualified coverage begins mid-year to make a contribution equal to their policy deductible for the year (or the annual contribution limit, if higher (see above). This will help people who begin their HSA-qualified coverage part way through the year and who are subject to the entire calendar-year deductible by allowing them to make a full annual contribution, rather than pro-rating their contribution for the number of months of HSA-qualified coverage. Taxpayers would be required to maintain a high deductible plan for a full year beginning in the month the HSA begins or pay tax on the contribution and a 10 percent penalty.
Additional Flexibility for Employers to Help Lower Paid Workers
* Allows employers to make additional contributions for lower-paid workers. The bill provides an exception to the current "comparability rules" that require companies to make equal dollar contributions to all HSA-eligible employees with similar coverage (single or family) and work status (full-time or part-time). This provision will give employers flexibility to provide greater assistance to their lower-paid workers in the form of contributions to their HSA accounts.
Earlier Notification of Cost of Living Adjustment
* Under current law, the minimum deductible and out-of-pocket limits for HSA-qualified policies, as well as the annual contribution limits are indexed for inflation. The bill requires the Secretary of the Treasury to announce adjustments to the amounts by June 1st of each year. Currently, the adjustments are not announced until November each year. Earlier notification will simplify planning decisions for insurance companies, banks, credit unions, employers, and taxpayers.
Read all the details of The Tax Relief and Health Care Act of 2006.
Find out more about Health Savings Accounts and how to get an HSA-qualified health insurance plan at: http://www.health--savings--accounts.com
Posted by Wiley Long at 12:14 PM | Comments (0)
December 09, 2006
Health Savings Account Improvements on the Way
With The Tax Relief and Health Care Act of 2006, the Senate has approved several very positive improvements to Health Savings Accounts that would make them easier to use, more accessible, and more attractive.
The legislation already has cleared the House, and Senate approval is the final hurdle before the legislation will be sent to President Bush. The Senate is debating interminably, but passage is expected very soon.
Here are the details that provide some much needed Health Savings Account fixes and new incentives:
- The legislation would allow money from other tax-favored accounts to be rolled over into a Health Savings Account (HSA). This includes savings from your company's Health Reimbursement Arrangement, your IRA, and the health dollars in your Flexible Spending Account. (FSAs are the use-it-or-lose-it accounts that motivate people to buy prescription sunglasses in December so they don't lose the money they had set aside in their company's cafeteria plan earlier in the year.)
This is good news because people who buy HSA-qualifying insurance plans don't necessarily create the accompanying savings account. This would let them shift money from another of these savings accounts into an HSA.
- It would boost annual contributions limits for HSAs. Current law says you can't deposit more in a year than the amount of your health insurance policy's deductible. Now, as long as you have a qualifying HSA insurance policy, you could contribute the maximum amount, which would be $2,700/individual and $5,450/family this year, then $2,850/individual and $5,650/family in 2007
- The Treasury Department would be required to publish in March (instead of August) the cost-of-living adjustments for HSA contribution and deductible amounts. Employers need to know this earlier in the year so they can get their health insurance contracts and literature printed for the next benefit year.
- You also would be able to make your full annual contribution to your HSA, even if you don't set up the account right away.
- Employers would be allowed to contribute more to HSAs for their lesser-paid employees. (Many employers have said that they want to introduce the plans but can't subject their lower-wage employees to the full deductible without making a bigger deposit to an HSA than current law allows to help them with the routine expenses.)
The Tax Relief and Health Care Act of 2006 will be the major piece of health care legislation passed this year, likely in the last hour of the last day of the session.
A lot of people who believe in the promise of HSAs worked very hard to convince members of the wisdom of these fixes. Kudos to all involved!
Posted by Wiley Long at 11:58 AM | Comments (0)
December 08, 2006
Health Savings Accounts Create Cost-Concious Individuals
People who own Health Savings Account plans appear to be more cost-conscious than those in traditional plans, according to a recent survey. Owning a Health Savings Account gives consumers a financial incentive to shop around for the best care at a reasonable price -- and to get only the care they need.
The nonprofit Kaiser Family Foundation conducted a survey of 1,389 health insured individuals. Here is what they found:
- Some 71 percent of those in the new "consumer-directed health plans" (such as Health Savings Accounts) said the policies prompted them to consider cost when seeking health care, compared with 49 percent of those with more traditional employer-sponsored coverage.
- People in HSA plans were more likely to ask about the cost of a doctor's visit and inquire about the availability of lower-cost alternatives in treatments and tests.
- More than half -- 55 percent -- who sought care said the HSA plans have changed their approach to using health care.
Such findings are in line with assertions by the Bush administration and other advocates who say that the new plans will check spiraling health-care spending by giving consumers a financial incentive to shop around for the best care at a reasonable price -- and to get only the care they need.
"It's a cultural shift," said Devon Herrick, a health economist at the National Center for Policy Analysis. "When you go to Wal-Mart you don't have to ask about price -- it's right there next to the good or service you are buying. Health care is not there yet, but it's getting that way. This is the early stages. We have the incentives to get people more responsible and asking about price."
Learn more about Health Savings Accounts at: http://www.health--savings--accounts.com
Posted by Wiley Long at 08:57 AM | Comments (0)
December 06, 2006
Universal Healthcare vs Health Savings Accounts
Newly elected Democrats and America's Health Insurance Plans (AHIP), the industry's trade association, have put universal health care at the top of their legislative agenda, says Investor's Business Daily (IBD). Hopefully they will both reconsider Health Savings Accounts as an alternative to universal health care.
While Democrats have not developed a comprehensive universal health care plan, AHIP has outlined its formal strategy:
- The group wants the federal government to spend $300 billion over 10 years on the plan, which would expand federal-state programs -- including Medicaid -- to insure below-poverty-line children and adults.
- The organization also wants individuals to buy coverage through universal health accounts paid for with pretax dollars, with federal matching funds for working families.
But John C. Goodman, president of the National Center for Policy Analysis has his doubts:
"There is no way to make health insurance really universal in the United States. To do that would mean everybody is in the same system, and you couldn't do that unless you make it free. A free system would mean runaway costs and reduction in quality," he explains.
Goodman's solution: Personal and portable insurance, similar to health savings accounts, which are engineered like the 401(k) retirement savings program, and allow individuals to buy their insurance with tax-free dollars and take it from job to job, city to city and state to state.
Health Savings Accounts are a much better solution than a universal healthcare system. Hopefully our lawmakers will see the advantages Health Savings Accounts bring to healthcare and increase the incentives for individuals and families to get an HSA.
Learn more about Health Savings Accounts at: http://www.health--savings--accounts.com
Posted by Wiley Long at 09:04 AM | Comments (0)
December 04, 2006
Don't Delay Starting Your Health Savings Account
Q: I'm very interested in opening up a health savings account and plan on buying a high-deductible health insurance policy in the next few months. How much money will I be able to contribute into the health savings account?
A: It depends on the size of your deductible, if the policy covers you or your entire family, your age and, most importantly, how early in the year you buy the health insurance policy. The sooner you sign up, the more you can deduct.
In general, you can make Health Savings Account contributions up to the amount of your health insurance deductible or $5,450 for family plans ($2,700 for individuals), whichever is less. In 2007, those contribution limits increase to $5,650 for families and $2,850 for individuals.
People 55 and older also an extra $700 catch-up contribution in 2006. That number jumps to $800 in 2007.
But you can only make the full contribution for 2006 if you had a high-deductible health plan in place on January 1, 2006. You can't open the HSA until you buy the HSA-eligible health insurance, and your maximum contribution is reduced by 1/12 for every month you wait. If you didn't buy the health insurance until July 1, for example, you'll only be allowed to contribute half of the maximum -- limiting your contribution (and income tax deduction) to $1,325 for individuals and $2,625 for family plans.
To qualify for an HSA, your health insurance coverage must carry a deductible of at least $1,050 for individuals, $2,100 for families. In 2007, those limits increase to $1,100 for individuals and $2,200 for families.
There is still time to take advantage of the tax savings for 2006 and have you plan in place to take full advantage for 2007. Learn how to get started at: http://www.health--savings--accounts.com
Posted by Wiley Long at 09:12 AM | Comments (0)
December 01, 2006
Future Policy for Health Savings Accounts
Since the November 7th elections have insured yet another narrowly balanced Congress next year, issues where political compromise could be forged will be at a premium. No public policy area is more important or more in need of reform than the nation's health care system. The retooling of an existing public policy tool -- personal Health Savings Accounts, or HSAs -- could pay great dividends to all the participants in America's health care system, as well as to both political parties.
Health Savings Accounts are the most unfortunate victims of the current political polarization. They offer individuals choice, flexibility, and freedom and also wider systemic benefits through the greater injection of economic incentives into America's health care system -- an area where all are notably absent. However, opponents have objected, saying Health Savings Accounts will only be used by the healthy, wealthy and young. One way to move the debate forward would be to take direct aim at opponents' criticism by tailoring personal accounts to help the sickest -- those with ongoing medical conditions.
For proponents, HSAs' flexibility, simplicity, and portability make them popular and the 3 million Americans now owning -- and the almost 1,100 banks offering -- HSAs agree. Critics respond that, by removing the healthy, wealthy and young from the traditional health care pool, rates will rise for those remaining.
In this rhetorical fight, proponents overlook their fundamental advantage. HSAs are a concept as well as law. When the concept is constrained by the law, it is the latter that needs to change. Proponents' best course for doing this is not simply quantitatively changing the terms of debate by adjusting qualifying policies' deductibles and individuals' annual contribution limits -- though decidedly good -- but qualitatively changing it. Proponents should therefore design an HSA specifically intended to aid individuals with an on-going medical condition.
Designing such a special account would not be difficult. People with diagnosed medical conditions requiring permanent or prolonged care -- such as diabetics or HIV-positive individuals -- would qualify. Substantially larger contribution levels would be allowed, encompassing not just deductibles but out-of-pocket expenses. These higher contribution levels could be based on the higher of individuals' past total expense experience or a multiple of their plan's deductible. By increasing contribution limits, account balances would be more likely to grow and these would offset the expected higher future expenses as these individuals age.
Properly designed HSAs would work for such individuals and for overall health policy. People with on-going health issues need to be participants in their own care. They must be managers, not simply patients. Many areas -- diet oversight, treatment regimens, testing, and more -- are things that medical professionals can't do at all, much less alone. HSAs give people both the economic incentive and the means to manage their health care needs now and in the future. Furthermore, if opponents are correct that removing the healthy, wealthy and young from the insurance pool will raise rates for those remaining, then using HSAs to remove these high-cost individuals from the insurance pool should likewise reduce the cost of general health care insurance premiums. That in turn should further reduce the ranks of the uninsured by making health insurance more affordable.
There are also strong arguments outside the health policy area for allowing those with ongoing treatment needs. Morally, who can deny the individual alone should have the right to make their health decisions -- not an insurance plan's permissible procedures or a government's mandated benefits? Additionally, every other sphere of American life is moving to personalizing products for consumer individualization. HSAs offer the greatest opportunity for individual health care choice and people with ongoing treatment requirements have the greatest need for such a product.
In the coming Congress, the narrowly separated parties will need to show they can work together to achieve solutions. Properly designed, personal accounts will work for anyone, and they represent the hope for a more rational health care policy. It is therefore incumbent that health policymakers find out how to make them work for those people with on-going treatment needs. Opponents should be willing to concede that additional choices can only help those most in need of help and to test their own theory that altering the proportion of those with costly claims will alter the cost of health insurance. And proponents should be willing to grasp this opportunity for personal accounts. If personal accounts are in fact the future, it shouldn't matter where their successes occur.
Learn more about Health Savings Accounts at: http://www.health--savings--accounts.com
Posted by Wiley Long at 09:01 AM | Comments (0)