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November 27, 2009
Health Savings Accounts Continue to Gain in Popularity as Healthcare Debate Rages On
While the nation's lawmakers debate possible ways to improve the health care system, a national consumer organization reports that thousands of Americans apparently believe they've already found an answer: Health Savings Accounts.
A Health Savings Account is a lot like an IRA. The money you put into your Health Savings Account provides an above-the-line tax deduction, reducing your adjusted gross income and thereby reducing your tax burden each year.
explains Vicki Rolens, managing director of the Federation of American Consumers and Travelers (FACT).
There is one main difference between an IRA and a Health Savings Account (HSA): With an HSA, you are allowed to make tax-free withdrawals at any time to meet medical expenses that your health insurance doesn't cover.
In a bulletin to its members, entitled "How a Health Savings Account Can Save You Money and Simplify Your Life," the Federation of American Consumers and Travelers (FACT) briefly outlines HSA basics:
1. The consumer purchases a high-deductible health insurance plan (HDHP), which costs less -- often far less -- than a "conventional" health plan.
2. Part or all of the money saved on premiums -- and saved on taxes -- can then go into a tax-free Health Savings Account. The Health Savings Account belongs to the consumer, not the insurance company.
3 If a health issue arises, the consumer uses his or her HSA to pay any qualified expenses which the high-deductible plan doesn't cover. The money is withdrawn tax-free.
4. In general, "qualified" expenses include dental bills, over-the-counter medicines, prescription drugs, eye care, hearing aids, and many other health-related items and services that the HDHP doesn't pay.
5. All money remaining in the Health Savings Account at retirement can be used to meet Medicare deductibles, long term care expenses, et al, or can simply be withdrawn -- without penalty if the consumer is over the age of 65.
6. In 2010, an individual will be able to contribute up to $3,050 tax-free ... $6,150 for a family. The HSA can be opened in addition to any IRA the consumer may already have.
"The basic concept is simple," says Vicki Rolens, managing director of FACT. "You save money by having a higher health insurance deductible than usual, and you put that savings in a tax-free Health Savings Account to meet medical expenses if and as needed."
"In essence, you pay a portion of your health-care budget to yourself instead of an insurance company, and you gain some distinct tax advantages in the process."
To qualify as an HDHP, a health plan's deductible amount must be at least $1,200 for an individual plan or $2,400 for family coverage.
Rolens points out that an HSA plan may not be right for everybody, and she recommends that anyone who's interested consult with his or her insurance expert or financial planner.
FACT is a consumer organization, formed under the not-for-profit corporation laws of the District of Columbia in 1984. It currently serves more than 1 million consumers nationwide. Additional information on FACT may be found in the Encyclopedia of Associations, and by visiting the association's Web site (www.usafact.org).
Posted by Wiley Long at 10:49 AM | Comments (0)
November 25, 2009
Health Savings Account High Deductible Options
If you are looking for an affordable health insurance plan, then you should look for plans which have a high deductible with a Health Savings Account option. The deductible is the amount which you have to pay out of pocket for healthcare before the insurance company starts to pay for your coverage.
The major costs of a health insurance plan come from the monthly or annual premium and the amount of deductible. Higher the premium, lower the deductible.
But a monthly or annual obligation of high annual premium is a heavy toll on your income and it is regular in nature, so the feel and zeal at having gotten yourself an affordable health insurance gets lost somewhere.
The health insurance providers realized it early on and agreed that the basic key to providing a health insurance plan is high deductible at the time of treatment and claim settlement and low periodic premium. This is based on the simple logic that one never knows when one may fall ill, when that catastrophic ailment or event may strike.
Also, the amount of premium collected in a year is not carried forward for the coverage stock of next year…and it may be ages before you even fall sick if you are a healthy being.
So the best approach to getting an affordable health insurance plan is to check for health insurance quotes that charge low premium and high deductible. Then you can get a Health Savings Account to help cover your deductible.
This saving of yours forms the part of non-taxable income and can be used any time towards the payment of deductible amount as and when the need arises. But this amount cannot be redeemed or utilized towards any other purpose. Otherwise you will have to pay tax on it.
So the best approach to getting an affordable health insurance plan is to check for health insurance quotes that charge low premium and high deductible health plans with a Health Savings Account.
Posted by Wiley Long at 11:15 AM | Comments (0)
November 20, 2009
Health Savings Account Things To Consider
A Health Savings Account is becoming a popular tool to save money for medical expenses. Many employers are providing them in conjunction with a high-deductible health insurance plan so that their employees can afford their deductibles. While Health Savings Accounts are becoming more popular, many people still do not know much about them. Here are six things to consider if you are thinking about getting a Health Savings Account.
1. Pre-Tax Contributions to your Health Savings Account
A Health Savings Account is kind of like a 401k for your health. Just like a 401k, you can deduct a portion of your paycheck tax-free and put it into a Health Savings Account. Deducting a small percentage of your paycheck without taking taxes out will not result in much difference in your take-home pay. Therefore, you can accumulate a pretty nice savings for health expenses this way.
2. Health Savings Accounts Allow You To Budget
When it comes to health care, most people do not budget anything for it. Since health care is such a hard thing to budget for, most people do not account for it until it happens. With a health savings account, you can put away enough money to provide the medical expenses you need. Budgeting a small portion of your income to this makes sense and it will help you avoid large medical bills that you cannot pay.
3. Employer Match to you Health Savings Account
Depending on your employer, they might make a contribution to your Health Savings Account for you. This works much the same way as an employer-match program on your 401k. You contribute so much and your employer will match up to a certain percentage to put in your Health Savings Account. This is a great way to build up funds without investing that much of your own money.
4. Early Health Savings Account Distribution Penalties
A Health Savings Account is designed to save for health expenses only. If you take any of the money out for other reasons before you are 65, you will be penalized for it. In fact, you will have to pay taxes on the money and get hit with a 10% early distribution fee. This means you should stay away from this as a form of saving money for anything except medical fees.
5. Health Savings Accounts Give You More Control
When you have money set aside for your health care expenses, you are automatically given more control over the situation. Many people just go wherever they can go that is the cheapest because they have no money reserved for health care. When you put back enough money in your Health Savings Account, you can choose where you want to go based on treatment and service instead of money only. Getting the treatment you deserve should never be about money and a Health Savings Account can make that possible.
6. Anyone Can Get a Health Savings Account
Contrary to what many people might think, you don't have to be at an employer that offers Health Savings Accounts to get one. You can get one from a bank or any other financial institution. You can still contribute tax free and get all the benefits of a Health Savings Account regardless.
Posted by Wiley Long at 11:14 AM | Comments (0)
November 17, 2009
High Deductible Health Plans and Health Savings Accounts
As the cost of health insurance and healthcare continues to grow, individuals and families are actively looking for ways to lower their healthcare costs. This increased cost, as well as the current health care reform efforts, have been beneficial for a couple of reasons. First of all, it has caused people to creatively look at ways to reduce premium cost. Secondly, it has caused us to consider what real purpose health insurance serves and evaluate our past coverage choices. Let's take a look at the components of using a Health Savings Account plan:
High-Deductible Health Plan (HDHP)
The Health Savings Account (HSA) coverage option has two components. The first component is a high-deductible health plan (HDHP). This is a major medical health insurance policy that has deductible options that meet guidelines established by law. Plans that meet the deductible criteria are considered to be "qualified" high-deductible health plans. There is an inflation factor whereby the deductible guidelines adjust on a yearly basis. These (HDHP) plans are considered comprehensive in the sense that all medical expenses large or small, even doctor visits and prescription drugs, are considered covered expenses and count towards the deductible.
It is important to note that there can be no benefits paid until the deductible is met on a qualified HDHP. For example, there cn be no doctor office co-pay or prescription drug co-pay. Having an up-front benefit of this type would violate the guidelines and disqualify the HDHP. It is important to note that preventative care or wellness benefits are allowed to be covered before the deductible on a qualified HDHP. For plans that use Preferred Provider Organizations (PPO), you also get the benefit of discounted pricing for all medical visits and procedures by a participating provider.
One unique and well accepted feature of the HDHP is that there is only one deductible for a family. This means that the deductible can be met by a single family member having a large medical expense or by all family members combining medical expenses. Once the deductible has been met, the entire family begins to have expenses covered. The expenses after the deductible can be covered at 100% or by a coinsurance percentage until a family maximum out-of-pocket limit is met.
The other component is a Health Savings Account (HSA). This is simply a qualified account for making deposits that can later be used for medical care. These accounts may be established with a bank, insurance company, credit union or investment company. The accounts must be "qualified" savings accounts and meet certain criteria established by law, therefore, it is important to verify that the account you are considering meets the qualifications. These accounts are interest bearing accounts and the funds can be accessed by debit card, writing checks or requesting a reimbursement of medical expenses paid. There are limits on the amount that can be contributed to an HSA each year:
2009 contribution limits
-single $3000
-family $5950
*$1,000 catch-up for 55 or older
2010 contribution limits
-single $3050
-family $6150
*1,000 catch-up for 55 or older
Here is the best part. Contributions to the HSA are deductible for tax purposes. This means that routine medical expenses, even things that are not covered under the medial plan such as dental, vision and over-the-counter medicines can be paid for with pre-tax dollars rather than after tax dollars.
Posted by Wiley Long at 12:43 PM | Comments (0)
November 13, 2009
Health Savings Account Deadline December 1st - Don't Miss This Date!
Posted by Wiley Long at 08:19 PM | Comments (0)
November 12, 2009
General Motors Moves to Health Savings Accounts
General Motors Co. is moving most of its 24,000 salaried employees into Health Savings Accounts and away from traditional health care plans starting at the beginning of 2010.
The employees are being offered two Health Savings Account options:
One Health Savings Account plan has a maximum of $2,200 in yearly out-of-pocket costs for a single salaried employee, and $5,000 for a family.
The other Health Savings Account plan has a $1,300 out-of-pocket maximum for an individual and $3,100 for a family, but with a higher monthly premium.
GM says these HSA plans with those monthly payments should, on average, be lower than what workers are paying for traditional health coverage.
GM has previously offered a version of the consumer driven plan for salaried workers, but starting in January all such employees must switch.
GM's 120,000 retirees and dependents will make a similar move to Health Savings Accounts, but their deductibles will be higher than those paid by active white-collar workers.
The automaker says it will deposit $1,300 per salaried employee into a Health Savings Account, to help them make the transition and pay out-of-pocket expenses.
According to recently released details, the monthly contributions, deductibles and out-of-pocket maximums paid by these retirees will be substantially higher than they pay now.
Like the plan for active salaried workers, some prescription drugs such as cholesterol medications are covered for retirees.
Most, however, aren't covered until retirees reach their out-of-pocket maximum, which is $3,500 for a single person and $7,000 for a couple or family.
Retirees will pay 20 percent of eligible expenses after their deductible is met, up to the out-of-pocket maximum; that rises to 40 percent if they use out-of-network providers. GM will pay all expenses after the out-of-pocket maximum is met.
GM is giving salaried retirees $260 a month until they turn 65 and qualify for Medicare. That money can be used for health expenses.
The automaker said last year that it would end health care coverage for Medicare-eligible retirees in 2009, and replaced it with a $300 monthly pension increase. Those under 65 were allowed to keep their coverage, with costs capped at 2007 levels.
No health care coverage is provided for salaried retirees who joined GM after 1993.
The new approach is intended, in part, to have people take greater responsibility for their own care.
Detroit's three automakers have sought to cut an annual tab for health care coverage that once topped $10 billion. In 2007, all three companies convinced the United Auto Workers to accept cash and company stock to fund a trust to pay for hourly retiree health care.
Posted by Wiley Long at 08:58 AM | Comments (0)
November 09, 2009
Blue Cross Offering Health Savings Accounts To Employees
While insurers nationwide say it's important that healthcare reform offer people plenty of insurance alternatives, Blue Cross Blue Shield of Florida has decided that one health insurance plan is best for their employees.
Their agents will continue to offer individual and businesses dozens of options in PPOs, HMOs, and other health insurance options, but next year the 5,000 employees of Blue Cross Blue Shield of FL will be required to go into a Health Savings Account with a high-deductible health insurance plan.
"This wasn't a one-year decision," says John Wagner, a Blue Cross Blue Shield product manager. "We started this transition four years ago as part of an over-arching [human resources] strategy... to have an engaged, productive workforce."
The Jacksonville-based insurer's leaders have become firmly convinced that an HSA plan makes sense because it requires workers to make their healthcare decisions -- and rewards those with healthy behaviors.
By law, Health Savings Accounts combine high-deductible health insurance plans with a tax-free savings account to which both employers and employees can contribute, similar to 401(k)s for retirement accounts. Unlike more common flex plans, Health Savings Account money can roll over year after year if not used.
Wagner says employees have two Health Savings Account possibilities: A $1,500 deductible with employees paying 10 percent co-insurance and a $2,500 deductible with a 20 percent co-insurance.
Critics of Health Savings Accounts say that their problem is that they assume consumers can make intelligent decisions about their healthcare when it's often difficult for most people to judge the costs and benefits of complex medical alternatives.
"They work well, especially for the healthy and wealthy," says Santiago Leon, a Miami healthcare insurance broker. "They work less well for the less healthy and less wealthy."
Health Savings Accounts also force people to make healthcare decisions when they don't have information. Leon points out that if a person is feeling symptoms that might be swine flu, he might delay treatment because he doesn't want to pay against his deductible or use his Health Savings Account dollars.
Wagner says such criticisms are unfair since Health Savings Accounts are built on a philosophy of informed decisions and wellness.
At Blue Cross, a key is for employees to fill out a risk-assessment survey, in which health basics like weight, blood pressure and cholesterol level are combined with behavior patterns like smoking and stress levels. Such surveys, becoming more popular among all employers, can lead to advice about diet and exercise, in an attempt to improve wellness and lower costs. Stressed employees might be advised to seek out the employee assistance program.
If employees fill out a risk assessment, Blue Cross will contribute $1,000 to the Health Savings Account. If they don't, the company match is $500. Employees can contribute their own money, in amounts depending on income based on guidelines from the Internal Revenue Service, Wagner said.
As its salespeople tell prospective customers, Health Savings Accounts are designed to make users smart consumers, since a percentage of their own money pays for almost all treatments.
The exception is some basic screenings -- such as mammograms and colonoscopies -- which the insurance pays for completely. Some other preventive measures, such as annual physical, involve co-insurance but not the deductible, says Wagner. That means if a person with the $1,500 deductible and 10 percent co-insurance had a $150 physical on Jan. 2, she would pay $15.
Wagner said there has been very little push-back from employees.
"Probably only three or four employees have raised concerns," he said.
Contrasting the Blue Cross HSA plan for employees with the offer of a wide variety in healthcare reform was "unfair," Wagner said. "We provide a good benefit" at a reasonable price.
In 2009, when the Health Savings Account was voluntary, about three-quarters of employees opted for the Health Savings Account, lured by the company match to the savings account. Wagner said that over several years, he has built up so much money in his health savings account, he planned next year to opt for the $2,500 option with 20 percent co-insurance because he could pay his portion with tax-free dollars.
Wagner said employee premium payments for 2010 had yet to be determined, but as in the past, they will be on a sliding scale, with top managers paying more and the lowest-paid employees paying less. In 2009, he noted, the lowest-level employee who completed a risk assessment paid nothing for the cheapest Health Savings Account.
Posted by Wiley Long at 10:33 AM | Comments (0)
November 06, 2009
How Health Savings Accounts Can Turn Bad
For millions of Americans worried that health care costs could wreck them financially later in life, Health Savings Accounts are a savior.
More than 8 million people have over $10 billion in Health Savings Accounts as of November 2009. That figure is estimated to rise to over $70 billion within five years. Over a seventh of that money will be in balances large enough that the HSA administrator can offer mutual funds as an investment option. A typical Health Savings Account has $2,000 as the minimum for a mutual fund feature.
So some question: How can you lose? The Answer...
By having your Health Savings Account funds managed by an HSA Administrator with high money-management fees.
Early on Health Savings Account balances were handed off by health insurers to partner banks. Many paid risk-free interest rates of around 4%. Health Savings Account rates have since fallen by half. The fund option begins to look attractive. But there is a tendency for the fund choices to be based on who offers the best deal--to the plan's managers, not to participants. With your 401(k) your employer has a legal obligation to put your interests first. With Health Savings Accounts no such standard of care applies.
United Healthcare controls roughly 15% of the market for Health Savings Accounts, which it offers through OptumHealth Bank, a wholly owned subsidiary. Until late last year its HSA clients had 11 mutual fund choices from Vanguard Group. Annual fees ranged from 18 cents to 35 cents per $100 invested.
By late 2008 Optum had yanked the Vanguard options for new customers. Funds on the menu now hail from firms like Munder and Thornburg; fees range from 76 cents to $1.37 per $100.
Why the switch? No coincidence, perhaps, that regulatory changes this January enabled entities like OptumHealth and their consultants to start pocketing a cut of fund management fees. Nor, perhaps, is it purely random that many fund firms popping up in Health Savings Accounts these days kick back fees to plan managers. Vanguard does not pay kickbacks.
UnitedHealth, OptumHealth Bank and Remjeske, their consultant, decline to say how they divvy up fees. WellPoint, another Remjeske client, started offering HSA funds in April via two-year-old Arcus Financial Bank, with six of its seven Arcus funds paying such fees (two of which have since suspended payments because of market turbulence, Remjeske says).
"Revenue sharing doesn't even cover our recordkeeping," Remjeske pleads. "It only helps keep the cost down."
He's got a point. Given the paperwork, the puny balances most savers have in their Health Savings Accounts are hardly a gold mine. But whatever the economics at the moment, there's cause for concern about weak disclosure, lax legal oversight and high fees on savings that people are counting on to keep their pill bottles filled in old age.
The conflicts of interest can get pretty thick. Aetna and Cigna rely on JPMorgan Chase to select mutual funds for their HSA customers. The result: a stable of funds run mostly by--surprise--JPMorgan. Joseph Mondy, a Cigna spokesman, declines to comment on compensation between Cigna and JPMorgan. Aetna and JPMorgan are mum about their deal.
The good news is there's a way for some HSA participants to avoid this fee-palooza. Some insurers provide self-directed accounts to customers with certain minimum balances. Blue Cross Blue Shield HSA plans in Minnesota offer a Charles Schwab account for participants with at least $10,000 in their Health Savings Accounts. For a $10-to-$20 trading commission participants can buy low-cost exchange-traded funds. Alternatively, they can pay a sales load or a $5 fee to get into a mutual fund from a menu of funds costing 60 cents to $2.25 a year (per $100) in expenses.
Another risk is that Health Savings Accounts could be pared back before balances get big enough to make choices really important. Some Democrats argue that the tax break is a luxury for the healthy and wealthy. One proposal knocking around would limit pretax contributions from the current $5,950 to no more than each plan's annual deductible, which could be thousands of dollars less.
Posted by Wiley Long at 07:35 AM | Comments (0)
November 03, 2009
How Healthcare Bills Will Impact Health Savings Accounts
Congress will soon vote on health care reform legislation that could harm the more than 8 million Americans who have a Health Savings Account (HSA) and restrict those who want to purchase HSA coverage in the future.
Starting this week, the House of Representatives will begin debate on the Affordable Health Care for America Act, and the Senate is expected to finish work on its version of health care reform shortly.
Both the House and Senate bills make major changes that would impact people with Health Savings Accounts:
- Both bills mandate benefit levels for most health plans that could eliminate Health Savings Accounts as an option.
- Both bills prohibit you from using any money in your Health Savings Accounts to buy over-the-counter drugs such as allergy medications that you now get without a prescription.
- The Senate bill may place a tax on high-value health plans, so-called "Cadillac" plans, by taxing the cost of such coverage, including employer contributions to your HSA.
- Both bills raise the penalty for the use of HSA dollars for non-qualified HSA medical expenses from 10% to 20% of the reimbursement.
It is important that you take the time to contact your members of Congress and let them know that you depend on your HSA for affordable coverage and the flexibility to set aside tax-free dollars to pay for your health care expenses.
Enter your zip code and find contact information for your member of Congress.
When contacting your member of Congress, here are some things to keep in mind:
- Over 8 million Americans currently have coverage through Health Savings Accounts – people should be able to keep the coverage they currently have.- Going forward, people should be able to choose what works best for them – including the right to pick a health savings account that allows them to decide how best to spend their health care dollars.
- Employers that offer Health Savings Accounts should be allowed to continue to provide these benefits to their employees.
Thank you for your involvement and support. We need health reform that protects people with Health Savings Accounts. HSA for America will continue to keep you informed about issues relating to Health Savings Accounts.
Posted by Wiley Long at 06:08 PM | Comments (0)
November 01, 2009
Health Savings Accounts and Obamacare
Health Savings Accounts could very well be the answer to our current healthcare mess. They are tax-exempt accounts which allow employees and employers to contribute thousands of dollars annually toward paying for health expenses. In conjunction with high-deductible health insurance, most people much less in premiums than a regular insurance option. Often, an employer will save enough to pay the deductible amount into the Health Savings Account, and still be able to cover the high-deductible health insurance plan's premium.
In other words, if all Americans got Health Savings Accounts overnight, we would immediately begin saving about one-third of our health care spending, and would instead put that money away for when we need it most. The results...
This would increase family savings (a good thing) and would drastically lower the cost of healthcare for everyday Americans (an essential thing). Additionally, Health Savings Accounts bring price transparency as well, since all health care costs—up to the high deductible amount have to be bought by the consumer, not the insurer, again encouraging shopping around, competition, higher quality, more innovation, and lower prices.
Unfortunately, Health Savings Accounts and HSA Plans are also under the gun in the house bill released: Health Savings Accounts will have to shoulder a medicine cabinet tax. That means while you used to be able to buy over-the-counter medicines with tax-free account money, you’ll now only be able to use after-tax dollars. The bill raises the additional tax on non-qualified withdrawals from a Health Savings Account (raising the tax from 10% to 20%). Health Savings Accounts will effectively be killed by a final provision, which requires that most plans provide first-dollar coverage for most services.
So, while Health Savings Accounts could save the system, our government is instead trying to kill them without thought of consequence. Pelosicare would destroy one of the best aspects of the current system.
Posted by Wiley Long at 11:12 AM | Comments (0)