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HEALTH INSURANCE 101
Health Insurance - HSA
How Can a Health Savings Account (HSA) Benefit You?
"If you truly seek 'health insurance of value,' consider the HSA program. The value of an HSA qualified health plan is that it minimizes your total financial risk for illness and injury by reducing your health insurance and income tax costs. By the way, you are permitted to keep the savings!
"HSAs provide consumers an excellent way to obtain affordable health insurance and save on overall medical expenses. Your ability to reduce your health expenses while working enables you to begin saving now for future health and/or "other" expenses during retirement.
The time to make this decision is now…before sickness and/or injury occurs… when you can medically qualify." Fred Simmons, Ph.D.
What Are "Health Savings Accounts?"
The Health Savings Account (HSA) Program is a new option for health insurance. HSAs were created by Public Law 108-173, the "Medicare Prescription Drug, Improvement and Modernization Act of 2003," signed into law by President Bush on December 8, 2003. HSAs are expected to change the way millions meet their health care needs because they are designed to help individuals save for "qualified" medical and retiree health expenses on a tax-advantaged basis.
HSAs come in two parts.
"Part One" is a "qualified" high-deductible health insurance policy that covers large hospital and medical bills. Only certain high deductible health plans work for the HSA program.
"Part Two" is the actual HSA: an investment or retirement account from which you can withdraw money tax-free for certain "IRS-defined" medical expenses. Otherwise, the money accumulates with tax-free interest until retirement…when you can withdraw your money for any reason and pay normal income taxes. You can use your HSA as a supplemental retirement account.
How much can you contribute annually to an HSA? The amount you can contribute to the health savings account is based upon the deductible of the "qualified high-deductible health plan" (HDHP) described in "Part One" above.
The maximum annual contribution is the lesser of the deductible amount under the HDHP or $2,700 for self-only coverage or $5,450 for family coverage (for 2006).
These dollar limits will be adjusted for inflation each year and assume your "start date" for your HDHP plan begins January 1. If not, the total annual amount you can contribute your first year in the HSA program is pro-rated by the actual number of months covered under the HDHP. Eg. If your HDHP beginning effective date is April 1, you could then contribute 9/12 or 75% of the maximum contribution limits.
HSA Benefits
Security - Your "qualified" HDHP and accompanying HSA protect you against high or unexpected medical bills. The HSA "qualified" health plan has a lower "annual out-of-pocket maximum" when compared to other, non-qualified high deductible health plans. A lower annual out-of-pocket maximum reduces your total health plan financial risk should a "significant" health event and/or injury occur.
Affordability - You should be able to lower your health insurance premiums by switching to health insurance coverage with a higher deductible. Most are already doing this so why not choose an HDHP that qualifies as HSA eligible?
Flexibility - You can use the funds in your account to pay for current medical expenses, including expenses that your insurance may not cover, or save the money in your account for future needs, such as:
Health insurance or medical expenses if unemployed
Medical expenses after retirement (but before Medicare)
Out-of-pocket medical expenses even when covered by Medicare
Long-term care (LTC) insurance premiums and associated LTC medical costs
Savings and Investments - You can save the money in your account for future medical expenses and grow your account through investment earnings.
Control - You make all the decisions about:
How much money to put into the account
Whether to save the account for future expenses or pay current medical expenses
Which medical expenses to pay from the account
Which company will hold the account
Whether to invest any of the money in the account
Which investments to make
Portability - Accounts are completely portable, meaning you can keep your HSA even if you:
Change jobs
Change your medical coverage
Become unemployed
Move to another state
Change your marital status
Ownership - Funds remain in the account from year to year, just like an IRA. There are no "use it or lose it" rules for HSAs.
Tax Savings - An HSA provides you triple tax savings:
1. tax deductions when you contribute to your account;
2. tax-free earnings through investment; and,
3. tax-free withdrawals for qualified medical expenses.
Warren Buffet once said, "A dollar spent on taxes is a dollar lost forever!"
Fred Simmons says, "A dollar spent on health insurance premiums is a dollar lost forever. Combining tax and health insurance premium savings can translate into thousands of dollars saved over a period of years. I'll be glad to show you how."
Need More Information about HSAs?
"State of the Union: Affordable and Accessible Health Care" - The White House: Office of the Press Secretary - January 31, 2006
http://www.whitehouse.gov/news/releases/2006/01/20060131-7.html
The National Association of Health Underwriters (NAHU) has an informative web-site that includes a "Consumer Guide to Health Savings Accounts (HSAs)."
http://www.nahu.org/consumer/HSAGuide.cfm and/or
http://www.nahu.org/legislative/MSAs/HSAs-HSSAs/HSA_chart_0704.pdf
The U.S. Treasury's web site has additional information about Health Savings Accounts, including answers to frequently asked questions, related IRS forms and publications, technical guidance, and links to other helpful web sites. Treasury's HSA website can be found through
www.treas.gov
(click on "Health Savings Accounts.")
Here are some helpful links to actual Health Savings Account Administrators.
I suggest you begin by looking at NAHU's "HSA Trustees List" last updated on May 9, 2005.
http://www.nahu.org/legislative/MSAs/HSAs-HSSAs/trustee%20list5.09.pdf
firsthorizon-MSaver partner with Nationwide Health Plans
www.nationwidehealthplans.com
firsthsa Allows investment options through Berkshire Capital Management Group and/or Linsco Private Ledger. http://www.firstmsa.com/index.html
hsabank.com http://www.hsabank.com/ (HSA Fred Simmons personally uses)
Fidelty Investments Introduce Health Savings Accounts http://content.members.fidelity.com/Inside_Fidelity/ fullStory/1,,6385,00.html
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