HSA Saving Account

Brad Miller asked:


The question is not whether your employer will drop its employee group health plan, but when. The good news is that the alternatives are actually better than the current system.

Changing times are eroding the old system

When group health insurance developed during World War II to attract a shortage of workers, health costs were relatively low and lifetime employment was common. While technology has made companies more efficient, the increased competition has strained profit margins in many industries. In an era of increased efficiencies, health care costs, on the contrary, are steadily rising 2 to 3 times faster than inflation.

Five-year decline in employer-provided health insurance

In 2005 nearly 4.5 million fewer workers had employer-provided health insurance than in 2000. The downward trend continued even during upswings in the economy such as between 2004 and 2005 when over 2 million jobs were created. The decline affected all segments of the workforce including full-time workers, those with college degrees, and even those with salaries in the top twenty percent. The decline was not limited by geography with 34 states experiencing significant losses in coverage and no state experiencing a significant increase.

Employer health plans that remain are hardly insurance

Many of the employers that have retained coverage for their employees have had to cut benefits, raise deductibles, or increase required employee contributions. Even Microsoft, which has long touted its generous health benefits, has made cuts to its prescription drug coverage. Considering these risks and the fact that employees lose health coverage when they leave their employer it is obvious that group health insurance could hardly be considered insurance at all.

HRA, HSA, and individual health insurance

The good news is that in place of completely dropping health benefits, more and more companies are reimbursing employees for their own individual and family health insurance through HRAs (Health Reimbursement Arrangements). Individual health plans, which include family plans, are more advantageous than group plans because the plan stays with the employee even if they leave their employer. And unlike group health plans, individual plans cannot have their benefits cut. In addition, an individual’s medical claims or health cannot alone cause an increase in premiums or loss of coverage.

The Federal government has also stepped in to make individual health insurance more affordable to more Americans by enacting legislation for the creation of HSA (Health Savings Account) plans. An HSA plan consists of a tax-favored savings account tied to a high-deductible health insurance policy. Eligible medical expenses that contribute toward the deductible can be paid with tax-free dollars from the HSA. The high-deductible plans were structured to reduce costs associated with processing small claims and at the same time put more responsibility for managing personal health into the hands of the consumer.



JULES

Wiley Long asked:


Health Savings Accounts consist of two parts - the high deductible health plan (HDHP), and the Health Savings Account (HSA) itself.  By carefully choosing which bank you use to establish your HSA, and strategically choosing how to fund your account and manage your investment, you will be able to get the most return on your money while keeping your expenses to a minimum.

Make Sure to Establish Your Health Savings Account

By switching from a conventional copay health insurance plan to a high-deductible health insurance plan (HDHP), most people are cutting their health insurance costs by about 40% or so.  This is such a big savings, that many people neglect to take the next step and set up their HSA.  But this is a financial mistake that is costing them money.

Unless you pay no income tax and have zero medical expenses (including dental, over-the-counter medications, or charges for alternative care like chiropractic or acupuncture), you will absolutely save money by establishing your HSA.  Just find a good HSA Administrator and get started. 

Run All Your Medical Expenses Through Your HSA

Not everyone feels like they have “extra” money that they afford to set aside in their HSA, despite the tax savings and other financial benefits.  Even if that’s the case, you should still establish your HSA.  Every time you incur a medical expense, deposit at least as much money as you spent on that medical expense.  For instance, if you went to the dentist and it cost $85, put $85 in your HSA.  If you like you can then take it right back out.

What this does is convert this medical expense into a tax-deductible expense.  Then when you file your taxes next year, you can put the total amount that you ran through your HSA on line 25 of your 1040, and deduct it from the total income you report.

Cover Your Deductible

Your next step is to get enough money in your HSA to cover your deductible.  For 2008, deductibles range from $1100 to $5600 for individuals, and $2200 to $11,200 for families.  Annual contribution limits are $2900 for individuals, and $5800 for families.  So it could take a couple years or longer to get enough money in your account to cover your deductible.

Once this money is in your HSA, you will have the confidence of knowing that you can cover most any medical expense that comes your way, particularly if you have a health insurance plan that pays 100% after your deductible.

As you continue to build money in your account, you may want to consider switching to a health insurance plan with an even higher deductible, which will further lower your premiums.

Minimize the Fees You Pay

If you will be using your HSA to pay medical expenses as you incur them, you should keep an eye on the fees your bank charges.  Until you have enough money in your account to cover any fees with investment returns, you probably want to have your HSA with a bank that charges no fees.  (Several are listed on the website referenced above).

If you plan to access money from your HSA to pay ongoing medical expenses, you may wish to keep a portion of your HSA money in a savings account or short-term CD.  But to take maximum advantage of your HSA, you’ll want to eventually move some of the funds to investments that have a higher potential return.

Investment Options

No other investment has the triple tax-advantage that Health Savings Accounts offer.  Not only is your Health Savings Account deposit tax deductible, and your withdrawals to cover medical expenses tax-free, but your investment also grows tax-deferred make Health Savings Accounts a great investment option.

Taking advantage of tax-deferred growth is one of the best ways to build long-term savings. Some banks will provide a short list of mutual funds you can invest in, while others provide access to an online discount brokerage such as Ameritrade where you can choose from stocks, bonds, mutual funds, and more.

The most aggressive strategy is to pay your medical expenses from somewhere other than your HSA, and save the receipt.  You can then reimburse yourself at a later date.  The additional growth you get from not paying any taxes on your investment may be enough to cover all your medical expenses.



BRIAN

Robert Valentine asked:


As often happens to investment vehicles created by legislation, Health Savings Accounts (HSAs) have suffered under the complex regulations meant to discourage misuse. However, the accounts have potential to do more than simply allow investors to save and pay for health-care expenses with tax-free dollars. They offer a potential way for individuals to bridge gaps in health insurance coverage that may occur during times of unemployment or in retirement.

The Medicare Modernization Act of 2003 created HSAs. Anyone younger than 65 can open an HSA after purchasing a qualified high-deductible health insurance plan. An individual can maintain an HSA and be covered under other insurance policies, as long as that person doesn’t “double dip” and have medical expenses paid by both insurance and the HSA.

To be considered “qualified” the insurance plan must have a deductible of at least $1,050 for individuals or $2,100 for family, and have a limit of $5,250 individual and $10,500 family for out-of-pocket expenses. Choosing a policy that qualifies can involve insurance and tax issues that should be discussed with professionals in those fields.

Contribution caps are the lesser of the insurance plan deductible or the IRS maximum. For 2006, the IRS max is $2,700 for individuals and $5,450 for families. Individuals 55 or older can make a $700 catch-up contribution in 2006.

Many employers offer flexibility spending accounts for medical expenses (and sometimes child care) that allow employees to set aside pre-tax dollars for medical expenses not covered by the company’s health insurance, including premiums and deductibles. Unlike flexible spending accounts, however, HSA contributions and gains can be rolled from year to year—there’s no “use it or lose it” requirement—and you retain ownership of the funds even if you terminate employment. If your employer offers a flexible spending account, you should take a description of the account requirements and restrictions when you discuss an HSA with your financial professional.

Because you establish an HSA independent of your employer, these accounts can provide a health care expense “safety net” should you terminate employment (voluntarily or involuntarily). They also provide retirees with another investment vehicle that offers tax deductions for contributions, tax-free growth and tax-free withdrawals for medical expenses. Withdrawals for nonmedical expenses after age 65 are still taxable, and a 10% penalty applies for nonmedical withdrawals before age 65.

If you plan to use HSA funds in the near term, a liquid, interest-bearing account like a savings account may be appropriate. However, if you don’t anticipate an immediate need for all or part of your HSA funds, the accounts are self-directed, allowing you to use other investment options. Your financial professional can help you determine which investment vehicle best meets your needs.

According to a 2006 survey by Watson Wyatt and the National Business Group on Health, health care insurance premiums have been rising at two to three times the rate of inflation for the past five years. Understanding the complexities of health savings accounts may be one way to lessen the blow and prepare for the future.



ALAN

Wiley Long asked:


 

The December 1st deadline is drawing near to secure substantial savings on your current year taxes. With the upheaval in our economy, there has been quite a surge in the number of people applying for HSA-qualified health insurance. HSAs, or Health Savings Accounts, allow you to put aside pre-tax money to cover future medical expenses. Anyone that has a plan in effect no later than December 1st is qualified to make a tax deductible contribution to their HSA during the current year, and may be able to reduce the taxes they owe on April 15th by $1900 or more.

 

While conventional co-pay plans continue to be popular, there has been a large increase in the number of people choosing to invest in health plans that work with Health Savings Accounts. HSA plans have become a better choice for many because these plans have premiums that are usually quite a bit lower than conventional co-pay plans. HSA plans also come with the added incentive that any money deposited into the HSA is tax deductible, which will directly lower the plan holder’s taxable income. A growing number of people are finding that a Health Savings Account is both a wise investment and a valuable way to meet their health insurance needs.

 

In addition to reducing their premiums and lowering their taxes, HSA holders are also able to begin building a tax-deferred medical retirement account. These accounts have proven their value for people who have built their accounts and later experienced unexpected medical issues. Rather than having a large amount of out-of-pocket expenses, these people were able to make a withdrawal on their HSA tax-free to cover the unexpected medical bills. Any growth to this account is tax-deferred and if a withdrawal is made for just about any kind of medical expense, that withdrawal is made tax-free.

 

If you have seriously considered making changes to your current health care arrangements, now is the time to act. At the very least, you could start your own investigation to see if an HSA would be a wise decision for you and your family. You must have your HSA-qualified health insurance in force no later than December 1, in order to take advantage of an HSA contribution and receive the accompanying tax reduction during the current year. Due to the fact that the underwriting process can sometimes take a few weeks, most insurance experts recommend that you apply for a plan as early as possible.

 

Anyone who does have a HSA insurance plan in place before December 1 will be able to contribute to their Health Savings Account up to $2900 as an individual, or up to $5800 as a family. People over the age of 55 can also make an additional contribution of up to $900 to their account. All money placed in these accounts, up to the limits just stated, is not subject to taxes. Someone in a 28% tax bracket who makes a $5800 contribution to their HSA will reduce their April 15th tax bill by $1624-even more when they count the savings on their state income taxes.

 

If you are paying for your own health insurance, now is the time to investigate a Health Savings Account. Online insurance agencies make comparing premiums and applying for coverage simple, and the lower premium and reduced taxes could add up to $4000 or more in annual savings.



SAMMY

Dennis Alexander asked:


Do Not Read This Unless You are Making a lot of Money!:

If you would like to know how you can save up to 47% on your current Health Insurance Coverage read on… this is going to be one of the most informative messages you will ever read. After reading this message you will never going to have words; expensive and health insurance in the same sentence.

As you already know health insurance costs are at highest they have ever been and there is no sign of them slowing down. More and more Americans are forced to cancel their coverage simply just because they cannot afford it.

Who are the uninsured?

• Approximately 46 million Americans, or 15.7 percent of the population, were without health insurance in 2004 (the latest government data available).

• The number of uninsured rose 800,000 between 2003 and 2004 and has increased by 6 million since 2000.

• The increase in the number of uninsured in 2004 was focused among working age adults. The percentage of working adults (18 to 64) who had no health coverage climbed from 18.6 percent in 2003 to 19.0 percent in 2004. An increase of over 750,000 in 2004.

• Nearly 82 million people - about one-third of the population below the age of 65 spent a portion of either 2002 or 2003 without health coverage.

• The number of uninsured children in 2004 was 8.3 million - or 11.2 percent of all children in the U.S. (1).

You might say that I have great coverage that I am happy with… that’s totally fine.

For past sever years average rate increase for health insurance was 16.2% and what if it keeps on going? If you are right now paying $500 per month for your health insurance in three years from now you would expect to pay over $780 for the same plan. Wait… we all know that insurance companies consistently decrease their benefits and increase co-pays and deductible. Therefore you will pay more for less coverage. By the way if you keep same plan for over five years you will pay over $1000 a month just for your medical coverage. What if you use your Health Insurance?… Chances are if it is not for a regular doctor visits or a check ups it would be considered pre-existing condition. That means your chances of changing to a more affordable coverage in the future will be nearly impossible. That is one of the main reasons people cancel their health insurance because they were diagnosed with something or taking a prescription medication and the insurance company kept raising their rate until they could not qualify for any other coverage and could not afford the one they had.

Now you are saying I do not need coverage my spouse works for a company and I have group coverage… Great.

What would happen if your spouse left that job or the company stopped providing benefits? Probably the most obvious things that you can see how much that group coverage is really costing you. Next time check how much is deducted out of the paycheck for health coverage, especially for dependents. Group plans do cost more money because by law they are what are called “guaranteed issue”. That means you can have serious medical conditions and still get coverage. Insurance companies have to follow the law and they know they have to accept everyone who works for a large company, therefore they do charge more money for coverage. The biggest problem is not the cost of group health insurance it is what happens if some one, while on the group plan, is diagnosed with a condition or starts to take prescriptions medications. We get back to same issues as mentioned before, unable to qualify for health insurance in the future. There are people that want to leave their job but they cannot because they are going through treatment and cannot to pay for it on their own.

There is another solution… Some might save, so what is the point of even having health insurance. Once you diagnosed with something and insurance company is going to keep raising rates to the point where I am going to have to cancel it anyway. Especially if something does happen and I have to use my coverage I might not be working and I might not have income. Is my insurance company is still going to keep raising my rates? YES.

Before you think about cancelling your coverage consider this. Here are some statistics

• A recent study by Harvard University researchers found that the average out-of-pocket medical debt for those who filed for bankruptcy was $12,000. In addition, the study found that 50 percent of all bankruptcy filings were partly the result of medical expenses. Every 30 seconds in the United States someone files for bankruptcy in the aftermath of a serious health problem.

• Illness and medical bills caused half of the 1,458,000 personal bankruptcies in 2001, according to a study published by the journal Health Affairs.

• Average day in the hospital is $7500 per day.

How can you save up to 47% on your health insurance? Simple… You probably already heard of Health Saving Accounts. They are becoming more and more popular everyday. With the way health insurance prices are moving today Health Saving Accounts are the only way to keep your coverage, save hundreds per month on your health insurance and still have a peace of mind.

To this day I was not able to hear a good definition that everyone can understand. I will do everything I can to make it simple to understand. The easiest way to understand Health Saving Accounts is to think of them as Roth IRA or your Company’s 401k plan. Instead of giving your money away to insurance company you get to keep it more of it for yourself. The way HSA plans work is there health insurance combined with savings account which works in a similar way to your retirement account. There tremendous benefits to have HSA qualified health plan. First all the money that you put in to your HSA account is 100% tax deductible and it is your money that rolls over year after year. At the age of 65 and up if you have not used up all of your HSA money you can roll it over in to your retirement account. Second your health insurance costs are going to be cut almost in half. For example if you had Health Insurance plan with $2500 deductible now and it is costing you $300 per month the same plans with HSA qualified plan, now will cost you only about $160 per month. The reason you save so much money with HSA qualified health plan is because HSA qualified plans do not cover anything until the deductible is met. There are exceptions depending on the Health Insurance Company. Some insurance companies will pay for your once a year physical before you meet your deductible.

Let take an example of how HSA qualified plan could benefit you. Let take some actual numbers from actual health insurance company. In this example I am going to use HSA plans from company called Assurant Health. Assurant Health is leader in Health Saving Accounts and they one of the first companies to implement them. The main reason is that Assurant Health is part of the world’s largest financial company that sets up retirement accounts. In this example I am going to use a family of four, husband 46, wife 42, kids are 12 and 16. On a regular family plan with $2500 deductible, maximum out of pocket of $5500, co-insurance of 80% and doctor visits covered with $35 co-pay, they are going to pay $676.40. Something to keep in mind that all of the regular PPO plans that are available on the market today have family deductible which is double of individual deductible. That means that if you have a plan with $2500 deductible and $5500 maximum out of pocket that means that your family deductible is $5000 and your family maximum out of pocket is $11,000. When we are comparing HSA qualified health plans there is only one deductible, once you meet it you are covered at 100% on the most plans. There are some companies and plans that you still might be responsible for the percent age of the bill until you reach your maximum out of pocket. Most HSA plans do not have maximum out of pocket that meant once you met your deductible you are covered at 100%, it’s that simple. The same plan with $5700 deductible for the entire family with HSA qualified health plans will only be $491.64 per month. For the total monthly savings of 184.76 per month. Also your maximum out of pocket will decrease from $11,000 on a regular plan to $5700 with HSA health plan. That’s yearly savings of $2,217.12 and additional savings of $5300 on the maximum out of pocket. (that’s if you have had to use the plan for emergencies) The main reason for starting HSA health insurance is for Saving Account and being able to put money in to account, at your discretion, tax free. You can put money in to HSA qualified account up to your deductible and you do not have to put any money in to that account if you do not want to. Health Saving Accounts are as flexible as you would want them to be. TO get more information on HSA accounts and get quotes for HSA qualified health coverage see my bio.



JASON

Wiley Long asked:


2007 is just around the corner, and there are several issues to consider if you currently have an Health Savings Account (HSA), or are planning on getting one in the near future.

100% of the deposit you place in your HSA is deductible on your federal income taxes. All but four states also make HSA contributions tax-deductible on state income taxes. If you are looking to reduce your 2006 tax burden and put away more money for retirement, your HSA is the first place you should put your money if you have not yet maximized your contribution.

The maximum you can contribute to your Health Savings Account in 2006 is the lesser amount of your deductible, or $2,700 for singles and $5,450 for families. Individuals who are 55 or older may contribute an additional $700. Note that contribution limits are pro-rated, based on the number of complete months during the year in which you have a qualifying HSA health insurance plan.

You have until April 15 (or later if you file for an extension) to make your 2006 contribution. If you do not fully fund your account for the current year, you cannot make a catch-up contribution for 2006 after this deadline. However, you can reimburse yourself in later years for qualified expenses incurred in 2006, even if you do not have the funds in your account to reimburse yourself at this time.

In 2007, the maximum annual HSA contribution will go up to $2,850 for individuals and $5,650 for families. Individuals 55 or older will be allowed to contribute an additional $800.

To maximize your tax benefit for 2007, it is important to have your HSA-qualified health coverage in place no later than January 1.

In order to pay for a medical expense from your HSA, it must be a qualified expense. Some of these qualified expenses include dental expenses, eyeglasses, chiropractic visits, over-the-counter medications, and sometimes even nutritional supplements.

Now is a good time to make sure you have an accurate record of your medical expenses for the year. Make sure you separate the expenses for which you have reimbursed yourself from your HSA from those that you paid for out-of-pocket. You’ll want to keep receipts for all medical expenditures paid from your HSA with your 2006 tax records. Place the “non-reimbursed medical expenses” in a separate file, keeping them with the concurrent year’s tax records in whatever year you decide to reimburse yourself.

The penalty for over-funding your HSA is a whopping 6%. You have until April 15, 2007 to withdraw excess funds for the 2006 tax year to avoid the penalty. Your HSA administrator may notify you of any over-funding, but they are under no obligation to do so. It is your responsibility, so make sure you check into this if you think your may have over-funded you account.

The minimum deductible for HSA-compatible health insurance plans in 2006 was $1,050 for individuals and $2,100 for families. In 2007 this will increase to $1,100 for individuals and $2,200 for families. If you currently have an HSA-qualified plan with the lowest eligible 2006 deductible, that deductible will automatically go up on January 1 to the new minimum.

Strategies to Maximize Your Tax Benefits

There are basically three different strategies you can take when deciding how to fund your health savings account.

1. Put no money in the account, except when you incur a medical expense. This strategy allows you to legally “launder” any money used to pay medical expenses. In other words, by depositing money into your HSA, then immediately withdrawing it to reimburse yourself for medical expenses, you are making your medical expenses all tax-deductible. You may want to use this strategy if you are on a tight budget and want to keep your cash outlay as low as possible.

2. Fully fund the account, or at least put in as much as possible based on your budget. Take money out of the account any time medical expenses are incurred, and let the rest grow tax-deferred. This strategy will maximize your tax deduction, while making your HSA funds available to pay any non-covered medical expenses before your deductible is met.

3. Fully fund the account, but pay all medical expenses from a non-HSA account. Reimburse yourself for medical expenses at a later date. This strategy will allow you to maximize your tax deduction, and will also allow you to maximize the tax-deferred growth of your HSA. You can then reimburse yourself, tax-free, at any time in the future for medical expenses incurred over the ensuing years.

To maximize the potential growth of your funds, you may want to make your 2007 deposits as early in the year as possible. Any growth in your account is tax-deferred, like an IRA. If possible, you should plan to make your deposit the first week in January.



MARQUIS

Kurt Stammberger asked:


An HSA - a “healthcare savings account” - is medical and retirement planning savings account that can be used on a tax-advantaged basis. HSAs were created in Medicare Modernization legislation passed in December 2003. To be eligible for an HSA, a consumer must be covered by a high deductible health plan (HDHP).

By contrast, an HRA - a “healthcare reimbursement account” is an account maintained by an employer to be used to reimburse employees for qualified medical expenses. HSA accounts must be funded before they’re used, but HRAs don’t need to be. Using an HRA, an employer can simply pay the medical expenses as they’re incurred.

HSA accounts belong to the individual employees and are fully portable; in other words, employees can take the accounts with them if they leave an employer. HRA accounts belong to the employer. Each employee gets an annual allocation of dollars and unused funds roll over from year to year as long as the employee continues in good standing. Typically, an employee forfeits the money in an HRA account if they leave the employer.

An HSA can be funded by either the employer or the employee (or, often: both). An HRA may only be funded by the employer.

All qualified contributions into an HSA are tax-free. If the employer contributes, then such contributions aren’t treated as part of the employee’s income, and are therefore tax-advantaged. If the employees makes contributions, these can be deducted from the employee’s income when tax returns are filed.

Here’s the best part: not only are deposits into HSAs tax-free… so are withdrawals. Any distribution from an HSA for qualified medical expenses is tax-free. HSAs are typically managed much like an IRA: that is, there are a variety of investment vehicles that the consumer can put his or her money into, so that it might compound and grow while it’s waiting to be used for medical needs. The specific investments available to a consumer vary depending on the company offering the HSA. As we said before, like an IRA a HSA belongs to the individual and is portable.

Consumers can make withdrawals from HSAs for non-medical purposes after the age of 65 but the withdrawals (aka “distributions”) are treated as income and taxed accordingly. Distributions for non-medical purposes made before the age of 65 are treated as an early distribution and subject to an early withdrawal penalty of 10% plus regular income tax.



FRANCISCO

Marilyn Katz asked:


at choosing the best health insurance plan can be very confusing. After all, most of us are not benefit professionals, and we need to wade through a lot of details to get to that right plan. Our parent’s generation probably had it a lot easier. For one thing, health care was not as expensive. For another thing, fewer options existed. They might have chosen a standard indemnity plan from a major company, or just been handed one from an employer. But now, we face higher costs and more choices, so we need to be more educated in order to choose a plan that fits our needs and budget!

PPO plans are still the most popular health plans on the market, especially the individual market. The main part of a PPO is a network of health professionals. The insurance company will offer the most coverage for services from those network medical providers. An insured person is still allowed to seek services outside the network, but will usually have to pay more for it.

PPO plans usually have a specified deductible and out of pocket maximum. That means that for covered services, the insured person must pay the first dollar amount up to the deductible. After the deductible, insurance will kick in for covered services at some specified percentage. Some services, like prescriptions and doctor’s office visits may have different coverage, like smaller deductibles or an office visit copay.

PPO health plans suit many families. Most of the time, the network providers are fine, but they do allow access to out of network providers in case of rare situations. Also, emergency services are usually covered at the network rate, no matter where they are performed. And most PPO plans allow non network providers to be covered at the network rate if no network provider is available in the area. Make sure you understand the policy so you know what is covered, if prior authorization needs to be obtained, and which situations would allow an exception to the network coverage policy.

HSA plans are newer, and they work well for some people. You have a higher deductible health insurance plan that works with a health savings account. The account earns interest and, within IRS limits, contributions are tax deductible. If regular contributions are made, the money in the HSA can be available to cover the higher deductible, and even to pay for approved medical services that are not covered by major medical at all. For instance, many dental services can be paid for by the HSA account that would not be covered under a major medical plan. If some of of the money is not used in a year, it will roll over to the next year. No money is ever lost, and the money can be taken out at retirement (Medicare) age.

Good savers will like HSA plans. People who may have challenges saving money, and like the more predictable nature of just paying a PPO insurance bill, should probably choose a more traditional insurance plan. Some people, who have stable finances and disciplined savings plans, are very satisfied with HSA plans, because they can keep insurance premiums low. A lot of the money only gets spent when the service is paid for. But other people, who may have unexpected bills that limit HSA contributions, are not happy when they do not have much money in their savings account to pay for services and their actual medical deductible is still very high.

If you try one sort of plan, from a company that offers both, and find that you are not satisfied, do not panic. Insurance companies will usually let you switch from one sort of plan to a comparable plan of the other type. After all, they would rather have you switch plans, but keep them as your health insurance company!



SALVADOR

Wiley Long asked:


Paying too much for coverage and not having enough coverage may be a familiar scenario for many of the residents in America. Not many health insurance companies offer policies with coverage that will give you dental, eye and alternative care. Americans are spending over $30 billion annually just for dental services and most of it is out of their own pocket. The prices for dental care can be very horrid, ranging between $850 to $1,000 for crowns, $150 for check-ups and cleaning and thousands of dollars for oral surgery.

Most of the dental plans available are expensive - the reason being that the insurance companies know that the individuals who purchase dental coverage already have dental problems and will definitely be using the coverage. This is also known as “adverse selection”. 

Another option is available today with the HSA, or Health Savings Account. This is an account that you can use to accumulate tax-free dollars for medical bills that aren’t covered under your High Deductible Health Plan, or HDHP. It is required that you are enrolled in a HDHP to qualify for an HSA. These plans have high annual deductibles, but you receive low monthly premiums in exchange. Since the money in the HSA is tax-free, the account holder can funnel their dental expenses through the HSA for a tax write-off.

If you decide to get a health plan with dental coverage, the deductible cannot be paid for with the HSA, but the expenses rendered from services can. Since you’ll be funding your account with pre-tax dollars, you can easily save $500 or more off the costs of your family’s yearly dental expenses by paying for the charges from your Health Savings Account.

There are some other options for dental coverage available. With prepaid dental plans you will be charged low monthly fees, which are usually around $7/month for individuals and $16/month for families. The plans give you significant discounts on check-ups, fillings, extractions and other dental services provided by a network dentist. Some plans help with the expenses for eyeglasses and contact lenses. Since these plans aren’t insurance, it can be paid for with the HSA. When calculating what medical expenses will be reimbursed from your HSA, include dental fees and premiums from the prepaid dental plan.

More About Health Savings Accounts

Any health expenses that aren’t covered under you HDHP can be paid for with your HSA, such as deductibles, eyewear and dental care. As long as the bill you are trying to cover was needed for a health problem, it can be paid for. So if you decided to get a massage while at the spa - this wouldn’t be covered, but if your doctor recommended that you go to a masseuse after a painful accident; this would be covered. Having an HSA is the way health insurance should be - you get to choose what medical help you receive for your health conditions.

This means if you decide to get alternative medicine instead of going to an allopathic physician (conventional doctors that use prescriptions drugs and other treatments for quick-fixes instead of delving to the root of the problem), you can do so and have the expenses paid with the HSA.

What is Considered an “HSA Qualified Expense”?

The definition of qualified medical expenses is only partially given in the IRS Publication 502 and through various federal court rulings. There are few restrictions - as long as the expenses are for medical treatments or prevention for a health problem. For instance, yoga wouldn’t be identified as a medical expense unless your doctor recommended it as a treatment for medical reasons, such as for physical therapy after an injury, then it is qualified as a medical expense.

Many may question why the government would give a tax deduction for someone using some crazy vibration machine to cure their cancer. Again, the HSA is how health insurance should be. You should get to choose what treatments would best benefit your health condition. This gives account holders that power to manage their health as they see fit. Health Savings Accounts are encouraging individuals to take personal responsibility of their health care while loosening the monopoly traditional health care has had over the past couple of decades.



CLIFF

Wiley Long asked:


People who have a Health Savings Account (HSA) benefit from lower health insurance premiums and reduced income taxes. But the best long-term benefit for many will be the large amount of money they will have in their Health Savings Accounts as they enter their retirement years. The best way to build up a significant amount in your HSA is to fund it every year, get a good return on your money, and avoid making withdrawals. And the easiest way to avoid withdrawals from your HSA is to stay in healthy.

People have much more control over their health than most of them realize. If you want to take more personal responsibility for your health, forget your New Year’s “Resolutions” (if you’re like most, you probably already have!), and make some real goals to improve your health and prevent future degeneration.

You Have the Power

The first step in the journey towards optimum health is to realize that you, indeed, do have the power to influence your health as you age. While the genes you inherited from your parents do affect your risks, for most diseases this influence is tiny compared to the role your lifestyle plays.

Here’s the way it plays out for the average American: by the time they are in their 30’s or 40’s, most are on at least one regular prescription drug - typically cholesterol medication, blood pressure medication, and/or Viagra. By their 60’s, most people are falling apart, on multiple medications, and suffering from arthritis pain, obesity, depression, insulin resistance, and a host of other complaints. Within 10 years, many are dropping like flies.

But of course it doesn’t have to be this way.

Imagine the Future

How do you imagine your life playing out? Pour yourself a beer (do it now, before we get to the part where we actually write out lifestyle goals), kick back, relax, and dream. Imagine that you’re 70 years old. Are you still in vibrant health, playing tennis, running on the beach? Or are you old and fat, with just enough energy to get off the couch and make it to the refrigerator and back during the Wheel of Fortune commercial?

Then imagine checking your Health Savings Account balance. Does it have $325,000 in it, or $325? If you’re not in the best health, chances are your HSA won’t be either.

If that’s too far in the future, just imagine January 2009, and where you’d like to be. It’s mostly your choice.

How Are You Going To Get There?

Once you’ve imagined the perfect future, its time to get serious about getting there. And the key is to focus on lifestyle habits, not end results.

Diet

Nothing is more important to your long-term health than eating a healthy diet. So your focus, as much as possible, should be the quality of your diet.

Base your diet on real, whole, unprocessed foods. Fruits, vegetables, fish, lean meat, nuts. Until 10,000 years ago, humans did not have access to bread and potatoes, and it is only in the past 100 years that we’ve begun eating high quantities of sugar, corn syrup, white flour, and other modern foods.

If losing weight is one of your objectives, going on a diet is NOT the answer. Chances are you’ve tried that before, and you know it doesn’t work. But what does work is permanently changing your eating habits, and where most people get stuck is they start out with a feeling of denial. Whether its wings and beer, or Twinkies and root beer, whatever you eat that’s gotten you to this point is probably what you feel like you “deserve” to eat, and you may feel that its not “fair” that you won’t get to eat this way anymore.

Get over it. The fact is that no one eats that way without consequences. Instead, choose to eat good food. Not temporarily, or just until you lose the weight. Don’t tell anyone that you are “on a diet”. Tell them that this is the way you eat, period.

Exercise

We are built to move, and anyone can improve their body’s functioning by moving more. The basics: muscle strength, cardiovascular fitness, and flexibility.

Here’s what your prescription should be:

1. Lift weights 3 times per week. Join a gym, or simply buy some 20 and 30 lb dumbbells. Each week make sure you work out your arms and shoulders, chest and back, and legs.

2. Do something aerobic 3 times per week, for 20 minutes or more. Don’t just go for a stroll, but actually do something that makes you breathe hard - whether it’s jogging, rollerblading, basketball, or whatever.

3. Stretch every night. 5 minutes or less ought to do it.

The Power of Written Goals

So at this point you should have two ideas in your head. One is a picture of you at some point in the future. How you look, how you feel, and how you function. The other is the permanent lifestyle changes you plan to implement to get you there.

Now is the time to put it on paper. This is a powerful exercise that will make your thoughts more “real,” and more likely to come to fruition.

First, write out a detailed description of your future, exactly as you would like it to be.

Then write out your lifestyle habits in positive wording. What kind of food are you going to eat? What kind of food are you going to have around the house? Where and when will you eat out, and what kind of food will you order?

Remember, it is very difficult to make changes if you have feelings of denial. Fighting hunger is virtually impossible. Instead of concentrating on what you won’t eat, concentrate on what you will eat, and on the end result. And if you want to splurge on some Ben and Jerry’s occasionally, go ahead.

How Much Will You Have In Your HSA When You Retire?

In 2008 the maximum annual HSA contribution is $5800 for families. If a family makes the maximum contribution each year, gets an 8% return on their money, and has $500/year in medical expenses, they’ll have $261,885 in their HSA after 20 years. If they have $3000/year in medical expenses, they’ll only have $138,354 after 20 years.

Stay healthy, get wealthy. They certainly go together. And with looming Medicare insolvency, you will certainly want to have as much of your own money available to pay future medical expenses when they do happen.

At one time it wasn’t uncommon for me to have wings and fries for dinner, washed down by a few beers. At other times it was beer for dinner, supplemented by a few wings. Amazingly, the human body is able to take these raw ingredients, and produce heart, lungs, eyes, and everything else that keeps us going. But if we were able to look more closely, we’d see poor ingredients produce a poorly functioning body.

If optimum health hasn’t been a focus in your past, make 2008 a year of change. You’ll be glad you did.



ANDREA