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Tax
Qualified Health Insurance Can Save You Money & Boost Your
Retirement
One of the most popular (and lowest priced) types of Tax Qualified Health Insurance plans is the HSA qualified HDHP. HSA
stands for
"Health Savings Account", more commonly referred to as a "Medical IRA".
HDHP stands for High Deductible Health Plan.
HSA qualified HDHP's are a unique way to attractively manage your
health insurance costs. For
a brief introduction to Consumer Driven Tax Qualified health
insurance please watch the following short but informative video: To illustrate how Bill's idea works in the real world. We will use a real world example. Tony & his wife are currently paying $1,134 a month for Cobra continuation coverage from a previous group plan. In comparison, the monthly premium for an HSA qualified HDHP (High Deductible Health Plan) which covers each insured family member up to $5 million dollars is less than half of the premium that they are paying now ($481.64 monthly to be exact). This is a yearly savings of $7,828.32 or a monthly savings of $652.36. This is a significant difference. However the insured has to give up all of their outpatient co pays. Is this worth it? This was the question posed to Senator Bill Archer (R) when he approached Congress back in the late 1990's. His answer to Congress was simply "make it worth it". In other words, he asked Congress to make it worth it to the insured. Their response was two fold. And it is these two primary reasons that make HSA's a "no-brainer" for every self employed prospective insured and for their corresponding employees. The first thing Congress did was to state that if a policy holder buys a major medical health insurance policy (HDHP) with a yearly family deductible between $2,200 per family (not per person) or as high as $5,800 per family we will call that an HSA qualified health insurance plan (HDHP). They further said that in order to make giving up outpatient co pays more attractive to the insured we will allow anyone who has an HSA qualified health insurance plan (HDHP) the option to open a tax favored HSA (Health Savings Account) with their local bank or financial brokerage house. Since the insured is saving a considerable amount of money each month by giving up their out patient co pays, we will allow them to take that extra premium that they would have normally given the insurance company for the "privilege" of a co pay and put it into a 100% tax deductible account that will grow tax deferred at an interest rate adjusted by the Fed. In addition to depositing the amount you save in insurance premiums, you may also deposit in your HSA an amount equal to what the IRS allows for that given year. For the year 2011 the maximum contribution a family can make to their HSA account is $6,150. In addition, any family member who is 55 years of age or older can deposit an additional $1,000 annually (more on the age 55 allowance below). This means that the total amount that Tony and his wife (in our example above) can deposit per calendar year is $7,150 and they can take a 100% tax deduction for that contribution similar to an IRA. Furthermore, if they do incur medical expenses that arise throughout the course of the year that are subject to the deductible (i.e. prescriptions, doctor's office visit charges, etc.) the IRS will allow them to pull out that money that they put into their optional tax deductible, tax deferred HSA savings account to pay for those expenses. When they use their HSA money to pay for those expenses the IRS will allow them to write those expenses off at a 100% tax deduction. The list that the IRS allows them to spend their HSA money on is very liberal and includes things like dental, orthodontics, eyeglasses, radiokeratonomy (Lasik corrective eye surgery), alternative medicines etc. Click the hyperlink to see the list of allowable expenses and disallowed expenses on the HSA section of the IRS web site here: http://www.irs.gov/publications/p502/index.html Arguably the most attractive tax advantage to owning an HSA is the fact that the money left over in the HSA account that was not used on medical expenses at the end of the year is "rolled over" into the next year and awarded a higher rate of tax deferred interest. The insured also has the option to roll those unused funds into no load mutual funds, thereby building an extra tax deferred retirement account with money they would have normally given to the insurance company each and every year whether or not they had any claims that year!
It should also
be noted that with not having a "co pay" with your plan does not
mean that your outpatient doctor visits and outpatient prescription
drugs will not be a covered expense. With most HSA qualified HDHP's
these charges are a fully covered expense just as they would be with
a
Traditional Health Insurance Plan.
The only difference is these charges will be subject to the
"aggregate" family deductible.
2012 Update:
With the recent passage of the PPACA (Patient
Protection & Affordable Care Act) the
following Federally mandated
preventive services which
must be covered without your having to pay a copayment or
co-insurance or meet your deductible. This applies only when these
services are delivered by a PPO network provider. The best way to explain the unique advantages of HSA qualified HDHP's is to look at the maximum out of pocket risk a family is exposed to with a Traditional Health Insurance plan and compare it to the maximum out of pocket expenses that a family would be exposed to with an HSA qualified HDHP. The out of pocket assumptions below assume that your Traditional plan requires each of three family members to satisfy their own deductible and coinsurance out of pocket expense each calendar year. Some plans only require two family members to satisfy their own deductible and coinsurance out of pocket expense each calendar year. Either way, for the same premium, your out of pocket risk will reduced significantly with any HSA qualified HDHP available on the market today.
Current Maximum Annual out of pocket
risk with the average Traditional Health
Insurance Plan
Annual deductible: $2,500 (for
one family member)
+
Annual deductible: $2,500 (for
2nd family member)
+
Annual deductible: $2,500 (for
3rd family member)
Total Family Deductible: $7,500
(Total Annual Deductible Risk
per family per year)
Annual coinsurance out of
pocket $2,000 - (20% of the first $10,000 in
bills) for one family member.
+
Annual coinsurance out of
pocket: $2,000 - (20% of the first $10,000 in
bills) for 2nd family member.
Annual coinsurance out of
pocket: $2,000 (20% of the first
$10,000 in bills) for 3rd family member.
Total Family Coinsurance Risk: $6,000 (Total Annual Coinsurance Risk per family per year)
By adding $7,500 in total
deductible risk per family
to
the extra $6,000 in
total coinsurance out of pocket
risk per family. We
arrive at a total per family
risk of:
$13,500 each calendar year.
The
average monthly premium for a family
of four for this type of Traditional Health Insurance plan
is $673.99
In contrast, if we compare that total calendar
year per family
annual risk to that included with an HSA
qualified HDHP with a $7,000 total "common"
family calendar year deductible. Here's what that looks like:
Calendar Year "Common Family" Deductible: $7,000 (to
be satisfied aggregately by all family members)
+
Annual coinsurance out of
pocket risk:
$0
(100% coverage after "common" family
deductible is satisfied)
Total Family
out of pocket expense per year: $7,000
(Total coinsurance risk
per family is $0. Plan pays 100%)
The
average monthly premium for a
family of 4 with an HSA qualified HDHP would be $430.77.
The premium savings per month between both products is $243.22 or $2,918.64 annually. And we actually reduce the total annual per family risk by almost HALF. In addition, once you have an HSA qualified Health Insurance plan. The IRS allows you to open the aforementioned "Medical IRA", more commonly referred to as an "HSA" (Health Savings Account) if you choose to do so. This is an option. It is however a very good option to select because not only can you deposit the premium difference between both plans above ($2.918.64) in to a Medical IRA (at the bank of your choice), but you can deposit as much as $7,150 as a family in 2011. If you are over the age of 55, you can deposit even more. It behooves you to do so for the following reasons: 1.) Unlike any other IRA, a Medical IRA (HSA) allows you to withdraw funds at any time with no penalty for "qualified medical expenses". Most importantly, when you withdraw your HSA funds to pay for any of the qualified medical expenses on that list, those expenses themselves become 100% tax deductible. 2.) Here's the key point though. If you have just ONE year without any significant claims and you even partially fund your Medical IRA, then if the worse case scenario occurs, you will have those funds available and be able to withdraw them with no penalty and use that money to help pay your $7,000 "common" family deductible. In year 2 (with no major claims) you are that far ahead of the risk management game. In fact, no other kind of Health Insurance actually allows you to lower your risk the longer you own it by hedging money you would have otherwise given an insurance company for a Traditional plan. I say this because, there is no other kind of IRA that you can withdraw from at any time with no penalties and then use those withdrawals to pay for medical costs and receive a 100% tax deduction for those expenditures. In fact, the longer you own an HSA qualified HDHP, the lower your risk becomes since the more years that pass, the larger your balance in your HSA account becomes. This is so because each year your remaining balance rolls over and continues to earn tax deferred interest. The longer you look at HSA qualified HDHP's the more sense they
make. This is why they have caught on like wildfire and will
continue to do so. The only inhibitor to the spread of HSA's is lack
of education (as is the case with any other financial vehicle)The
"Whole Foods" supermarket chain chose HSA qualified Health
Insurance. It worked so well for them that they were recently
featured on the ABC 20/20 episode entitled "Sick In America" hosted
by John Stossel: To learn more about HSA's and the recent federal legislation that has made them even more attractive to people over the age of 55 click: http://www.treas.gov/offices/public-affairs/hsa/about.shtml to read all about them on the Federal Governments HSA educational web site. To learn more about H.S.A.'s in a power point presentation format please click here: http://www.hsacenter.com/ and click on the informative videos on the right. If you are an employer and are considering HSA qualified plans for your employees consider this. An individual's employer can make contributions that are not taxed to either the employer or the employee. The combined income and payroll tax deductibility leads to discounts for health insurance of over 40 % in some cases relative to other forms of insurance. For more details for the employer http://www.treas.gov/offices/public-affairs/hsa/faq_employer-participation.shtml For the best interest rates you will find just about anywhere on a Health Savings Account please click: HERE Seven of the best priced HSA qualified HDHP's are featured below. Please “Contact Us” with questions about HSA qualified HDHP's. If you have a C.P.A. or tax advisor please feel free to ask he or she about the advantages of owning an HSA as well. The plan brochures for seven of the best priced HSA qualified HDHP's available on the market today are highlighted below. You can also click below to get free HSA quotes from multiple carriers. No phone number is required.
Since accidental injuries are far more likely to occur than major medical illnesses (most especially when you have active children) many families are choosing to purchase supplemental accident expense plans. These plans pay you a cash benefit of $2,500, $5,000, $7,500 or $10,000 when an accidental injury occurs. This cash can then be used to pay your health insurance plan deductible. Supplemental Accident Expense plans are also a great way to save money because you can choose a higher deductible than you would normally choose knowing that you will not have to pay that deductible if an accidental injury occurs to any member of your family. Click below for more information:
Supplemental Accident Expense plans can also be coupled with Critical
Illness plans. In fact, Supplemental Accident Expense plans are often
cheaper when coupled with Critical Illness plans. Why consider Critical
Illness coverage? WOULDN’T A CHECK BE BETTER THAN A GET WELL CARD? Critical Illness benefits are paid directly to you. You choose how to spend the benefit at a time when you and your family may need extra cash the most. For example:
A merican General (www.AmericanGeneral.com) has introduced a new Supplement Accident Expense plan that also includes Critical Illness coverage and it's extremely well priced. Adding this product to any health insurance plan would not only alleviate the worry of paying your health plan deductible if you or a family member where to suffer an accidental injury but it will also provide you a much larger cash benefit (up to $25,000) if you or a family member were to contract a critical illnesses such as life threatening Cancer, Stroke, or Heart Attack. For more information about this unique and affordable plan click the brochure below. For a free quote, please contact us and we will send you quotes via email. Or call us toll free @ (866) 724 7123.
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