Health Articles

Article / Updated 04-25-2016

Opening a Health Savings Account (HSA) is one of the most important things you can do for yourself in the here and now. The benefits to you are both immediate and long term. Here are a few reasons for arranging your health insurance coverage to include this important tool. You can pay for healthcare expenditures with tax-free money. The money deposited in this account is tax-free! That’s right, no income tax! The government keeps its hands off it! When you use your HSA debit card to pay for your medical expenses and deductibles, you are paying for it in pre-tax dollars, which is like getting a 20–30% discount on services rendered, depending on your tax rate. Over your lifetime, that’s a huge savings. You will need to keep records of all of those expenditures with your annual tax filing in case you ever get audited by the IRS. Those receipts are the only acceptable proof to the IRS that you spent the tax-free funds on approved products and services. Interest earned on your HSA account is tax-free, too. The interest earned on the money in an HSA is tax-free. Unlike your other banking accounts that generate interest income, the HSA will never send you a 1099-INT. The interest stays in your account until you are ready to use it to pay for your healthcare expenses. You own your health savings account. You own the money in your HSA account. It doesn’t belong to the insurance company or your employer and can’t be raided for any other reason by anyone. And unlike Flex accounts, HSA accounts do not have to be used in the same year as the contributions. Benefits of the HSA account can’t be lost. Even if you lose your health insurance, the account stays with you. It can’t be taken away if you change employers. This is not a ‘Use it or Lose it’ benefit! The money just rolls over and stays with you for whenever you need it in the future. Even upon your demise, the money is yours and will be distributed to your beneficiary. A health savings account is a good strategy for retirement planning. Since the HSA rolls over year after year and there are no limits to how much you can accumulate in the account, the HSA account is a good tool for retirement. After the age of 65, you can withdraw funds from your HSA account penalty-free for any purpose. You will pay income tax on the withdrawal if it is not used to pay for health care, but that tax rate is likely to be lower in your retirement years when your income is lower. And, of course, you can continue to withdraw the money from your HSA account tax-free to pay for medically necessary expenses. That’s right. You don’t have to use the money for healthcare expenses after you reach retirement age. You can use it to fund that dream vacation that you never had time for while you were working. Funding it to the maximum allowed is why the HSA has been described as a "Medical IRA." You become a more informed healthcare consumer. The insurance plans that qualify you to get all the benefits of an HSA account are called High Deductible Health Plans (HDHPs), so you will be paying the full cost of your care (using the tax-free dollars in your HSA account) until your deductible is met. All of a sudden, you're looking at what is spent on your healthcare, and that’s a good thing. Most HDHPs have tools that will help you shop around for providers. Not only do they provide some pricing information, but also some measures of the quality of the service provided. An HSA can reduce stress. Just being in control of your healthcare can give you additional peace of mind. It reduces the uncertainty of future health expense planning because you know where the money will come from! Plus, knowing that the deductibles will be paid from pre-tax dollars has got to put a smile on your face. HSAs come with a significant premium savings over traditional health insurance plans. HSA plans have a higher deductible than other plans, but they come with much lower premiums. This savings is especially apparent to someone who pays the premiums all year long but doesn’t actually go to the doctor or use medical services very often. For this person, the premium can feel like money out the window. Based on premium savings alone, some HSA owners see 20–40% savings in the cost of maintaining insurance coverage each year. Over the years, a healthy person can save some serious money! An HSA can be used to pay for any medically necessary service. Use the HSA to pay for dental, vision, prescription drugs and non-drug over-the-counter medical items. Even if your health insurance coverage doesn’t cover these items, you can use your HSA debit card to pay for them with pre-tax dollars. Over the years, this savings is huge. Starting January 1, 2011, over-the-counter drugs were no longer considered eligible medical expenses. However, if you get a doctor's prescription for over-the-counter drugs, then you can still use your HSA to pay for the items tax-free and penalty-free. The rule against buying over-the-counter drugs with your HSA does not apply to non-drug over-the-counter items such as bandages or contact lenses cleaner. You can use it as an emergency savings account. Some HSA owners pay all their eligible medical expenses out-of-pocket and let the HSA account grow a tax-deferred emergency fund. Keep the receipts and if next year the owner needs emergency cash, he can reimburse himself for the previous year’s expenses up to the total of the receipts and owe no tax.

Article / Updated 04-25-2016

The majority of individuals and families have health insurance through their employers. You’re likely best off with your employer’s group plan than any other option available to you. Group coverage is easier and much less expensive to get than private insurance. Plus, your employer may pay most or all of the cost for you, and you can’t be denied coverage. However, if you change jobs, get laid off, or are fired, you can lose your group health insurance. If you find yourself without employer-sponsored health insurance, the following options may be available to you: Individual health insurance: Perhaps your employer doesn’t offer health insurance, or you’re self-employed, a student, or retired before age 65. If you’re relatively healthy, you should purchase an individual health insurance policy. Certain health conditions may be excluded from coverage for a period of time. In some circumstances, pre-existing health conditions will be covered; however, your cost for insurance can be substantially higher than it would be if the pre-existing health conditions weren’t covered. Each insurance company may treat pre-existing health conditions differently and can deny you coverage altogether. Paying the extra cost and obtaining full coverage is generally better than having a pre-existing condition excluded from your health insurance policy. COBRA: A provision in the law requires almost all employers to allow their terminated employees to continue group insurance coverage for a period of up to 18 months through a program called COBRA. However, you must pay 100 percent of the cost of the insurance. As your COBRA benefit period nears its end, or you get tired of paying those high premium rates, you need to search for group health insurance on your own. Generally, employer-sponsored plans (which is still who your COBRA coverage is through) have very low or no deductibles and minimal copayments. Simply by raising the deductible and copayments — bearing more of the risk yourself — you could dramatically reduce your insurance costs. HIPAA: The Health Insurance Portability and Accountability Act (HIPAA) of 1996 requires that states provide at least a minimal coverage after you exhaust COBRA benefits, as long as you haven’t had any extended lapse (generally a break of 63 days or more) in coverage. Premiums under HIPAA may be two to three times what they would be for a standard-rate policy. HIPAA policies are typically an option of last resort for many people without employer-provided health insurance; however, HIPAA is still better than no health insurance at all. Each state has its own HIPAA rules, so contact your state insurance department before dropping any current coverage. Your state’s high-risk health insurance pool: If you're medically uninsurable due to significant health problems, your best option may be to apply for coverage through the high-risk pool in your state, if it's available. Only 33 states have high-risk pools that provide coverage if traditional health insurance providers reject you. For more information about whether your state has a high-risk insurance pool and how it works, contact The National Association of State Comprehensive Health Insurance Plans or your state insurance commissioner’s office. Most states have their insurance premiums capped at 125 percent to 150 percent of the cost of a standard policy. Even if your state has a high-risk insurance pool, you might not be able to obtain insurance immediately because there may be a long waiting list. Medicaid and other state-based healthcare programs: If you’re financially destitute, Medicaid is the nation’s largest program providing healthcare services to low-income individuals and households. Each state’s Medicaid income, eligibility requirements, and benefits vary. Check with your state for the specifics on Medicaid as well as other state-based programs. State Children’s Health Insurance Program: This program provides healthcare coverage to children when their families don’t qualify for Medicaid because they make too much money. Federally funded community health centers: These provide healthcare assistance to the needy. You can call 800-ASK-HRSA (800-275-4772) for more info.