Riddle me this, riddle me that, how’s a person with government care going to get that?

As promised in last week’s article today we’ll touch on medical benefits. 

The pendulum swings

This time last year as the debate regarding health care reform raged on carriers were motivated to sway public opinion and attempted to do so by offering some of the lowest rates we’d seen in years.  For a short time we saw employee rates for group plans back into the $1 per hour range, since the law has passed the price pendulum has swung away from business and families and it’s likely to swing even further in the coming years.  (check out the benefits tab to see some of the reasoning).

A dual benefit you can use

During the second term of President Bush congress enacted some changes to health insurance that give people the chance to gain control of their health dollar.  The programs weren’t touted in the media and certain state insurance commissioners attempted to block their effectiveness.  Regardless they appear to have come through the current reform mostly unscathed although Congress did limit one benefit that would have helped families reduce medical costs.  [We’ll discuss that a bit later]

Previously Congress established the HDHP – High Deductible Health Plan, and with it the HSA – Health Savings Account.  Now not every health plan with a high deductible is a HDHP.  To qualify as a HDHP a plan has to function within certain parameters which are adjusted by Congress each year. 

 On the short list of items to qualify as a HDHP the deductible has to be within a range between $1,200 to $5,950 for self only coverage and $2,400 to $11,900 for families.  Since a majority of small business plan deductibles are already beyond the $1,200 mark you can begin to see the confusion the name has equally true also for those who purchase high deductible plans with deductibles for individuals beginning at $5000.00.  But let’s not get stuck on the name, for what’s in a name a rose by any other ….. I’m sorry I digress (at least my English Lit teacher would be proud). 

The key is if you have a HDHP you can qualify to have a HSA or Health Savings Account.  The HSA was also established by Congress and signed in to law by President Bush.  It allows individuals to put away money tax-free to meet medical expenses, similar to an IRA the money set aside will grow tax-free and the contribution is tax-deductible.  Unlike an IRA you can actually use the money before you retire without penalty as long as it is used on qualified medical expenses.  The maximum contribution for an individual with a qualified HDHP is $3,050 and $6,100 for family. 

Now you may be thinking you’ve heard of this program before as a Flex-spending account comes to mind.  A HSA is different, first the money can only be used on un-reimbursed medical expenses including vision and dental (to see a complete list of benefits look up Publication 502 and Publication 969 available from the IRS) expenses and second which is perhaps the most important benefit is it rolls over year after year.  That’s right, no use it or lose it feature.   

How one takes control with a HSA

So how do you put this information to work for you, it’s simple.  First you get a qualified HDHP (for you and your family) then establish and fund to the max your HSA.  Don’t worry if you can’t put the max in day one, you can put regular contributions in up to the max allowed that year before the last day of the year.  The best scenario would be to get a qualified HDHP with the lowest out-of-pocket expense available.  More often than not it’ll be a $1500 out-of-pocket for an individual and $2,500/$5,000 for a family.  Now if that causes your heart to skip a beat keep in mind even a modest $1,500 deductible plan with a 80/20 co-insurance benefit will have an out-of-pocket expense of $10,500 for a family.  As you can see the HDHP is less than half the exposure of a modest 80/20 plan.  

Once you have the plan in place begin systematically putting money in your HSA, keep in mind these dollars are “pre-tax” and you may be able to locate the funding dollars by making an adjustment on your tax withholding (form W-4)[i]. 

At the end of each year you’ll see how much savings you have accumulated, that’s money set aside for your medical expense that you did not spend which rolls over to the next year.  As your HSA account builds you’ll be able to adjust the out-of-pocket expenses of your HDHP and thereby lower your monthly premium expenses.  In theory in a few short years you could have the maximum exposures of the out-of-pocket expenses set aside in your HSA and generate a surplus that will be available for other purposed at retirement.   

Like to learn more about these plans and benefits leave your questions in the comment section and I’ll send you more information on alternative benefit programs.  You can also visit the National Association of Alternative Benefit Consultants at http://www.naabc.com/ to find people in your comuinity that can help.

Until next time

Always at your service,

Rick Matthews

 We help business owners increase profits, solve employment problems, reduce employer liabilities and protect valuable assets thru outsourcing.  www.primaryhroutsourcing.com

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[i] To be clear I am NOT tax preparer and I am NOT giving you tax advice.  To get tax advice contact your accountant or CPA or…. I am simply pointing out there may be ways to fund a HSA without bustin’ the budget.

Note: DISCLAIMER: This information is offered NOT as a solicitation to sell insurance, it is offered as a discussion of options you may want to learn about.  You’ll need to contact your health insurance agent if you are shopping for medical insurance, they’ll appreciate your support.