Good Neighbor Insurance (dev.gninsurance.com and www.gninsurance.com) is continuing to update our clients on the new health insurance laws. There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work. Many critical details of this new insurance law will be clarified in the months and years to come.
These six major coverage options are:
(1) Individual or family coverage (private health care plans)
(2) Employee/employer group option for small businesses (typically under 50 employees)
(3) Employee/employer group option for large businesses (typically larger than 50 employees)
(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)
(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards
(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service.
Health Saving Account (HSA), high deductible plan, high deductible health plan (HDHP), no copay plan, and a catastrophic health plan are all the same when it comes to your medical health care benefits.
An HSA also called a Health Savings Account is:
* Tax – deductible: contributions to the HSA are 100% deductible just like an IRA.
* Tax – free: withdrawals from your HSA bank account are never taxed when used for medical purposes (not for premiums)
* Tax – deferred: interest earnings accumulate tax – deferred, and if used to pay for qualified medical expenses, is tax – free.
* HSA money is yours to keep: Unused money in your HSA is not forfeited at the end of each year and is rolled over for any next year’s medical expenses. Thus, you never loose monies you place into your HSA bank account.
Let us get one thing straight: All health insurance is financial insurance. What we have to ask ourselves is: “How much risk am I willing to take and how much premium do I want to spend to let insurance companies carry the other risk?”
So let us get back to basics. A health savings account (HSA) is a medical plan that our grandparents had without the tax advantage we are now able to use. Remember that any HSA plan has no bearing to your medical plan, and what makes the tax advantage happen is on the HSA side. In fact, you may have an HSA medical plan and never open up an HSA bank account, and still use your medical plan–but without the tax advantage.
There are many types of plans in the individual private market, but it comes down to two simple options: one with copays and one without copays. An HSA (no-copay plan), if you are looking at it on a 12-month basis, is going to provide you the best financial security you could ever imagine. Why?
1. On a no-copay plan, once you meet the deductible, you have no further out-of-pocket costs. But on a copay plan, you will still have copays to take care of.
2. Usually a no-copay plan is 35-40 percent less in premium than a copay plan.
3. An HSA has no coinsurance, while many copay plans have coinsurance. Coinsurance is where you and the insurance company share the medical costs after your deductible is met–usually shown as 80/20 or 70/30 of a certain amount. Thus, your deductible and coinsurance, usually used for hospital and medical/surgery care, will be a higher expense than with an HSA deductible-only plan.
On average you will be saving $500 to $1000 per person per 12-month policy period on an HSA plan over a co-pay plan.
As you read below remember that a HSA plan is two parts; your medical no copay plan and the second part is monies you place into your HSA bank account to use for possible future medical care.
What are the benefits of an HSA bank account?
* You can claim a tax deduction for contributions you place in your account.
TIP: the amount you can put in will be changing in 2012.
* The contributions remain in your account from year to year until you use them.
* The interest or other earnings on the assets in the account are tax free.
Qualifying for an HSA
* To be an eligible individual and qualify for an HSA, you must meet the following requirements.
* You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.
* You have no other health coverage.
* You are not enrolled in Medicare.
* You cannot be claimed as a dependent on someone else’s 2009 tax return.
TIP: If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an HSA contribution. This is true even if the other person does not actually claim your exemption.
High deductible health plan (HDHP) has:
* A higher annual deductible than typical health plans. This is not always the case since copay plans will usually have coinsurance and HDHP plans usually will not have coinsurance expenses.
* A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. There are no copays in HSA plans, by law, however the US government has allowed for excess use cost which is usually associated with visits to the hospital emergency room without being admitted and bariatric surgeries.
* Preventative care is provided like on any medical health plan sold in the US.
TIP: For 2010, if you have self-only HDHP coverage, you can contribute up to $3,050. If you have family HDHP coverage you can contribute up to $6,150.
Tip: If you no longer qualify to make contributions, you can still use the money in your HSA bank account for qualified medical expenses.
Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care information with him at all times when he travels (check out his diving travels at www.douggulleson.com). Keep our blog close by you, www.gntravelinsurance.com , for continual updates on the changes with the US health care system.