Alternative Health Idea:

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Health S= avings Accounts (“HSA’s”)

The rising cost of he= alth care has become a major topic of discussion in this country. Health care premiums have risen ne= arly 50% over the past 4 years! The increase in premiums has been a tremendous burden to companies throughout t= he nation. As such, many compani= es are passing along these increases to their employees. Employees who simply want to provi= de health care for their families are being squeezed by health care costs that= are seemingly out of their control. So how can an individual stabilize health care premiums and take control of th= eir own health care costs? Since = health care is very individual, there are a million opinions on the proper directi= on of health care but perhaps the answer is simpler than we think it is. With that, we offer Health Savings Accounts; an alternative that combines traditional health insurance with consumer choice and the concepts of a 401(k) plan.

Years ago, before hea= lth insurance was the multi-gozillion dollar industry it is today, people went = to a physician when they got sick and paid the physician a rate that the patient= and physician agreed upon. If cash wasn’t available, the barter system prevailed. Sometimes, just like today, physic= ians provided their services at no charge. The system was not perfect and some people died because they could n= ot afford health care. With the = onset of Medicare, Medicaid, and health insurance, the billing decisions were tak= en from both the physician and the patient.&n= bsp; Patients now give their insurance card to a physician and voila, the procedure is paid for without either the patient or the physician knowing w= hat the charge was. Can you name = any other sales transaction where a service is performed without any knowledge = of the cost involved? Would you = buy a television without first examining the price? Simply stated, there is no consume= rism involved in health insurance and “the system” allows for insura= nce companies (and physicians) to take advantage of the patient.

The health insurance = industry has become the controlling entity in health care. They have taken the consumer out o= f the patient, the physician, in some cases, out of the medical decision, and a 2= 0% administration fee out of your health insurance premium.&= nbsp; Health insurance itself, is a prime component in the rise of health = care costs.

Introducing the Health Savings Account…

Health Savings Accoun= ts were developed as a way to reintroduce personal responsibility back into healthcare. Health Savings Ac= counts provide patients with the ability to save a portion of their premium for current and future health care expenditures while still protecting the participants and their families against a catastrophic medical event.<= /o:p>

Here’s how they work:

Each month, a premium= is paid for a high deductible insurance policy.&nb= sp; The maximum current deductible allowed by law is $2,650 for an individual and $5,250 for couples or families. (The premium is much lower than yo= ur current insurance because the deductible is much higher.) In addition to the low premium, ho= wever, a Health Savings Account contribution of up to $217 for an individual or $4= 33 for a couple or family can also be deducted / contributed. Combined with the tax free benefit= s of the HSA, both deductions will still be lower than your former insurance premium.

(Sample Medical Plan Premiums comparing Low Ded. Plan vs. Hi Ded. P= lan w/ HSA)

Monthly P= remiums[1]<= /a>	Individua= l	Couple	Family
PPO Low Deductible	$435	$756	$1,180
	&nbs= p;	&nbs= p;	&nbs= p;
PPO High Deductible	$262	$451	$715
HSA Contribution	$217	$433	$433
Tax svgs on HSA (33% of HSA)	($72)<= o:p>	($144)=	($144)=
PPO Hi Plan w/ HSA Total	$407	$740	$1,004

Health Sa= vings Account	Individua= l	Couple	Family
Annual Contributions	$2600	$5200	$5200
Annual Claims (est.)	$1000<= o:p>	$1500<= o:p>	$2500<= o:p>
HSA Surplus	$1600	$3700	$2700

The HSA account is us= ed to pay for health care costs that are applied to your deductible, applied as a co-payment, or medical expenses not covered by the underlying health care p= lan. (A list of permissible medical exp= enses is included.) As in the examp= le above, if your medical claims for the year are under your HSA contributions= , a surplus that can be used for future medical claims will result. This HSA surplus is tax free as lo= ng as it is used for medical claims. It is tax deferred if used for retirement after age 65. With continued participation, the = HSA Account will continue to grow and provide a reserve for future medical clai= ms.

Procedurally, the acc= ount is simple to use. The HSA is aki= n to a checking account with a credit card. Any medical claims are paid directly by the individual via check or credit card. Of course, this = also means that the individual is responsible for the checks they write and can incur overdraft charges. All charges must also qualify as medical expenses (see IRS Publication 502).&nbs= p; As an example, an individual who has their teeth cleaned for $75 can choose two different methods:

(1) Pay the claim directly to the dentist using their HSA credit card. Save the receipt in case they have= total calendar year claims over the deductible amount.

(2) &= nbsp; Present your insurance card to the dentist and wait for the Explanation of Benefits (EOB) report showing the payment you are responsible for. Write a check to the dentist for t= hat amount.

Like a 401(k) plan, t= he funds within the HSA can be invested in a wide assortment of mutual funds so additional earnings are possible. A claim-free HSA (based on Family contributions) held for 30 years and earnin= g 8% per year will yield over $525,000 in tax deferred benefits (tax free if used for medical claims). Even an = HSA account with moderate claims can be expected to generate a surplus of over $23,000 after ten years.

As you can see from t= he example, saving for future medical claims through an HSA provides the follo= wing advantages over your standard low deductible insurance policy.

Allows individuals to keep a portion of the traditional premium.
Encourages participants to weigh health care options
Stabilizes long term medical premiums<= /o:p>
Permits additional earnings through investm= ent
Benefits are tax free or, if used as retire= ment distribution after age 65, tax deferred

While the benefits of= an HSA versus a standard insurance policy are compelling, there are risks for unhealthy individuals who meet or exceed their deductible every year. Based on standard plans with a low deductible of $500 per year, an unhealthy individual who joins an HSA plan = will have greater out of pocket expenses using the HSA. As an example, look at the plan comparisons of an individual who meets or exceeds their deductible.

90% copay= plan	Individua= l	Family
Standard<= /p>	HSA	Standard<= /p>	HSA
Ann’l Deductible	$500	$2600	$1000	$5200
Ann’l Premiums (est.)	$4800	$3000	$6000	$5600
Copays @ 10%	$ 600	$ 600	$1100<= o:p>	$1100<= o:p>
Total Out of Pocket	$5900	$5200	$8100	$11,900

For those with famili= es, the risks of the HSA plan occur during a claim year where claims exceed the amo= unt saved in the HSA plan. If you= have low claims during the first two years in the HSA, your future risks are dra= matically reduced because you will always have savings to meet any potential claim. The longer you can delay usage of = the HSA fund, the more savings you accumulate.

If the HSA is sponsor= ed by a group, the HSA account does not disappear should an individual leave the group. The assets continue to= earn and can be used to pay COBRA premiums in addition to other medical expenses. The surplus can als= o be used to pay for long term care insurance.&= nbsp; At all times, the assets are the responsibility of the individual and cannot be taken from them except by court order.

Because each individu= al saves what they do not use, HSA Health Insurance Accounts provide each individual with the responsibility to evaluate every medical event. Patients may choose to only underg= o one test instead of three tests. Patients can compare the cost of major procedures between two hospit= als, or two specialists, before they choose. Health Savings Accounts introduce a= level of consumerism that traditional insurance does not. After all, this is your money. Shouldn’t you be concerned w= ith how it’s spent?

Younger individuals w= ho now disregard health insurance because they will “live forever”, can now utilize an HSA to generate tax free savings for later medical claims wh= ile still keeping catastrophic claim insurance.

An HSA Account provid= es greater long term benefits than traditional health insurance. In short, Health Savings Accounts provide individuals with more options than ever before.