Sunday, August 19, 2007

Consumer choice plans - high value for employers and individuals

One of the most effective consumer choice plans is a Health Savings Account. (HSA) It's a cost containing approach to medical insurance and is often perceived to have a high value by those enrolled.

One of the attractive features, not available in other group or individual plans but provided in some HSAs, is 100% coverage for a broad variety of Preventive care such as:
• Annual preventive care office visits
• Screening tests including coronary artery disease – colorectal cancer prostate cancer – diabetes – osteoporosis – mammograms – pap test
• Various immunizations including a flu shot

The best way to think about the first part of a HSA account is as financial protection for routine medical expenses. A special savings account with an easy to use debt card is used to pay day-to-day medical treatment expenses. The account can also be accessed by writing a check.

Another good feature of HSAs is they get people involved in questioning the need for and cost of medical treatment services. Then too, since most people have limited expenses each year the HSA is a higher value approach to medical insurance. In a short time the savings part of the HSA will build up and provide 100% coverage.

Note: IRS regulations tell us contributions can be made regularly or periodically and are limited during 2007 to not more than $2,850 for Single and $5,650 for Family coverage. Individuals 55 or older can contribute an extra $800. Funds grow tax-free, and come out tax free when used for medical expenses. Amounts remaining at the end of the calendar year stay in the person’s account. Contributions made by payroll deduction are tax-free and those made periodically throughout the year become an above the line deduction, at tax time, and are also tax-free.

Whether through an employer or set up by an individual each person “owns” their own special account. It can be established at various banks or what are called HSA Trustees.

Funds in the account can be used to pay medical treatment expenses before the HSA plan’s 100% major cost insurance coverage begins. For example, going to the doctor when sick and getting medication for two weeks. All covered expenses, except the defined preventive care, such as a primary care or specialist office visit; diagnostic work; medication; outpatient surgery and procedures; or hospitalization are combined and applied toward the plan’s major cost coverage annual deductible. Other medical related expenses listed in IRS Section 213(d), not covered under the insurance plan, such as eyeglasses and dental can also be paid from
this account.

The second part of the HSA is the major cost insurance. It often has a premium much lower than co-pay based plans so the savings can be contributed to the special medical savings account. It is your financial protection for situations when there are significant medical expenses. A common HSA plan deductible is $2,000 for single and $4,000 for dependent coverage. In one sense, HSA’s are a return to the real purpose of insurance – coverage for unexpected medical expenses.

IRS regulations require the major cost insurance to meet certain coverage requirements to be a qualified HSA High Deductible Health Plan. (HDHP) An individual must be enrolled in a qualified HDHP before they can open the special savings account.