Archive for April, 2011

Great Tax Savings – Health Savings Accounts

// April 4th, 2011 // Comments Off on Great Tax Savings – Health Savings Accounts // General Benefits Information

Health Savings Accounts may be the last great tax savings vehicle for individuals, families and employers. In this article hopefully, we will explain why Health Savings Accounts can be of benefit, the history behind them and some of the rules and regulations surrounding implementation of a Health Savings Account.

The History:

Health Savings accounts were created to be used in conjunction with consumer driven health plans (CDHC). These plans were developed by the insurance carriers to provide the consumer with a better way to manage how, when, where, with whom and how much they spend their health care dollars.

The Benefits:

You can claim a tax deduction for contributions you, or someone other than your employer mad to your Health Savings Account , even if you do not itemize your deductions on Form 140
Contributions to your Health Savings Account made by your employer may be excluded from your gross income.
The contributions remain in your account from year to year until you use them and usually in an interest bearing account.
The interest on the assets in your account are tax free
Distributions will be tax free if they are used to pay for a qualified medical expense
Health Savings Accounts are portable so the money goes with you wherever you go

How Do you Qualify for Health Savings Account?
You must have a High Deductible Health plan $1200 for individual, $2400 for family. There are limits on maximum annual deductible and other out of pocket expenses as well. $5950 for individual and $11,900 for family
You have no other health insurance coverage except for those ancillary insurance products such as accident, disability, dental, vision, long term care, a plan that pays for a specific disease (such as Cancer) or illness, or a plan that has a fixed amount per day or period of hospitalization.
You cannot be enrolled in Medicare
You cannot be claimed as a dependent on someone else’ tax return. Note per the IRS each spouse who is an eligible individual who wants a Health Savings Account must open a separate Health Savings account, you cannot have a joint Health Savings account even though you have joint insurance coverage.

Having set out the most significant requirements of eligibility put forth in IRS publications, let’s turn to what a Consumer Driven Health Plan is and why having one is a good idea for most people. Again, a consumer driven health care plan comes from the need and desire of people today to control how, how much, when and with whom health care dollars are spent. Some of the immediate goals of a person seeking to utilize a consumer driven health plan include but are not limited to:
Participants are actively involved in making decisions about their own health
Participants will seek out and use non-traditional sources for health care, including online resources, wellness incentives, phone-a-nurse service, etc.
Participants will look at health care and saving for health care expenses as a long term venture rather than just another visit to the doctor’s office, and more

High Deductible Health Plans have a “safe harbor” for preventative care. What this means to the consumer is that there is no cost for specific preventative measures. This coverage is provided before any deductibles have been met. Under some plans there may still be a co pay required but that is based solely on the benefits of the individual plan one purchases. Some of the more common preventative care included in this “safe harbor” are:
Annual physicals
Screening services (such as mammograms, Pap Smears, PSA tests)
Routine pre-natal and well child care
Child and adult immunizations
Tobacco cessation programs
Obesity/weight loss programs.

The individual plans should be scrutinized to determine what is covered. Preventative care will not include services to treat an existing illness, injury or condition. Some drugs can be considered preventative if , for example, they are taken by a person who has developed risk factors for a disease that has not yet manifested itself or to prevent the recurrence of a disease. Common examples of this would be cholesterol drugs to prevent heart attack or heart disease and ACE inhibitors to prevent a second heart attack. Again, care must be given to understand the plan one is signing up for to ensure the proper coverages.
Simply speaking the “average” adult only goes to the doctor for an annual physical and is carrying health insurance for the ”catastrophic” event. What better way to get a tax deduction, have your annual physical paid for and save money to cover your deductible in the event of that catastrophic event…?
HEALTH SAVINGS ACCOUNT coupled with High Deductible Health Plan.
The literature on the whys, how’s, etc is almost limitless. Health Savings Accounts with High deductible plans may not be the answer for everyone. It is recommended that you speak with your insurance advisor to work on the best plan to suit your needs. I work diligently to achieve these goals with my clients.

Benefitsmart, LLC, is now located right here in Weatherford, Texas, and would love to help you with any questions about Heath Savings accounts, please contact us to found out more.

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