Monthly Archives: June 2009

Use it or Lose it? Not with HSAs

Heath savings accounts (HSAs) and flexible spending accounts (FSAs) both provide tax-free ways to pay for all your medically eligible expenses. But they are often unfairly lumped together in people’s minds when it comes to the perceived drawbacks associated with the accounts.

It’s true that with an FSA, if you can’t use up invested money by the end of the year, you lose it. So, people scramble around, buying eyeglasses they don’t really need and finding any way possible to exhaust their account … or they’re left in the lurch when the account runs dry early. That experience leaves a bad impression on many people, which creates resistance around the idea of putting in place the HSA associated with high-deductible plans.

But HSAs are getting a bad rap.

HSAs are truly flexible, portable and in your name (not the employer’s). You have the control over when you put money in and when you take money out. You have control over the amount of those funds. You don’t have to take an educated guess at how much you’ll spend because the money isn’t vanishing into thin air at midnight on Dec. 31.

Not only is an HSA a retirement account, but whatever you don’t spend, you keep. The amount left over just rolls over into next year and continues to accrue. If you leave your employer, you take that account with you. It’s established and opened in your personal name, so the employer has nothing to do with it and the money doesn’t roll back to the employer. So, with an HSA you’re getting a medical IRA. You can actually make money on it if you’re a savvy investor and take that money wherever you go. It is a legitimate addition to your financial portfolio.

Used wisely, an HSA is an investment tool that will save you money and continue to grow. If you have big expenses later in life (braces for your kids, a big and unexpected medical expense, etc.), you have money saved up to deal with that.

This All Sounds Good … How Do I Get Started?

Starting an HSA is a pretty simple process-especially if you have your health insurance broker walk you through it. HSAs can be opened through essentially any bank or HSA administrator. You have to have a high-deductible, HSA-compatible health plan to open and contribute to one. What’s important to know is that if you later switch health plans, you won’t lose your HSA; you just can’t continue to contribute to it.

You can put in whatever amount of money you want at the outset. In fact, you can either prefund it or wait till you have a medically eligible expense. That means you can put in money ahead of time or pay out of pocket, fund the account after the fact and reimburse yourself out of the HSA account.

What’s Considered a ‘Medically Eligible’ Expense?

The book detailing what IS covered is an inch thick. You’ll only run into trouble with “elective” medical expenses such as cosmetic surgery, so no Botox injections or augmentation. Complementary medicine such as chiropractic care and acupuncture is eligible if you can validate that it’s needed. You also cannot pay medical premiums or insurance premiums with the funds. Otherwise, it covers most things that come up. Ask your broker if you’re not sure about a specific medical expense.

It’s Not Too Good To Be True

People often figure there must be “a catch” with HSAs since FSAs, while still quite valuable, are full of rules an exceptions. The reality is that HSAs are highly flexible, portable, carry over into the next calendar year and can grow over time. Talk to your broker or contact us with any questions you have or to get started.

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Answering Your Health Care Reform & Benefits Questions

While negotiations in Congress are certainly still ongoing, we thought it would be a good time to talk about the most recent health care reform proposals—and through doing so answer some frequently asked questions.

Let’s start by simply stating the obvious: We have a broken system. There are too many uninsured people in this country, too many people struggle to obtain adequate coverage and the process is so complicated that without a good broker it’s an immense challenge to secure the very best, most affordable plan for you and your family.

The solution with the most steam is mandated health coverage for all Americans (or more realistically 95 percent of all Americans). The outline recently released by Sen. Ted Kennedy (D-Mass.), as The Washington Post puts it, calls for “sweeping health-care legislation that would require every American to have insurance and would mandate that employers contribute to workers’ coverage.”

Democrats are not alone. This week, Sen. Judd Gregg (R-N.H.) reportedly broke ranks with his Senate colleagues with a proposal requiring that individuals own health insurance.

And while coverage for all Americans is certainly appealing, it’s the second part about mandated contributions that has many groups—from insurers to doctors to employers—concerned and keeping a watchful eye. What would it really mean for employers to contribute to workers’ coverage … and how would it work? Would this guaranteed health care be guaranteed by the government? Guaranteed through a person’s employer? Through a public health option?

There are a lot of uninsured individuals who don’t have coverage through their employer, so how do you make similar plans available to all individuals and families—especially those who don’t have health coverage through their employer?

These are all questions to which we have some clues, but it’s still too early to tell. What is clear is that the Obama administration is deeply committed to health care reform this year. In that same WaPo article the president is quoted as telling members of Organizing for America, “If we don’t get it done this year, we’re not going to get it done.”

That kind of urgency necessarily leads to a discussion of cost. Analyses of a recent Democratic House proposal estimated a need to cut 2 trillion dollars over the next 10 years to pay for a dramatic overhaul of the health care system. President Obama this week, according to the reporting of Politico.com, “summoned Democrats from two key Senate committees to the White House on Tuesday to make clear that the bill must control health costs and not add to the deficit.”

The goal is affordable health care plans for everyone, but where does that money come from and who’s going to pay for it?  That’s the big challenge right now. That’s what everyone on the Hill is trying to figure out, while those groups who would suffer under changes are mounting opposition.

I’m not here to characterize the current proposals as good or bad for Americans. In fact, there’s not enough concrete information at this stage to even make that judgment. My concern as a father, a broker and an American citizen is the potential for rushing into a new program too quickly and then have “buyer’s remorse.”

If this is done too quickly we could look back and realize our options or the quality of benefits has been compromised. For example, no legislation should prevent an American from being able to choose his or her own doctor. No legislation should effectively “penalize” those who have taken the steps to secure coverage by forcing them into inferior changes. There’s no evidence that a current proposal would create such limitations, but that’s just the type of unintended consequences that can occur from a rush to action. I just hope that through deliberation, we can put the right plan in place. At Stephenson Welsh, we strongly believe in continuing a private health care system that supports the freedom to choose your own doctors—one in which those who need coverage most are not denied the coverage they need.

It’s a good thing that reforms are being discussed. It’s just essential that we go about this in a thorough, deliberative way.

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