By Ron Dorner
Health costs continue to rise at unreal rates. Most of us will work for more than one employer during our working years. Insurance costs are high because of misuse of the system. Most health insurance plans take decision-making away from the patient and give it to a third party.
Now is the time to take charge of your own health care. The federal government has given us all the opportunity to make choices. If there ever was a time to re-evaluate the health coverage for your family; now is the time.
Your policy can be independent of where you work. Job changes need not be a concern. Health coverage can be more reasonable.
The federal government has passed legislation that allows a new way of obtaining health insurance. It is called the High Deductible Health Plan (HDHP) /Health Savings Account (HSA) approach. To qualify for this plan you must be under age 65, not be claimed as a dependent on someone else’s tax return and not have coverage with another health plan.
A HDHP/HSA plan gives you control of how you spend some of your health care “premiums”. You must first obtain a federally-approved high-deductible insurance plan. You place into your HSA an amount equivalent to your policy deductible each year. Your contributions to the HSA are not included in your taxable income.
The amount in the HSA can be used for medical deductibles, vision and dental needs, glasses, prescriptions, alternative therapies, over-the-counter drugs and long-term care insurance. You will notice that some of these items are not usually tax deductible.
Any amount left over at the end of the year rolls over for future needs. All interest and excesses accumulate tax-free and at age 65 are treated like an IRA. If you are over age 55 you can make additional contributions to your HSA.
The high deductible policy must have at least a $1,000 deductible if you are single and $2,000 deductible for a family. The deductible can be as large as $2,600 (single) and $5,150 (family). These amounts are for 2006.
The total cost of health insurance could be less using this approach. Your high deductible policy will cost less because the company does not have to cover all those “nuisance” expenses. If you are frugal and health conscious you will pay out little from your HSA. You do not have to use the HSA funds to pay for medical expenses, they can be paid from other sources which allows you to accumulate even more in your HSA. Your HSA account can grow tax free into a nice retirement nest egg.
Your HSA need not be with the same company as your high deductible health insurance. Your HSA should have options available to invest in funds, stocks and bonds as you accumulate larger amounts.
Presently, there are more and more companies beginning to offer qualified policies and health savings accounts. If you are looking for health insurance that is portable, lower cost, and allows you to accumulate excess funds tax-free for a future health need or retirement, this new approach might be for you.
This is one of the largest shifts in personal economics we have seen in years. Do not hesitate to explore this opportunity. “There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up.” Proverbs 21:20
Ron Dorner has worked in Grace Brethren financial and estate planning for more than 17 years. For more information, or to schedule a Financial Planning Seminar in your church, e-mail finplan1@juno.com.
