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Tax Qualified Health Insurance Can Save You Money & Boost Your Retirement

One of the most popular (and lowest priced) types of Tax Qualified health insurance plans is the HSA qualified HDHP. HSA stands for "Health Savings Account", more commonly referred to as a "Medical IRA". HDHP stands for High Deductible Health Plan. HSA qualified HDHP's are a unique way to attractively manage your health insurance costs. For a brief introduction to Consumer Driven Tax Qualified health insurance please watch the following short but informative videos:

Contrary to popular belief you can still purchase an HSA qualified HDHP in 2014 and beyond. The "Bronze" plan under the PPACA (Obamacare) is an HSA qualified HDHP. In fact, there are many more benefits included with HSA qualified HDHPs than there were before Obamacare. This is so because all health insurance plans sold after January 1, 2014 must now include 63 preventive care test and exams with no deductible or co pay required. To view all of those test and exams click the banner below:

HSAs were originally named MSAs or Medical Savings Accounts designed by Mr. Terry Holman and promoted in Congress by Representative Bill Archer (R) of  Texas.  Terry's idea was to  find a way to reduce the cost of health insurance for the self employed without sacrificing quality coverage for a  major medical illness. Terry's brilliant idea was to eliminate the parts of a Traditional Health Insurance Plan that cost the consumer the most money. These expensive benefits include outpatient doctor "co pays" and outpatient prescription "co pays". Terry approached Congress with a proposal that stated in essence that if you remove those two features and keep the major medical coverage in place you could conceivably cut the cost of your health insurance premium considerably. He was absolutely right.

To illustrate how Terry's idea works in the real world. We will use a real world example. Tony & his wife are currently paying $1,134 a month for Cobra continuation coverage from a previous group plan. In comparison, the monthly premium for an HSA qualified HDHP (High Deductible Health Plan) which covers each insured family member up to and unlimited lifetime coverage amount is less than half of the premium that they are paying now ($550.64 monthly to be exact). This is a yearly savings of $7,000.32 or a monthly savings of $583.36. This is a significant difference. However the insured has to give up all of their outpatient co pays. Is this worth it? This was the question posed to Terry when he approached Congress back in the late 1990's. His answer to Congress was simply "make it worth it".

In other words, he asked Congress to make it worth it to the insured. Allowing the policy holder to save that extra money each year on a tax deferred basis makes it worth it. For the year 2015 the maximum contribution a couple or a family can make to their HSA (Health Saving Account) is $6,650. In addition, any family member who is 55 years of age or older can deposit an additional $1,000 annually (more on the age 55 allowance below). This means that the total amount that Tony and his wife can deposit per calendar year is $8,550 since he and his wife are both over the age of 55. The best part is they can take a 100% tax deduction for that contribution similar to an IRA.

Furthermore, if you do incur medical expenses that arise throughout the course of the year that are subject to the deductible (i.e. prescriptions, doctor's office visit charges, etc.) the IRS will allow you to pull out that money that you put into your tax deductible, tax deferred Health Savings Account to pay for those expenses. When you use their HSA money to pay for those expenses the IRS will allow you to write those expenses off at a 100% tax deduction. The list that the IRS allows you to spend your HSA money on is very liberal and includes things like dental, orthodontics, eyeglasses, radiokeratonomy (Lasik corrective eye surgery), alternative medicines etc. Click here to see the entire list of allowable expenses.

Arguably the most attractive tax advantage to owning an HSA is the fact that the money left over in the HSA account that was not used on medical expenses at the end of the year is "rolled over" into the next year and awarded a higher rate of tax deferred interest. The insured also has the option to roll those unused funds into no load mutual funds, thereby building an extra tax deferred retirement account with money they would have normally given to the insurance company each and every year whether or not they had any claims that year.

It should also be noted that not having a "co pay" with your plan does not mean that your outpatient doctor visits and outpatient prescription drugs will not be a covered expense. With most HSA qualified HDHP's these charges are a fully covered expense just as they would be with a Traditional Health Insurance Plan. The only difference is these charges will be subject to the health plan deductible.

Being "subject to deductible" does not mean that you will pay full price for these charges either. If you stay within the vast PPO network that most reputable carriers offer (www.phcs.com) your outpatient doctor office visit charges will be discounted by as much as 40%. Your prescriptions will also be discounted significantly as well by staying within the Rx prescription network.

Let's break that down in plain English. Let's say your doctor's office charges you $100 for a "sick visit". If you use a PPO provider those office charges will be "re-priced" down to roughly $60. Now compare that to a Traditional plan which provides you with a $30 "co pay". The difference to you is $30 out of pocket for that doctor's office visit. But is that all you are really saving? Not if you add in the monthly premium savings between the two plans. The typical monthly premium savings between a Traditional plan and an HSA qualified plan for a family is $200 monthly. This equates to an annual savings of $2,400.

Now let's take that $2,400 annual savings and deposit it into a tax deferred, tax deductible interest bearing account. Let's go a step further and imagine you find an HSA account that bears you NO interest AT ALL (which is not that hard to imagine in this economy). You're still saving $2,400 annually and you're deducting that amount from your adjusted gross income. This means less reportable income which means less taxes.

Now lets imagine you have no major medical claims in year two and you deposit the same amount. Now in year three you have a worse case scenario occur. Now you have $4,800 to help pay your plan deductible. Not to mention any additional funds you deposit into your Health Savings Account during that same time frame.

In summary, the advantages to owning a Health Savings Account are as follows:

1.) Unlike any other IRA, a Medical IRA (HSA) allows you to withdraw funds at any time with no penalty for "qualified medical expenses". Most importantly, when you withdraw your HSA funds to pay for any of the qualified medical expenses on that list, those expenses themselves become 100% tax deductible.

2.) Here's the key point though. If you have just ONE year without any significant claims and you even partially fund your Medical IRA, then if the worse case scenario occurs, you will have those funds available and be able to withdraw them with no penalty and use that money to help pay your calendar year health plan deductible. In year 2 (with no major claims) you are that far ahead of the risk management game. In fact, no other kind of Health Insurance actually allows you to lower your risk the longer you own it by hedging money you would have otherwise given an insurance company for a Traditional plan.

I say this because, there is no other kind of IRA that you can withdraw from at any time with no penalties and then use those withdrawals to pay for medical costs and receive a 100% tax deduction for those expenditures. In fact, the longer you own an HSA qualified HDHP, the lower your risk becomes since the more years that pass, the larger your balance in your HSA account becomes. This is so because each year your remaining balance rolls over and continues to earn tax deferred interest.

The longer you look at HSA qualified HDHPs the more sense they make. This is why they have caught on like wildfire and will continue to do so. The only inhibitor to the spread of HSA's is lack of education (as is the case with any other financial vehicle) The "Whole Foods" supermarket chain chose HSA qualified Health Insurance. It worked so well for them that they were recently featured on the ABC 20/20 episode entitled "Sick In America" with John Stossel:





Now you can help fund your HSA account by purchasing every day items! www.myhsarewards.com

To learn more about HSAs and the recent federal legislation that has made them even more attractive to people over the age of 55 click here to read all about them on the Federal Government's HSA educational web site. To learn more about HSAs in a power point presentation format please click here: http://www.hsacenter.com/ and click on the informative videos on the right.

If you are an employer and are considering HSA qualified plans for your employees consider this. An individual's employer can make contributions that are not taxed to either the employer or the employee. The combined income and payroll tax deductibility leads to discounts for health insurance of over 40% in some cases relative to other forms of insurance. For more details for the employer http://www.treas.gov/offices/public-affairs/hsa/faq_employer-participation.shtml

For the best interest rates you will find just about anywhere on a Health Savings Account CLICK HERE

Please
“Contact Us” with questions about HSA qualified HDHPs. If you have a C.P.A. or tax advisor please feel free to ask he or she about the advantages of owning an HSA as well.


About Assurant Short Term

Assurant, a Fortune 500 company and a member of the S&P 500, is traded on the New York Stock Exchange under the symbol AIZ. Assurant has approximately $29 billion in assets and $8 billion in annual revenue. Assurant has approximately 14,500 employees worldwide and is headquartered in New York's financial district. Assurant Health’s products are underwritten and issued by John Alden Life Insurance Company, Union Security Insurance Company and Time Insurance Company, which has been in business since 1892. Headquartered in Milwaukee, Wisconsin, Assurant Health employs approximately 2,000 employees. Assurant Health is rating A-(Excellent) by A.M. Best ratings.

To get quotes & apply online for Assurant Health's temporary health insurance click their logo below:

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You will owe a non compliance 'fine' to the IRS for buying short term insurance

You must also understand that you will be subject to a 1% of your MAGI 'fine' (TAX) for purchasing temporary health insurance since these plans do not include the "essential health benefits" under Obamacare such as Maternity for 62 year old women and single men, drug rehab coverage for those who do not own a crack pipe and pediatric dental for those without children. As such temporary policies are not considered 'qualified health plans'. Rest assured though, if you are self employed and do not over pay your taxes you will never pay that 'fine' (TAX) for the only recourse the IRS has to collect that fine is to hold your tax refund. All criminal penalties for non compliance were removed from the health care law prior to passage.

If your pre-2014 individual plan is renewing in 2014 that is a 'qualifying event' with Assurant.

Assurant Health announced yesterday that they are now honoring this regulation that states quite clearly that if you have an 'old' policy from the 'old' market and that plan renews you can purchase a 2014 'qualified' Bronze, Silver, Gold or Platinum health insurance plan on or off the exchange on a guaranteed issue basis between open enrollment periods. This is VERY good news for anyone who has an 'old policy' that renews this year and is facing a large premium increase and/or has exclusion riders on their existing policy and wishes to purchase a new 2014 plan without exclusion riders. 

At this juncture, Assurant Health is the only carrier that we are aware of that is honoring the aforementioned regulation and as such they have a corner on the market until the next open enrollment period begins on November 15, 2014 for coverage effective dates beginning no sooner than January 1, 2014. As I stated in this recent article, many health insurance carriers like Aetna and Humana are not even offering short term (temporary) health insurance products until the next open enrollment period and the few carriers who are offer them with dangerously low lifetime maximum coverage amounts. It must also be reiterated that if you purchase short term coverage these policies do not cover preexisting conditions and you will be subject to a 1% of your MAGI 'fine' (TAX) from the IRS if you purchase short term coverage because those plans are not considered 'qualified health plans' under CMS and HHS regulations.

If your old health insurance plan is renewing in 2014 and you wish to get quotes from Assurant Health for a qualified replacement plan click their logo below. There is a now a new section on the application where you will need to either upload a copy of your existing health insurance ID card proving that you have a policy from the old market or you can fax a copy of your old ID card to the fax number provided on the application. This is necessary to prove that you qualify for a special enrollment period as an applicant with a qualifying event. 

Most other insurers will not offer health insurance again until November 15, 2014

The last date to purchase individual, renewable health insurance during the first open enrollment period in 2014 was March 31st. If you missed the first open enrollment period and do not qualify for a special enrollment period, you can still stay insured between open enrollment periods by purchasing non renewable, short-term health insurance from Blue Cross Blue Shield of Illinois. BCBSIL offers affordable, quality short-term health insurance plans that can keep you covered until the next open enrollment period which begins on November 15, 2014 with effective dates starting January 1, 2015. Whether you have experienced a 'qualifying life event' and qualify for a 'special enrollment period, or you wish to shop for temporary health insurance click the logo below to compare BCBSIL plans and find the right health insurance plan for you and your family.

United HealthOne is no longer offering health insurance products of any kind in Illinois as of January 1, 2014. They do offer fixed indemnity plans, these are not health insurance products and we do not recommend purchasing fixed indemnity plans. The risk exposure is too great. United HealthOne is offering temporary health insurance outside of Illinois between open enrollment periods in 2014. Click the United HealthOne logo to apply for health insurance on or off the health insurance exchange. These plans will be available for sale again on November 15, 2014 with effective dates beginning January 1, 2015.

Depending on what your 2014 total household MAGI - Modified Adjusted Gross Income - will be, you may qualify for a significant federal subsidy under the new health care law to lower your premiums. The next date to find out is November 15, 2014 when Medal renewable health insurance plans are available again for sale during the next open enrollment period.

If your 2014 total household MAGI - Modified Adjust Gross Income - will be lower than:

$46,680 for an individual
$62,920 for a couple
$79,160
for a family of three
$95,400 for a family of four
$111,640 for a family of five
$127,880 for a family of six
$144,120 for a family of seven
$160,360 for a family of eight

you will be better off financially by buying a new health insurance plan inside the health insurance exchange implemented by the PPACA - "Patient Protection & Affordable Care Act" - otherwise known as "Obamacare". By doing so, you
will qualify for an APTX - Advance Premium Tax Credit (federal subsidy) - to reduce the cost of either the Bronze, Silver, Gold or Platinum health insurance plans offered inside the health insurance exchange.

Click the Humana logo below to apply for coverage with Humana inside or outside of the new health insurance exchange. These plans will be available for sale again on November 15, 2014 with effective dates beginning January 1, 2015. Humana is not offering temporary health insurance coverage between open enrollment periods in 2014.

Click the Aetna logo below to apply for coverage with Aetna inside or outside of the new health insurance exchange. These plans will be available for sale again on November 15, 2014 with effective dates beginning January 1, 2015. Aetna is not offering Temporary health insurance between open enrollment periods in 2014.
 

 

Since accidental injuries are far more likely to occur than major medical illnesses (most especially when you have active children) many families are choosing to purchase supplemental accident expense plans. These plans pay you a cash benefit of $2,500, $5,000, $7,500 or $10,000 when an accidental injury occurs. This cash can then be used to pay your health insurance plan deductible. Supplemental Accident Expense plans are also a great way to save money because you can choose a higher deductible than you would normally choose knowing that you will not have to pay that deductible if an accidental injury occurs to any member of your family. Click below for more information:


 

Supplemental Accident Expense plans can also be coupled with Critical Illness plans. In fact, Supplemental Accident Expense plans are often cheaper when coupled with Critical Illness plans. Why consider Critical Illness coverage?

Approximately 1.2 MILLION people suffer heart attacks each year. Approximately 780,000 people suffer strokes each year. More than 1.4 MILLION new cancer cases were estimated for diagnosis in 2007 alone. Between 1994 and 2004, the death rate declined approximately 31% for heart attacks and almost 24% for strokes. (Source: American Heart Association, Heart and Stroke Statistical Update, 2008.) The possibility of surviving a Critical Illness before age 65 is almost twice as great as dying. (Source: National Center for Health Statistics.)

WOULDN’T A CHECK BE BETTER THAN A GET WELL CARD? Critical Illness benefits are paid directly to you. You choose how to spend the benefit at a time when you and your family may need extra cash the most. For example:

  • Home Health Care
  • Cost of Caregivers
  • Lost Income of Self or Spouse
  • Daily Living Expenses
  • Co Pays, Deductibles & Co-Insurance
  • Non -Covered "Experimental Treatments
  • Housekeeping or Child Care Expense
  • Maintenance of Your Family's Quality of Life

Colorado Bankers Life insurance company has partnered with Dearborn National to offer a Critical Illness plan that is extremely well priced. Adding this product to any health insurance plan would alleviate the worry of paying your health plan deductible if you or a family member were to develop a critical illnesses such as life threatening Cancer, Stroke, or Heart Attack.  For more information about this unique and affordable plan click the brochure below. If you have questions please contact us.



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