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HEALTH PLANS: Promoting HSAs, by Ron Grenier

My commenter Ron deserves to have this post promoted from yesterday’s open thread. I oppose HSAs (and for that matter employment-based health insurance) as a policy because they are diametrically opposite to being the overall solution to universal health insurance, although I’m pretty much indifferent to whether we go with a tax-based single payer system or a strictly-regulated, compulsory, community-rated (non-underwritten) individual or group insurance system as the preferred outcome.  However, in real life we’re not getting to any of those politically any time soon, and as a solo operative with some of my own health problems it appears to me that a high deductible plan with an associated HSA is my best option.  So I’ve got one.

Ron explains in this example why that might be a good option for others….of course he doesn’t get to the community-rating/risk pool division issue, but that’s for another post.  Here’s Ron’s example:

A 30 Year Old Nurse Who Is A Single Mother
Pick Any Des Moines Hospital
Annual Income:  $50,000

A single parent mother making $50,000 a year is not rich. Many
employers will pay $400 a month for single coverage but the employee
must pay the additional $400 a month to add on their child, out of
their paycheck. Now the Mother has deductibles and co-pays on both her
and the child. Probably, knowing health insurance like I do, the
employee insurance has switched from co-pays on RX to co-insurance
($10 co-pay for Generics and $25 co-pay on Brand Name PLUS Co-Insurance
of 50% on Brand Name). Remember, some people when they get sick have RX
bills of $1,500 a month, ask Montel Williams. So if the mother or the
child got sick we have no idea what will be the out of pocket annual
expense for just RX. PLUS, If the mother got ovarian cancer and could
not work, a requirement for keeping her insurance, she would be put to
COBRA for insurance termination. Everybody, including people who sell
group insurance, say they can’t comprehend why that makes even the
slightest difference in the world. To me it’s simple, I would prefer a
contract that can’t be singled out for termination because of my
relationship to some employer.

The HSA Individual Option

The Mother pays the total family premium of $78.68 per month. Now
she saves $400 a month coming out of her paycheck that she can save or
spend on her baby. The $400 a month, that the employer is currently
spending on the Mother’s single insurance, is redirected to the bank,
in the Mother’s Tax Free Health Savings Account or HSA. The bank must
be FDIC insured, it’s the law.

Annual Deposit From Employer: $4,800
Maximum Annual Out-Of-Pocket (OOP) for the family:  $5,200

So the maximum annual OOP expense for this Mother and child is
capped at $400 a year and she is currently paying $400 a month, out of
her check, with no idea how much she could owe with co-pays and
co-insurances.

No FICA Tax on HSA deposits. The FICA tax is 15.3% and is split
between employer and employee. Now the hospital won’t pay 7.65% on
every dollar the mother earns. Employers love the HSA when they figure
it out.

The Hospital is depositing $4,800 a year in the mother’s HSA. She or
her employer may maximize her HSA annual deposit and save on taxes,
another $400 or a maximum of $5,200 may be deposited each year.

When the mother goes to the doctor everything is the same. The
doctor’s bill is $80 for example. The first thing is the charge is run
it through the PPO, exactly like they are doing it now, and the charge
is sent to the insurance company. The insurance company then sends an
Explanation Of Benefits (EOB) that says, your $80 charge has been
diminished to (example) $50. Do you want to pay the $50 with personal
funds or would you prefer to have it deducted from your HSA? Once
covered charges hit the deductible they are paid at 100%.

If the mother put the max in her HSA and didn’t use any HSA funds,
which some people do, at 65 years of age she would have over $400,000
at 4% interest. If she uses average $1,300 a year she will have over
$300,000. If she uses $2,600 a year she will have over $200,000 at 65
years of age. Also she has the freedom to place her HSA balance in
mutual funds for the possibility of a higher return.

I tell clients to max out their HSAs because 30 years of retirement
health care expenses will be expensive. HSA funds dedicated to
retirement health care expenses are never taxed and money that is never
taxed will last longer in retirement.

Next month retirement will be high lighted when the House throws it’s retirement bill on the table.

Who thinks this Mother should keep her present employer’s insurance at $400 a month out of her check?

Livongo’s Post Ad Banner 728*90

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KristyMaureen LaytonCalifornia Health InsuranceZippypoltroon Recent comment authors
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Kristy
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Kristy

Oh, and for the person who made the insulting comment about “people thinking about getting pregnant more” because they’ll have to come up with the “front-end money”, how insensitive is that? If you’re not already collecting SSI, you’d better be praying that every fertile woman is having 3 and 4 kids so that you will have SSI to collect. Without another baby boom, our SSI will be in the tanker too. Too bad you won’t be able to use your HSA account to live off of when your SSI runs out. You’re all a bunch of kooky crooks.

Kristy
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Kristy

What I think is most humorous is how badly you “professionals” communicate. I’ve seen better grammar on a third grade writing test. I won’t even comment on the spelling errors. Frankly, the real problem is the high cost of medical care. That paired with crooked professionals in both the medical and insurance agencies means the customer gets screwed. These PPOs and HSAs make the HMOs look like the good guys. Here’s my story: We moved to ND where HSA/PPO insurance is the only option for us. But to get maternity coverage, my monthly premium would go from $200 to $600.… Read more »

Maureen Layton
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Maureen Layton

My husband’s employer has just signed on with an HSA plan through the same insurance co. used previously. My ins. premium for the plan is $760 per mo. (That is an increase over last year’s premium in the PPO plan.) That $760 per mo. goes to the insurance company – not into an HSA account. We have a $2000 per person deductible. We will have to contribute $166.00 per mo. each into an HSA account in order to meet the deductible for this coming year. The employer is contributing nothing to the HSA accounts. We will have to pay all… Read more »

California Health Insurance
Guest

I think HSA’s are a great way to provide health insurance. Health insurance is a major aspect to many lives.

Ron Greiner
Guest

Zippy,
Tell them we need a raise too. These agents getting commission on $20,000 a year premiums, per family, are playing golf while agents with HSA insurance that costs only $78.68 a month educate America for free.

Zippy
Guest
Zippy

Ron comes off so sarcastic and obnoxious I wouldn’t buy anything from him. Someone should report this thread to the company he represents.

Ron Greiner
Guest

Sue,
Your association coverage costs with a family Out-Of-Pocket (OOP) of $8,000 plus 40% of all Rx cost is:
Des Moines’ 30 year old Single mother and child = $881/month
Calf. zip 90210 30/yr mother and child = $$1,280/month
90210 — 50/yr old couple plus 2 children = $4,625/month
90210 — 60/yr old couple = $5,004/mo or over $60,000/yr!!!!!
Don’t grow older on your plan Sue, you can’t afford it.
Heck, the example they use to determine rates is a 35/yr old couple with 2 children in Montana and the premium is over $20,000 a year.

Ron Greiner
Guest

Sue, I checked out your association insurance with no medical underwriting. Here is what I have found: The above 30 year old single mother’s premium would be $881 a month (This is insane). That is over 10 times the HSA premium. Plus, the family out of pocket is $8,000 a year (higher than HSA coverage) with Rx never paid more than 60%. The total lifetime max is only a million too. Under exclusions: any charges incurred as a result of any injury or sickness which arises out of or in the course of any occupation, except for owners, proprietors or… Read more »

Ron Greiner
Guest

Oh and Sue, //You never fully answered the questions I raised relative to tax treatment of the account in the event of loss of insurance due to premium non-payment// Yes I did fully answer that and so did rdg. Nothing happens to the account. People can continue to use their HSA balance and get interest on their balances. You can’t make deposits in an HSA if you don’t have qualifying HSA insurance. HSA balances are never taxed if the funds are used for qualifying medical expenses which include medical, vision and dental expenses. I have seen ads that say the… Read more »

Ron Greiner
Guest

Sue, Yup, when a hurricane takes out a business everybody loses their health insurance, it’s insane. You really said a mouthful. Of course to answer that many questions and correct all of the misconceptions would would take me too much time, so I won’t. I will check out your New York Life health insurance. CORRECTION SUE: You said//The issue I have with HSAs is that in addition to the high deductible, there can be pre-existing exclusion coverage// Would you prefer that HSA law said that if you have an exclusionary rider it is illegal for you to pay your deductibles… Read more »

Sue
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Sue

Ron, you want specifics here they are. The association I referenced, NMA stands for the National Management Association. Their insurance is managed by Marsh and handled through New York Life. It isn’t the best insurance I’ve ever seen in terms of premiums, but since I had been covered by a group plan I ended up with no pre-existing condition loopholes and it is cheaper than Texas high risk pool premiums. AARP also offers insurance through United Healthcare that I am currently exploring. Although not AARP age, my husband’s membership allows me to explore that option and it would be cheaper… Read more »

rdg
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rdg

I think part there is some confusion about HSA. The HSA is a health savings account. To qualify for an HSA you have to have a qualifying high deductible health insurance plan. You can have the qualifying health insurance plan and not open an account. You cannot have the account unless you have the health insurance. So there are two components. The first is the health insurance. Then you can open and fund an account at a financial institution. You can contribute an amount not to exceed your deductible in the account every year. You can pay medical expenses from… Read more »

Ron Greiner
Guest

rdg,
You are so correct so Sue will quit talking to you.
Everyone is getting HSAs. Matthew, poltroon, President Bush, you, me and a million others so far. Soon Sue will be the only one with no HSA balance when she retires so she will have to get down on her knees and beg a politician for a handout in retirement.

Ron Greiner
Guest

Sue, //my professional associations, NMA, offered a group insurance plan. Their insurer tried to avoid me too// Sure, sure Sue. Name this association and the name of the insurance carrier and I will check it out. //Group, HSA and individual policies all have loopholes that favor insurance companies over consumers// Sure, Sure Sue. Name an insurance company that has an HSA product besides us. HSAs are a bank product usually. You keep saying HSAs have loopholes and I keep asking what are they? A couple of days ago you were saying that HSAs have underwriting and at least I have… Read more »

Ron Greiner
Guest

poltroon, //Quote: Finally, going back to your to your last question which is if your employer shuts its doors; are there COBRA extensions–the best way answer is that if you had a group insurance policy HIPPA provides that another group plan must accept you with no pre-existing condition exclusion. You have a 90 day window after leaving a policy where that provision still applies.// Here is a better way to answer — NO. If the group is gone the COBRA extention is gone too. Then you have a 63 day period, not 90 as is repeatedly said on this board,… Read more »