TAX TIME! Maximize your Tax Deductions for 2010

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Take your personal HSA tax deduction on line 25

Since this blog is dedicated to offering the most up-to-date Health Savings Account information, we want to make sure you maximize your HSA for 2010. Remember, if you were covered by an HSA qualified High Deductible Health Plan (HDHP) on or before December 1st, 2010 then you have until you file your taxes (or April 15th 2011) to finish up your 2010 contributions and get a 2010 tax deduction.

2010 Contribution limits:
Single – $3050
Family – $6150
Catch up contribution (age 55 or older) $1000 per person*

2011 Contribution limits:
Single – $3050
Family – $6150
Catch up contribution (age 55 or older) $1000 per person*

*If both are 55+ then both have to open HSA accounts for both to participate in catch up contribution

These limits are also stated on the U.S. Department of Treasury website.

These maximum contributions will not be pro-rated if your HSA qualified health insurance plan (HDHP) was either in force all 12 months of 2010 OR if it was in force by December 1st of 2010 AND remains in force all 2011.

Your tax deduction is based on how much you DEPOSIT into your HSA, not how much you spend.

You do not have to itemize to get the tax deduction.

You do NOT have to pay your eligible expenses out of your HSA.

HSA Eligible Medical Expenses

You are required to keep receipts of your eligible expenses in case the IRS audits you. You can choose to reimburse yourself at a later date up to the medical receipts you have accumulated without being subject to 20% penalty or taxable income.

The triple-tax advantages (tax deductible deposits, tax free interest earned, and tax free withdraws for eligible medical expenses) only available with HSAs make them an important tax planning tool that is unmatched when used properly.

Other statistics show that nearly half of the 10 million Americans covered by the required HDHP insurance plans have not established their HSA account, and therefore are not participating in the tax savings they offer. Although OFM Benefits is one of the nation’s premier HSA focused insurance agencies, there are probably some of you that have procrastinated setting up your account. If you have been covered by your HDHP before or on December 1st, 2010 and haven’t set up your HSA, it’s not too late!

OFM is proud to recommend HSA Bank because of their great combination of low fees, competitive interest rates, and a large number of investment options.  With over 350,000 HSA accounts and over $1 billion in HSA deposits, HSA Bank has established themselves as one of the nations leading HSA administrators.  They also recently eliminated all setup fees.

As many Americans are facing huge health insurance premium increases and revenue decreases, HSA qualified plans are becoming even more popular. The average household pays over $13,000 per year for health insurance premiums! We feel HSA qualified plans offer the best value in healthcare today.

If you are self employed or a business owner and would like to receive the premium savings and tax deductions only available with HSAs, please visit www.missionHSA.com

http://www.missionHSA.com

Scott Borden
Host of “Insurance Talk with Scott & Mike” Saturday mornings 7-8 on KCMO Talk Radio 710
  OFM Benefits Consulting, LLC
6400 Glenwood, Suite 307
Overland Park, KS 66202
913-432-2732
913-432-2061 fax

HSA, FSA, HRA, and CDHP Explained!

New videos from Humana do a GREAT job explaining health insurance and Consumer Driven Health Plans (CDHPs)!

One of the biggest problems facing Health Savings Accounts is trying to explain why HSA qualified plans make good sense.  This one explains Health Savings Accounts (HSA) & Flexible spending Accounts (FSA) & Health Reimbursement Arrangements / Accounts (HRA):

Healthcare Consumerism:

How to get the most out of your health insurance plan:

This one shows how insurance works:

Now it all makes sense!

If you wish to obtain an individual or family quote from Humana along with other competitive health insurance companies visit our website www.missionHSA.com

Scott

Health insurance premiums are going up again

Nationally, cost increases for employers who offer health insurance plans will average 8 to 10 percent. In the Kansas City area, employers’ 2009 costs are going up as much as nearly 30 percent.

We are heading into health insurance renewal time for many businesses.  The Kansas City Star published an article this week describing the pain being felt by local businesses.  I’m not surprised that local brokers are saying many of their clients are contemplating dropping insurance altogether due to these increases. 

Benefits enrollment time brings higher costs for health plans at work

When businesses re-allocate their healthcare dollars to purchase an HSA qualified High Deductible Health Plan (HDHP) which and put the premium savings into the employee’s Health Savings Accounts (HSA), there is a built-in shielding of the huge premium increases usually associated with health insurance renewals.

Over 95% of my clients elect HSA qualified plans.

Maybe that’s why my HSA clients don’t drop their health plans!

“The Right Way to HSA”  Seminars are being held this week Thursday October 2nd in Overland Park at 7pm and Friday October 3rd in St. Joseph at 12 noon. If you would like to see why over 6 million Americans have already made the move to HSA qualified insurance plans, please RSVP by visiting our website www.missionHSA.com or by calling our office at 913-432-2732 ext. 110.

Keep in mind that moving your January renewal up to December 1st can allow HSA contributions to be deducted from your 2008 taxes!

Are HSAs too confusing?

Hello! My name is Scott Borden I am a self-employed independent health insurance agent. I purchase health insurance for my family of 5. If I worked for a big company they would be paying for a portion of my health insurance. There are advantages and disadvantages to being self-employed. No help for health insurance is a big disadvantage.

Is there a smart way to purchase health insurance without breaking the bank?

There are millions of self-employed Americans out there facing the same situation. Over the past 10 years since I first found Medical Savings Accounts (MSAs), I have worked with hundreds of health insurance agents trying to get them to recommend the lower cost Health Savings Account (HSA) qualified plans to self-employed people and businesses. Still today very few health insurance agents agree with me. The most common complaint I hear from agents is that HSAs are too confusing and too complicated. People just don’t understand them. They are too risky. You name it, I’ve heard it all.

Are HSAs really difficult to understand?

I’ll let you decide…

Which health insurance plan should I choose for my family of 5 living in Kansas?

Plan 1: Blue Cross Blue Shield of KC Preferred-Care Blue Premium
Monthly premium $725
$500 calendar year deductible per person usually with a maximum of 3 decuctibles per family
Co-Insurance – 80% up to the stop loss of $10,000
Example: $10,000 x 20% = $2,000 co-insurance out-of-pocket
Primary care physician $20 co-pay (some plans charge more for specialists)
Prescription medication $12 tier 1 generic (350 of which are now $4)
Prescription medication $35 tier 2 formulary name brand
Prescription medication $60 tier 3 non-formulary name brand
Emergency Room $100 co-pay then deductibe and 20% co-insurance
Maximum out-of-pocket $2,500 per individual (NOT including co-pays)
Maximum out-of-pocket $7,500 per family (NOT including co-pays)

Plan 2: Humana Autograph Total + Rx HSA
Monthly premium $365
$5,000 family calendar year deductible
Maximum out-of-pocket $5,000 per family
Take premium savings ($360/month) and deposit into HSA
Use HSA to pay smaller bills
If I don’t spend my HSA ($4,320 in the first year), I KEEP IT!

Which is more confusing?  That wasn’t very difficult to understand, now was it.  Plan 2 simply requires a deductible be satisfied then covers all remaining expenses including inpatient, outpatient, physician visits, and prescription drugs for my entire family at 100% for the rest of the calendar year. 

Which would be the best to own in a healthy year?

The lower premium plan always saves money in a healthy year.
 
Which would be the best to own should I come down with a major disease?

In order to decide which plan “would be the best” we have to calculate which plan would cover the disease at the lowest out-of-pocket expense. Does my monthly premium play a role in this calculation? ABSOLUTELY!

With Plan1 we have to know how many physician visits, how many prescription drugs, how many outpatient treatments, how many emergency room visits, was surgery involved, etc. The policy claims “$2,500 maximum out-of-pocket per person” but unfortunately that didn’t include the co-pays. It is possible in this type of a situation to have literally thousands of dollars worth of co-pays above and beyond the “$2,500 maximum out-of-pocket”

Plan 1 summary:

       $8,700 annual premium ($725 x 12)
    +$2,500 “maximum out-of-pocket” (deductible + co-insurance)
    +$1,000 (hypothetical) additional co-pays for additional services
    + $0 assuming no additional expenses for the rest of the family
   = $12,200 TOTAL COST

Plan 2 summary:

      $4,380 annual premium ($365 x 12)
    +$5,000 family maximum out-of-pocket
   =$9,380 TOTAL COST

Once again – requires a little study and math, but not very difficult.

I own the Humana plan now with a $7,000 family deductible that costs me just over $300 per month. Once money starts accumulating in the HSA then feel free to go to a higher deductible which saves even more money. This grows my HSA even faster!

Unfortunately most health insurance agents don’t want to take the time to educate the public on a lower cost way of managing health care expenses. The lower monthly insurance premiums results in lower commissions.  Why should they work harder to make less?  As long as 95% of the public is willing to keep paying rediculous health insurance premiums they will keep on selling them. 

If I hear one more health insurance agent saying HSAs are too complicated for people to understand I am going to…
I feel much better now!

Did I mention that HSAs offer tremendous tax advantages also?

Why Are Labor Unions Afraid of HSAs?

I know this is an election year.  The political nonsense is everywhere.

Here is yet another article full of unsubstantiated threats:

McCain endorses health care rip-off

The AFL-CIO’s criticism of the position McCain took on State Children’s Health Insurance Program (SCHIP) is interesting.  SCHIP is supposed to provide additional government funded (Medicaid) health insurance for the poor, right?

Then how come the definition of “poor” could be up to $62,000 of annual household income?  This would have required already short state budgets to fund Medicaid well into middle-income earning families.  It would have also ended up moving a tremendous number of privately insured children into Medicaid.  “Why pay for it if the state offers it for free?”  Most states couldn’t afford to match the federal funding requirement in the SCHIP bill anyway.  I can’t blame McCain for voting against it.  That was bad legislation.

This is the part of the Peoples Weekly World article that I need someone to explain to me…

How can AFL-CIO Political Action Director Karen Ackerman claim, “that employers would use these individual medical savings accounts as an excuse to dump health care plans workers fought for decades to win..”?

You can’t have an HSA without being covered by a health insurance plan!

I know of many people that thought they had good health insurance because their deductible was low.  The insurance deductible is only part of the “out-of-pocket” equation. There are actually three moving parts, the deductible, co-insurance (the 80/20 part) and, of course, co-pays.  Most health insurance policies don’t count co-pays towards the “out-of-pocket maximum”.  If there is a cancer or serious heart issue or organ transplant you can plan on paying thousands of dollars in co-pays in excess of your “out-of-pocket maximum” deductible and co-insurance.  These co-pay plans shouldn’t be able to use the words “out-of-pocket maximum”.

My last blog, “Do Co-Pays Really Make Sense???” speaks on this issue further.  HSA qualified health insurance plans when implemented properly offer both healthy people and high utilizers excellent value.

Have any of you Union employees been unfortunate to have suffered through a life threatening incident such as cancer or an organ transplant?  How much total medical expenses did you have to pay including all co-pays.  Would you rather have had an insurance plan like the City of Iola, KS (way to go Judy!)?  They have a $1500 deductible 100% comprehensive major medical health insurance plan that saves the city enough premiums to fund each employee with $700 per year into their HSA.  Do the math: $1500 – $700 = TERRIFIC HEALTH INSURANCE PLAN!

And for the employees that don’t spend their $700 HSA, they keep it!

Go to Blue Cross, Coventry, Aetna, Cigna, Humana, United Health Care, or any other health insurance company and tell them you want to purchase a health insurance plan that has a total out-of-pocket risk in any calendar year of $800 including all inpatient, outpatient, testing, prescription drugs, EVERYTHING!

You can’t buy a better health insurance plan than a properly designed and funded HSA plan.

So why do HSAs seem to upset Labor Unions?  I fail to believe it has anything to do with the HSA itself.  It has to be politically motivated, because financially, HSAs make sense.

General Motors and Ford spend more money on health insurance per car than they spend on steel.  This huge expense has allowed Toyota to surpass GM as the largest auto manufacturer in the world.  GM had owned that spot for 75 years.  Unfortunately trying to hang on to old inefficient health insurance plans will keep GM out of the top spot.  Labor Unions need better quality health care that costs less.

Hey GM, CALL ME!!

The HSA GUY… Scott Borden

2010 UPDATE:  Hoosiers and Health Savings Accounts article in WSJ talks about the results of HSAs in Indiana:

“The state is saving, too. In a time of severe budgetary stress, Indiana will save at least $20 million in 2010 because of our high HSA enrollment. Mercer calculates the state’s total costs are being reduced by 11% solely due to the HSA option.”

Do Co-Pays really make sense?

What is the best health insurance you can buy?  Do lower co-pays make it better?  What about the deductible and co-insurance portion?  Oh, that’s right.  Since they never seem to come into play, they don’t matter. 

WRONG!

The old Major Medical plans had a deductible and maybe some co-insurance that included all medical expenses whether inpatient, outpatient, physician office visits, or prescription medications.  Since co-pays are affordable, these plans are far superior to the old Major Medical designs…Or are they?

NY Times Article – “Co-Payments Soar for Drugs With High Prices”

Robin Steinwand had been paying $20 a month for her multiple sclerosis drug, which she keeps in the refrigerator. When she went to pick up her prescription in January, it cost $325.

Some people think an HSA qualified High Deductible Health Plan (HDHP) is a new concept.  In reality it is an old design that was used long before co-pays encouraged people to use health insurance like it was a never-ending pot of money.   Since most HSA qualified plan designs we recommend have their calendar year deductible (averaging around $2,500 per year for an individual), then cover all qualified medical expenses at 100% for the rest of the calendar year, these plans frequently offer the lowest out-of-pocket risk of any plan design. 

Robin Steinwand would have loved to have a plan that covered her prescription medication at 100% once she satisfied her calendar year deductible.  Now her co-pay plan is costing her almost $4000 this year just for one of her prescription drugs.  This doesn’t include any other medications, physician visits or procedures that would require additional co-pays, deductible or co-insurance. 

Oh, I almost forgot.  HDHPs are typically 20% to 60% lower monthly premiums!

HSA qualified HDHPs offer the best health insurance value available today.

Scott

Limited Health Policies Vex Some Buyers

Did you read the article in USA Today on September 5, 2007 showing how some insurance companies have severe limitations that you should know about?

http://www.usatoday.com/money/industries/insurance/2007-09-04-limited-coverage_n.htm

 Here is my response:

Why is it that we look at health insurance so much different than any other type of insurance we purchase?  Does our auto insurance cover oil changes and windshield wiper blades?  Does our homeowners insurance cover our washer/dryer or furnace?  Why is it we expect health insurance to cover every minor expense?  The problem with our current health insurance system lies in how the services are delivered.  What else in our free-enterprise society today is delivered in a “copay” system?  Imagine buying a car and paying a $200 copay with someone else paying the rest.  Would any of us be driving the same car we are today?  Of course not!  No wonder health care now consumes over 16% of our total GDP which is 60% more than Americans spend on housing! 

With skyrocketing health insurance premiums companies such as Mega Life and Health can easily sell these limited policies to people because they get insurance that includes copays for doctor’s office visits and some prescription drug coverage at a much lower premium than comprehensive major medical plans.   

There needs to be a change in vocabulary in order for people to understand how to purchase health insurance.  Most comprehensive major medical health insurance plans have 3 moving parts consisting of deductible, coinsurance, and copays.  These 3 combine to represent some sort of out-of-pocket maximum that is difficult to understand.  Most plans do not even count copays towards this maximum.  Those plans should be described as “unlimited” out-of-pocket.  Other than the new HSA qualified major medical insurance plans, which are required by IRS guidelines to have maximum out-of-pocket limitations, it can be very difficult to understand how much is covered.

This is why you should consider an HSA qualified comprehensive major medical PPO insurance plan.  Once you own a qualified insurance plan you are then allowed to open a triple tax-advantaged (pre-tax deposits, tax-deferred interest earned, and tax-free withdrawals for eligible medical expenses) HSA account.  You then pay your smaller bills out of your HSA at the in-network PPO discount while retaining insurance in case of a larger expense.  Whatever is left in your HSA account YOU KEEP!  The insurance deductible is offset by your HSA  so that your total out-of-pocket maximum is usually much lower than it is with traditional plans. 

I have read many of Julie Appleby’s writings and she has mentioned HSAs on many occasions.  Although most health insurance brokers are hesitant to recommend HSA designs experts are still predicting 10 million HSAs will be in use by 2008.  HSAs provide a vested interest in saving health care dollars for possible future expenses, or if we never spend it, keep it to help supplement retirement income (think IRA). 

I just wish the people victimized in this article had been given this information.

N. Scott Borden
OFM Benefits Consulting, LLC
6400 Glenwood, Suite 307
Overland Park, KS 66202
913-432-2732 ext. 105
www.ofmtorch.com