Health Savings Account Provider

A health savings account provider (HSA) allows individuals to place their money in an account that is not subject to federal income tax. The funds in the account are used to pay for medical expenses. However, if money is withdrawn and not used for medical expenses then the withdrawals are treated the same as those in a retirement account. Tax penalties would apply if removed before retirement age. Medical savings accounts (MSA) provide a way for individuals to save for future medical expenses. Premiums for an HSA or usually much lower compared with regular insurance premiums especially when deductibles are high. Consumer driven health care encourages individuals to be proactive with their own health care expenses in making responsible choices about health problems. Putting God first, reading His word, and seeking Him for all things helps individuals to realize that they are not alone when trying to make important decisions in life. "But without faith it is impossible to please Him: for he that cometh to God must believe that He is, and that He is a rewarder of them that diligently seek Him"(Hebrews 11:6).

People have more choices now on how to pay for medical costs than ever before. Rising insurance premiums have prompted government sources to find alternatives to traditional health insurance. One of these alternatives is available through a health savings account provider. Regular doctor's visits and paying for prescriptions come out of the account and insurance covers major illnesses or other major medical occurrences. This type of plan encourages individuals to be responsible with healthcare decisions such as whether to choose generic or brand name drugs. One of the reasons why traditional insurance premiums are so high is because of the choices that some patients make which cost the insurance company more money. Patients often feel justified choosing brand names over generics because of the high premiums they have to pay.

Employers with less than 50 employees or those who are self-employed are eligible to adopt medical savings accounts. Tax deferred deposits are made to use for future medical expenses. The contributions go towards paying the high deductible amount for a year. Once the deductible is met then the funds left cover expenses related to medical, dental, vision, and disability. At the end of the year the employee or self-employed individual can withdrawn the funds left as taxable income. The main purpose for this type of plan is the hope that eventually it will have a positive effect on healthcare costs.

Saving for future healthcare may help to reduce the costs of healthcare and increase the likelihood that the medical care system will become more efficient. When consumers contribute money to put into a health savings account provider they will naturally become more proactive in what expenses are medically necessary. Many doctors today will give patients a substantial discount when paying cash at the time services are rendered. When doctors do not have to haggle with insurance companies and wait a considerable amount of time for payment they will be able to run their offices with less personnel and will save money in the long run. Many doctor offices have one to two employees just to handle billing and insurance, larger offices have more than two.

Some sources say that millions of workers today are enrolled in consumer driven plans. Most employees that have a health savings account provider are generally employed in larger companies that have more than 50 employees. However, employers of any size can adopt an HSA for their employees. Employees that do not wish to withdraw funds left over from a current year do have the option of rolling over funds into the next year. This type of plan allows individuals to roll over funds into an individual retirement account one time only. If an employee has a substantial amount left in a healthcare plan and does not foresee needing it for future medical expenses he or she does have the option of putting that money into a retirement savings fund where the money will earn interest.

Funds may be withdrawn from an HSA with either a debit card or through personal checks. Some plans allow the policyholder to send funds to their doctor or hospital as a reimbursement. Money can be withdrawn for other reasons other than patient expenses but this money is subject to income taxes and a penalty. If a person is over the age of 65 penalties are generally waived. Withdrawals from medical savings accounts need documentation to prove that the money was used for healthcare expense. Failure to prove that money was used for health reasons could mean paying income taxes and penalties at the end of the year. One of the biggest benefits of having a HSA or MSA plan is that the money used for healthcare is not subject to income taxes.

People who choose to open a savings account just for their healthcare can certainly do so but if a major illness happens and they do not have enough money saved then they are in a bad situation. Two of the major incentives for people choosing medical savings accounts are the tax benefits and the security in case of a major illness. For these two reasons many people choose an MSA over trying to save by themselves. This plan also helps those who are self-employed who have a small number of employees. To cover a small number of employees cost an employer a lot more money when using traditional healthcare coverage. One of the reasons that an MSA is much cheaper is because of the high deductibles that individuals have to meet before using major medical coverage. The major drawback with an MSA is that sometimes medical expenses may exceed contributions.

Medical Savings Accounts

Medical savings accounts are a special type of health insurance plan combining a low premium, high deductible insurance policy with a tax-deductible savings account. Individuals have more control of their health care than under traditional policies, including the ability to choose personal physicians and specialists from any network without referrals or penalties. Plans also include preventive and alternative medicines that are often not covered from major insurance companies. Acupuncture, chiropractic care, contact lenses and eyeglasses, as well as dental care are all completely covered. Although such plans have been heavily disputed during the past decade, millions of people have chosen more consumer-driven options like medical savings accounts.

Individuals who are self-employed and small businesses are able to establish medical savings accounts for their employees. Employers can make a set contribution into the savings account or employees can make the deposits themselves, but both cannot make contributions into the same account in the same year. Since plans are not tied to a specific employer, individuals keep the account between jobs or take it with them to their next employer. Generally managed by a bank or insurance company, money can be used to pay for routine health care costs up to the full deductible amount. Annual deductibles are high and vary per policy. Once a member meets the deductible, the insurance program is activated to cover remaining medical expenses. Annual out-of-pocket costs are usually capped on such plans. All contributions are pre-tax dollars, and money uses for medical expenses are not taxed. Deposits into medical savings accounts cannot exceed more than 65% of the deductible for individuals, 75% for families per year. If expenses are high the first few years, individuals run the risk of having to pay for some care out-of-pocket. However, any unused money left over in the account at the end of the year automatically rolls over into the next year without a tax penalty. Non-medical use of funds will be taxed and is subject to a 15% penalty. When a member turns 65 years old, the account can be rolled over into a 401H and become another retirement account. "Hearken unto me, O house of Jacob, and all the remnant of the house of Israel, which are borne by me from the belly, which are carried from the womb: And even to your old age I am he; and even to hoar hairs will I carry you: I have made, and I will bear; even I will carry, and will deliver you." (Isaiah 46:3-4)

Medical savings accounts were first established by the Health Insurance Portability and Accountability Act (HIPAA) or the Kassebaum-Kennedy Bill in 1996 as a national test in the private health insurance market. Only 750,000 plans were allowed to participate during this four year test. Self-employed individuals and businesses with fewer than fifty employees were permitted candidates. In 1997, the Balanced Budget Act established a similar program for up to 390,000 Medicare members. This demonstration was scheduled to end in 2002. Members under both federal laws were able to take advantage of federal tax breaks for entering the program. By 1998, 26 states had enacted state-specific programs. However, state-authorized plans could only provide state tax advantages and were not eligible for federal tax breaks. Employers who offered private plans had to do so in accordance with either state or federal law to take advantage of income tax relief.

Wall Street analysts and many politicians have opposed medical savings accounts, arguing that such plans will only attract healthy individuals, making costs for those who are sick skyrocket. They also claim that members will not utilize the health care options available, ignoring problems that could have been prevented. Tax breaks will cause extra strain on both state and federal governments. Proponents argue that because these plans eliminate the insurance middle-man, individuals will take health care into their own hands, become aware of costly services and shop around for more affordable providers. This will force medical practices to cut costs down to a reasonable level. Employers save on cost for premiums, physicians are relieved from the hassle of referrals and claim forms and patient choice is restored. Most policies require an additional catastrophic health insurance plan to cover unexpected illness and hospitalization.

The Health Opportunity Patient Empowerment Act of 2006 took over where the 1996 and 1997 bills left off. Health savings accounts (HSAs) replaced medical savings accounts. A more permanent plan, these plans include the same low premium, high deductible insurance polity with a tax-free savings account to businesses of all sizes. Although high, deductibles are still capped, and unused money is rolled over into the next year's plan penalty free. Under the new act, companies using HSAs grew from 8% to 13% in the first few months of 2008. Large insurance companies began to buy out smaller companies who offered consumer-driving health care and now offer them as an extra health care option. The employers still under the original demonstration plans could continue to offer coverage until the company had grown to over 200 employees, after that, they had a year to pull out of the program.

Before deciding to enroll in medical savings accounts or its newest alternative, health savings accounts, individuals should compare out-of-pocket costs compared to the group insurance already enrolled in. Such plans can be more expensive than major medical plans and risky for people who are already on a very tight budget. Although individuals own the money put into the account, it is clearly tied up for medical use only until the individual reaches 65 years of age. Some people simply cannot afford to pay the high deductible cost or have that money out of reach for that long period. If a catastrophic illness policy is not included, a major health emergency can easily drain the account, plus some personal savings before the insurance policy becomes active.

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