Health Savings Account health insurance

Health Savings Account -
Testimonial and F.A.Q.

Note: The HSA approach is available and becoming more widely implemented by families, individuals and for corporate employee benefit plans as well. Here is a true story of how one family has implemented it.

Marc and Jeana and their two kids are healthy. They have the occasional office visit and the two of them have regular exams, but overall they rarely go to the doctor. Yet they were spending over $600 per month on a PPO plan with a $3500 deductible. Even though they are spending so much in premiums, they still have to cover their deductible for some services out of pocket and they also pay office visit copays. There had to be a better way. Here is what they did...

Rather than spend $624 per month, they switched to an HSA health plan and now only spend $228 per month. They have a high deductible health plan, which means every year they may fund their HSA bank account with up to $5450, which comes off their taxable income at the end of the year. At a 30% tax bracket, they just put $1620 back in their pocket and by the way, they also saved $396 per month in reduced premiums.

Since Marc and Jeana actually wanted to save money with this plan, they decided to fund their HSA bank account with $300 per month. So with the HSA health plan, their premium went from $624 down to $228.

Additionally they purchased a personal accident benefit plan ($34.95 per month from VBA) on the side so that any accident related expenses for their family are reimbursed to them, thus covering their high deductible and giving them additional financial protection. Their total out of pocket costs were now $263 versus $624 from their prior plan.

Then they are funding their HSA account with $300 per month. Therefore their total monthly outlay is $563, which is $61 less than with a regular health plan. Additionally they can deduct $3600 (12 X $300) from their taxable income, which actually saves them $1080 in taxes each year.

So they are saving over $1800 per year AND they are putting $3600 in their HSA bank account every year too. The money in their HSA savings account is used to pay for medical expenses, office visits, dental, vision, braces, prescription drugs, over the counter drugs and any out of pocket medical expenses they encounter along the way... even lasik surgery!

Additionally, since they are healthy and don;t have a lot of medical expenses, the money in their HSA bank account will continue to grow each year. Whatever they need for ongoing medical out of pocket costs (office visits, prescriptions, dental visits, eye glasses, etc.) comes out of their HSA account (tax free on their HSA debit card). One day they will retire and the money in their HSA account can be used for their retirement, just like IRA money (after age 65).

Contact us to see how the numbers work out for your family or for your company's employee benefit plan.

Call us at 1-800-610-6418 - Bill Lorenz
Broker - Cal Health Plans Insurance Services
www.cal-health-plans.com

Q. What is an HSA Account?

A. An HSA is a qualified tax deferred health savings account. The money that you contribute to your account is your own and you use that money to pay for any health related expense. All of the money you contribute is tax deductible at the end of the year.

An HSA consists of a high deductible health plan (HSA compatible health plan), along with an HSA bank account. Your contributions in the Health Savings Account accrue interest and some banks also offer built-in investment options such as mutual funds, money market funds and other investment vehicles.

Q. Is it available for my company's group plan?

A. Yes. HSA's can be set up for both individuals and families as well as company group plans. Employers are using HSA's to lower their premiums and then using the savings to fund their employee's HSA accounts. They can even fund the accounts as an bonus plan too, which is a huge employee incentive, as these accounts are portable and go with the employee when they change jobs. Later the HSA accounts can even be used as a retirement account.

Q. How much can I contribute?

A. The higher your deductible, the more you can contribute to an HSA. However the maximum amount you can contribute per year is $5,650 for family coverage and $2850 for self-only, excluding catch-up contributions for those 55 years of age and older.

Individuals age 55 and over can make additional catch-up contributions until they enroll in Medicare (Call for details). Individuals 55 and over may contribute an $800 in 2007, as a "catch-up contribution.

Q. When and how much do I contribute immediately and ongoing?

A. You can front-load or fully fund your HSA account on day one of your health savings account or simply fund it each month as you go. You can make deposits anytime, even at the end of the year (lump sum), all the way to April 15th of the following year, just like with an IRA.

Q. If I start my HSA plan mid-year, how much can I fund the first year?

A. Starting in 2007, there are no longer any limitations on fully funding your HSA, even when starting mid-year. In prior years it was prorated based on the number of months on the HSA, but that is no longer the case. Therefore you may now fund your HSA bank account with up to $5,650 for a family or $2,850 for an individual, but never more than the amount of your HSA plan's annual deductible.

Q. What are the advantages of the HSA?

1) You can deduct your entire annual contribution from your taxable income at the end of the tax year, regardless of how much out of pocket health related expenses you may have. We recommend that you always check with your CPA or tax preparer to fully understand your specific tax situation.

2) Additionally, you would use the HSA account to pay for all eligible expenses throughout the year. That means you are now using tax-free money to pay for your health expenditures!

3) HSA as a tax deferred Retirement Fund...

At age 65 you can begin withdrawing the funds as retirement income, penalty free. At that point the money is taxable (as you pull it out), but can be used for anything (health or non-health related items), without incurring penalties.

Essentially you are creating a tax deferred savings account that can be used tax free for qualified medical expenses and penalty free as a retirement fund at age 65 and beyond, for any use whatsoever at that point.

4) You will save money each month on health insurance since your HSA compatible high deductible health plan has a lower premium than a standard health plan. You can use your monthly savings to fund your HSA account. The healthier you are, the more you will retain in your account, to use at retirement age.

Q. Which HSA compatible plan does Cal-Health-Plans recommend?

A. At Cal-Health-Plans, we recommend the "Blue Cross PPO $3500 with HSA Compatibility" plan. This plan has a $3500 individual deductible, or $7,000 deductible, per family. This allows you to contribute the maximum amount to your HSA account annually ($2,850 for individuals and $5,650 per family).

Also, Blue Cross has an agreement with Chase Bank to seamlessly set up your HSA account at the time of enrollment for your Blue Cross High Deductible Health Plan.

We like this plan because it is one of the most of affordable HSA high deductible health plans available. This makes more money available to fund the HSA bank account. We highly recommend funding the HSA account as much as possible to have funds available for your out of pocket health related expenses.

Get a live quote: A family (age 40 subscriber) would pay $253 per month (Orange County rate).

Click here for a live quote on the Blue Cross web site. Also allows you to apply using the Blue Cross' paperless enrollment method

Q. How do I learn more and get started?

A. Complete the information form below, or simply call for more information at (800) 610-6418.

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Ph Toll Free: 1(800) 610-6418

Broker: William Lorenz
CA Lic. 0D61899