Health Savings
Accounts are not only good for consumers, they can help companies and maybe the
health care system itself.
by: Derek Overstreet, Investment Adviser June 23,
2017
Thirty
years ago, when I started working in the health care industry selling health
insurance to business owners, that sector of the economy was booming, and all
of us benefited. Across the nation, small-business owners, as a group, were
growing at a breakneck speed. The Internet did not even exist until a few years
later. Cellphones were a new invention. My first one was the size of a
briefcase and weighed around 15 pounds, and service cost a $1 a minute.
Around
1987, a family could purchase a reasonable health insurance policy for around
$300 per month with a $400-$500 deductible. That same policy would be around
$1,800 per month now. On average, 80% of the bill was paid by the insurance
company, while around 20% was paid by the family. Maximum out-of-pocket costs
rarely exceeded $1,000. Typically, the insured would pay for doctor visits and
prescriptions while insurance was left to cover major issues: cancer, heart
attacks, hospitalization, serious illnesses and other concerns.
What
happened next began the downfall of health care and the insurance industry as
we knew it. Large health care companies approached large employers and
introduced them to HMOs. Things sounded great. With a $5 co-pay, Americans went
to their doctors more often, even for minor ailments. On the other side of the
coin, insurance companies induced some doctors to join their plans by paying
them a capitation fee of $15-$20 per month for every patient who went to them.
It was a great way for doctors to build up their practices and get paid, even
if they did not see patients.
How we got in a health insurance bind
All
of this sounded good, but problems quickly emerged. The low co-pays ensured
patients went every time something was wrong, no matter how minor it was. As
usage went up, doctors found they did not have the time to treat the patients
who needed their attention for major problems. This caused some doctors to
discontinue participating in HMOs because they could not treat patients at the
level they wanted since they were dealing with minor ailments.
The
Affordable Care Act, also known as Obamacare, made things even worse. Despite
claims that it would make health care more affordable, costs for many consumers
actually skyrocketed. With some in Washington now calling to
reduce penalties issued for not signing up for insurance, it appears likely
that the only people who will enroll under the Affordable Care Act will be the
ones who face major concerns, making costs go up.
As
the largest payer of health costs, including insurance premiums and doctor and
hospital costs, the federal government also makes things more expensive in
other ways. Increasingly, doctors and hospitals are growing tired of fighting
the federal government over reimbursements, so they jack up their own prices
higher than they should be, knowing they will have to discount their costs
during the reimbursement process.
Let
me offer an example. A woman I know suffered from an irregular heartbeat,
leading to a heart monitor being used for a month, with the data sent to a
hospital in another state. The provider sent a bill to her for $7,000 for these
services. When the patient objected and called in to complain, the provider
asked if $400 was better. Needless to say, the patient said yes and quickly
paid that bill.
This
is just one case in point, but not everyone is as lucky as this woman was. If
you are a private payer, you might get stuck with a high bill because you don’t
have insurance and you may not receive a discount.
HSAs can help consumers in several ways
With
all the confusion over the future of the Affordable Care Act and health care in
general, investors need to keep health savings accounts (HSAs) in mind. If you
have a plan with a high deductible or an HSA-compliant health insurance plan,
in 2017 you can, if you are 55 or older, put up to $4,400 for yourself or
$7,750 for your family into your HSA every year to
pay for doctor visits, your co-pays and other health expenses. And if two
members of your family are 55 and older, together you can give up to $8,750 to
your HSAs per year.
Contributions
to HSAs are done on a pre-tax basis, making it a good tax tool, as it reduces
your taxable income. Increasingly, large employers, including state
governments, are embracing HSA-compliant health care plans, with their higher
deductibles and lower premiums. Many people are opting into HSAs, especially as
larger companies help contribute to them.
With
more options and flexibility, HSAs can provide a boost for employers, freeing
up more funds to hire new employees. Large businesses and small-business owners
should at least consider looking at insurance plans that are HSA-compliant.
They will find their costs will be lower across the board.
They’re
also popular with investors and employees for reasons other than their tax
benefits:
·
Unlike flexible spending
accounts (FSAs), people with HSAs do not need to spend all their funds in the
account each year or risk losing them.
·
You never lose your
money in a traditional HSA, though an investment HSA is a different matter.
·
If you continue to
fund your HSA until you are 65, you can use that money to cover your Medicare
supplement premiums, prescription drug costs or any medical bill you incur.
HSAs
also give consumers more choices in their health care by letting them decide
how that money is spent. If more Americans opt to use HSAs, health care costs
should drop because more competition could lower prices. Simply put, HSAs can
provide a boost to reining in health care prices and for employers. They also
offer investors a nice vehicle to reduce their tax burden while helping boost
their health care options.
Kevin
Derby contributed to this article.
This
article was written by and presents the views of our contributing adviser, not
the Kiplinger editorial staff. You can check adviser records with the SEC or
with FINRA.
Derek Overstreet, Investment Adviser Owner, New Millennium Group, an Investment Adviser who owns New Millennium Group in Utah. He believes
a retirement plan should be built around safety and offer greater security for
you and your loved ones. His team of financial planners provides comprehensive
wealth management services designed to help you meet your investment goals.
No comments:
Post a Comment