Health Savings Accounts – An American Innovation in Health Insurance

The term              https://trevonbranch.tech/                     “health insurance” is commonly used in the United States to describe any program that helps pay for medical expenses, whether through privately purchased insurance, social insurance or a non-insurance social welfare program funded by the government. Synonyms for this usage include “health coverage,” “health care coverage” and “health benefits” and “medical insurance.” In a more technical sense, the term is used to describe any form of insurance that provides protection against injury or illness.

In America, the health insurance industry has changed rapidly during the last few decades. In the 1970’s most people who had health insurance had indemnity insurance. Indemnity insurance is often called fee-  It is the traditional health insurance in which the medical provider (usually a doctor or hospital) is paid a fee for each service provided to the patient covered under the policy. An important category associated with the indemnity plans is that of consumer driven health care (  Consumer-directed health plans allow individuals and families to have greater control over their health care, including when and how they access care, what types of care they receive and how much they spend on health care services.

These plans are however associated with higher deductibles that the insured have to pay from their pocket before they can claim  these, the Health Savings Accounts are the most recent and they have witnessed rapid growth during the last decade.

WHAT IS A HEALTH SAVINGS ACCOUNT?

A Health Savings Account (  is a tax-advantaged medical savings account available to taxpayers in the United States. The funds contributed to the account are not subject to federal income tax at the time of deposit. These may be used to pay for qualified medical expenses at any time without federal tax liability.

Another feature is that the funds contributed to Health Savings Account roll over and accumulate year over year if not spent. These can be withdrawn by the employees at the time of retirement without any tax liabilities. Withdrawals for qualified expenses and interest earned are also not subject to federal income taxes. According to the U.S. Treasury Office, ‘A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care.

enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.’ Thus the Health Savings Account is an effort to increase the efficiency of the American health care system and to encourage people to be more responsible and prudent towards their health care needs. It falls in the category of consumer driven health care plans.

Origin of Health Savings Account

The Health Savings Account was established under the Medicare Prescription Drug, Improvement, and  Act passed by the U.S. Congress in June 2003, by the Senate in July 2003 and signed by President Bush on December 8, 2003.

Eligibility –

The following individuals are eligible to open a Health Savings Account –

– Those who are covered by a High Deductible Health Plan
– Those not covered by other health insurance plans.
– Those not enrolled in

Also there are no income limits on who may contribute to an HAS and there is no requirement of having earned income to contribute to an HAS. However HAS’s can’t be set up by those who are dependent on someone else’s tax return. Also   cannot be set up independently by children.

 

health insurance plan which has a certain deductible threshold. This limit must be crossed before the insured person can claim insurance money. It does not cover first dollar medical expenses. So an individual has to himself pay the initial expenses that are called out-of-pocket costs.

In a number of  and preventive health care are excluded from the deductible which means that the individual is reimbursed for them.   can be taken both by individuals (self employed as well as employed) and employers. In 2008  are being offered by insurance companies in America with deductibles ranging from a minimum of $1,100 for Self and $2,200 for Self and Family coverage. The maximum amount out-of-pocket limits for   is $5,600 for self and $11,200 for Self and Family  These deductible limits are called IRS limits as they are set by the Internal Revenue Service (IRS). In the relation between the deductibles and the premium paid by the insured is inversely  i.e. higher the deductible, lower the premium and vice versa. The major purported advantages of   are that they will a) lower health care costs by causing patients to be more cost-conscious, and b) make insurance premiums more affordable for the uninsured. The logic is that when the patients are fully covered (i.e. have health plans with low deductibles), they tend to be less health conscious and also less cost conscious when going for treatment.

Opening a Health Savings Account

An individual can sign up for   with banks, credit unions, insurance companies and other approved companies. However not all insurance companies offer  health insurance plans so it is important to use an insurance company that offers this type of qualified insurance plan. The employer may also set up a plan for the employees. However, the account is always owned by the individual. Direct online  qualified health insurance is available in all states except Hawaii, Massachusetts, Minnesota, New Jersey, New York, Rhode Island, Vermont and Washington.

Contributions to the Health Savings Account

Contributions to   can be made by an individual who owns the account, by an employer or by any other person. When made by the employer, the contribution is not included in the income of the employee. When made by an employee, it is treated as exempted from federal tax. For 2008, the maximum amount that can be contributed (and deducted) to an  from all sources is:
$2,900 (self-only coverage)
$5,800 (family coverage)

These limits are set by the U.S. Congress through statutes and they are indexed annually for inflation. For individuals above 55 years of age, there is a special catch up provision that allows them to deposit additional $800 for 2008 and $900 for 2009. The actual maximum

Contributions by the Employer

The employer can make contributions to the employee’s HAS account under a salary reduction plan known as Section 125 plan. It is also called a cafeteria plan. The contributions made under the cafeteria plan are made on a  -tax basis i.e. they are excluded from the employee’s income. The employer must make the contribution on a comparable basis. Comparable contributions are contributions to all  of an employer which are 1) the same amount or 2) the same percentage of the annual deductible. However, part time employees who work for less than 30 hours a week can be treated separately. The employer can also  employees into those who opt for self coverage only and those who opt for a family coverage. The employer can automatically make contributions to the  on the behalf of the employee unless the employee specifically chooses not to have such contributions by the employer.

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *