Health Saving Account / High Deductable
Today's health insurance market
is broken into many segments . Some are highly specialized in their
coverage and others are more comprehensive. The more comprehensive and
inclusive the health insurance the higher the premiums.
It is generally in your best interest to purchase group coverage (through an
employer) when available. Group coverage is generally more comprehensive and
group rates are generally lower because their is strength in numbers. However,
group plans are almost always managed care programs and have lots of
restrictions.
If group coverage is not available then you will have to purchase an individual
plan. Individual plans are medically underwritten and there are no guarantees
that an insurer will approve your application. Premiums for individual policy
holders are more in line with their expected health care cost than in group
coverage. That means, the premiums will be higher for those who are older or
less healthy.
Health
Insurance "Short-Term"
As its name implies, short-term
health insurance is temporary coverage and lasts from one to six months
. Some companies may allow the insured to renew the policy one time but the
total length of coverage will not exceed twelve months. This is perfect for
someone who just dropped off their parents' policy because they graduated from
college or maybe they hit that age limit and need health insurance before they
find a full-time job. Or maybe for somebody between jobs.
Coverage is generally comparable to that of an HMO or similar plan and
typically includes various hospital charges, office visits, diagnostic tests,
and prescription drugs. Maternity costs are not covered, however. Unlike an HMO
or PPO, though, a short-term plan is an indemnity plan, which means you
have the freedom to go to any doctor; you're not confined to a network of
doctors.
Plans are typically offered with
a number of deductibles ranging from $200 to $2,000. Most young adults choose
the $500 deductible or the $250 deductible. Older adults generally choose
higher deductibles to offset their higher premiums.
The down side of short-term
policies
In many short-term policies the
deductible you pay is per injury or illness. That means you must meet the
deductible all over again each time you are treated for a ear infection or
other illness. After you meet the deductible, the company pays 80 percent of
the next $5,000 in expenses and then pays 100 percent.
Short-term policies also have certain strict eligibility requirements, although
they will vary from insurer to insurer. If you have ever been denied health
insurance, you won't be eligible for short-term insurance because a denial
indicates you might have significant health problems. In addition, if you have
a pre-existing condition (an illness or chronic condition you've had within the
previous five years), it won't be covered under most short-term plans. That
means if you've had leukemia, a stroke, or even allergies or asthma within the
last five years, those illnesses won't be covered under your short-term policy.
Pregnancy is not't covered either, although complications arising from
pregnancy generally are.
And what happens if you bought a
three-month policy only to find that the job you hoped to land - with health
benefits - has not't materialized? Don't count on automatically being able to
renew your short-term policy, because it doesn't work that way. You have to go
through the application process all over again and take out a new policy. If
you had any illnesses or injuries during your previous policy period, those now
become pre-existing and won't be eligible for coverage.
Shop around on your own compare rates and benefits from several companies to
make sure you get a plan that's right for you. For more information and rates
on short-term health insurance visit our specialists.
Catastrophic Health
Insurance
Catastrophic health insurance
policies are intended only to pay for major hospital and medical expenses, not
routine visits to the doctor's office or trips to the ER to get stitched up. A
catastrophic plan would cover things like treatment in an intensive-care unit
for 10 days after an auto accident or complications from a pregnancy that land
you in a hospital.
Catastrophic health insurance
policies typically come with a very high deductible from $500 to $15,000 and a
high maximum benefit payment, such as $1, $2 or $3 million.
Who buys catastrophic health
insurance?
There are two groups of
individuals who commonly purchase catastrophic health insurance. The first is
the young adults who are self employeed or do not have coverage through their
employer. They are healthy on no medications and would rather pay their own
office visit and save the premium. The second group is primarily made up of
individuals between the ages of 50 - 65. They typically choose high deductibles
$5,000 and up and are primarily concerned with catastrophic losses associated
with heart attacks, cancer and other such illnesses.
Is Catastrophic Coverage Right
For You?
As with all insurance you are
gambling that you are going to need the coverage. With catastrophic coverage
you are elimination coverage to reduce premiums. Be careful not to take a
deductible larger than you can afford and plan for what you're comfortable with
is the worst happens. Shop around on your own or talk to an independent
insurance agent to make sure you get a plan that's right for you.
Traditional Health
Insurance
Up until about 30 years ago,
most people had traditional indemnity coverage. These days, it's often known as
fee-for-service. Indemnity plans are a bit like auto insurance: you pay a
certain amount of your medical expenses up front in the form of a deductible
and afterward the insurance company pays the majority of the bill.
Advances in modern medicine increased the cost of providing health care and
made it possible for people to live longer. Those advances caused many
insurance companies to look for ways to reduce their costs of doing business,
giving managed care the boost it enjoys today.
Fee-For-Service
For years, indemnity or
fee-for-service coverage was the norm. Under this type of health coverage, you
have complete autonomy when it comes to choosing doctors, hospitals and other
health care providers. You can refer yourself to any specialist without getting
permission, and the insurance company doesn't get to decide whether the visit
was necessary.
You don't, however, have
complete autonomy. Most fee-for-service medicine is managed to a certain
extent. For instance, if you're not already incapacitated, you may need to get
clearance for a visit to the emergency room.
On the down side,
fee-for-service plans usually involve more out-of-pocket expenses. Often there
is a deductible, usually of about $200, before the insurance company starts
paying. Once you've paid the deductible, the insurer will kick in about 80
percent of any doctor bills. You may have to pay up front and then submit the
bill for reimbursement, or your provider may bill your insurer directly.
Under fee-for-service plans,
insurers will usually only pay for reasonable and customary medical expenses,
taking into account what other practitioners in the area charge for similar
services. If your doctor happens to charge more than what the insurance company
considers reasonable and customary, you'll probably have to make up the
difference yourself.
Traditionally, preventive care services like annual check-ups and pelvic exams
have not't been covered under fee-for-service plans. But as the evidence mounts
that preventive care can prevent more costly illnesses down the road, some
insurers are including them.
Fee-for-service plans often
include a ceiling for out-of-pocket expenses, after which the insurance company
will pay 100 percent of any costs. Traditional fee-for-service coverage offers
flexibility in exchange for higher out-of-pocket expenses and is not for
everyone.
Shop around on your own or talk
to an independent insurance agent to make sure you get a plan that's right for
you. For more information and rates on short-term health insurance visit our
specialist site below.
Preferred Provider
Organizations (PPO'S)
"Managed Care"
A Preferred Provider
Organizations is the least restrictive type of managed care. PPOs have made
arrangements for lower fees with a network of health care providers. PPOs give
their policyholders a financial incentive to stay within that network.
For example, a visit to an in-network doctor might mean you'd have a $10
co-pay. If you wanted see an out-of-network doctor, you'd have to pay the
entire bill up front and then submit the bill to your insurance company for an
80 percent reimbursement. In addition, you might have to pay a deductible if
you choose to go outside the network, or pay the difference between what the
in-network and out-of-network doctors charge.
With a PPO, you can refer yourself to a specialist without getting approval
and, as long as it's an in-network provider, enjoy the same co-pay. Staying
within the network means less money coming out of your pocket and less paper
work. Preventive care services may not be covered under a PPO.
Exclusive Provider Organizations are PPOs that look like HMOs. EPOs raise the
financial stakes for staying in the network. If you choose a provider outside
the network, you're responsible for the entire cost of the visit.
Is a PPO Right For You?
Rates and coverage vary form
state to state so shop around on your own or talk to an independent insurance
agent to make sure you get a plan that's right for you. For more information
and rates on PPO health insurance visit our specialist site below.
Point-of-Service (POS)
"Managed Care"
A Point-of-Service plan is a
little more least restrictive type of managed care. Point-of Service plans like
PPO's have made arrangements for lower fees with a network of health care
providers and give their policyholders a financial incentive to stay within
that network.
However, Point-of-service plans
introduce the gatekeeper, or Primary Care Physician. You'll need to choose your
primary care physician (PCP) from among the plan's network of doctors.
As with the PPO, you can choose to go out of network and still get some kind of
coverage. In order to get a referral to a specialist, though, you usually must
go through your PCP. You can still choose to refer yourself, but it'll mean
more hassles and more money coming out of your pocket.
If your PCP refers you to a doctor who is out of the network, the plan should
pick up most of the cost. But if you refer yourself out, then you'll probably
have to deal with more paper work and a smaller reimbursement. You may also
have to pay a deductible if you go outside the network.
POS plans may also cover more preventive care services, and may even offer
health improvement programs like workshops on nutrition and smoking cessation,
and discounts at health clubs.
Is a POS Right For You?
Rates and coverage vary form
state to state so shop around on your own or talk to an independent insurance
agent to make sure you get a plan that's right for you. For more information
and rates on POS health insurance visit our specialist site below.
Health Maintenance
Organizations (HMO's)
"Managed Care"
A Health Maintenance
Organization plan is the most restrictive type of managed care. Like Point-of
Service and PPO's, HMO's have made arrangements for lower fees with a network
of health care providers and give their policyholders a financial incentive to
stay within that network.
HMO plans also utilize a
gatekeeper, or Primary Care Physician. You'll need to choose your primary care
physician (PCP) from among the plan's network of doctors. HMO's require that
you only see their doctors, and that you get a referral from your primary care
physician before you see a specialist. In most cases you'll need to get
clearance before you can visit the emergence room, if your able. In general,
you must see HMO approved physicians and use HMO approved facilities or pay the
entire cost of the visit yourself.
HMO plans generally cover more preventive care services, and may even offer
health improvement programs like workshops on nutrition and smoking cessation,
and discounts at health clubs.
Is a HMO Right For You?
HMO coverage is a trade-off
between premiums paid and plan flexibility. HMO's offer some very attractive
rates but are very restrictive when it comes to coverage. Rates and coverage
vary form state to state so shop around on your own or talk to an independent
insurance agent to make sure you get a plan that's right for you.
Health
Saving Account / High Deductable"
Health Savings Account Answers
This fact sheet explains the ins and outs of opening, funding and benefitting
from the recently created health savings account.
By Kimberly Lankford January 31, 2006
Questions about health savings
accounts have been pouring in ever since the tax-free savings vehicle was
introduced as part of medicare prescription drug plan last year. Below are the
most frequently asked questions we've received and the answers we've found:
Who can get an
HSA?
Anyone under age 65 who buys a
qualified high-deductible policy can open an HSA. You can't be covered by
another health insurance policy that isn't a qualified high-deductible plan
(either as an individual or a dependent), although you can still have other
disability, dental, vision and long-term care insurance policies.
How much
can I contribute annually to an HSA?
You can contribute in 2006 the
amount of the deductible, up to $2,700 for singles and $5,450 for families,
each year to your HSA. And if are 55 or older, you can put in an extra $700.
Can any high-deductible health
insurance policy qualify for an HSA?
Any high-deductible health
insurance policy can qualify, as long as it meets the IRS requirements. The
deductible must be at least $1,050 for individuals or $2,100 for families, and
the annual out-of-pocket expenses cannot exceed $5,250 for an individual or
$10,500 for a family, including the deductible and co-payments (but not
premiums). So individuals can buy high-deductible policies on their own, or
through their employers.
If you're buying a plan on your
own, be sure to ask your health insurance company if it qualifies, says
Victoria Bunce, research and policy director for the Council for Affordable
Health Insurance.
How and where can I open a health
savings account?
It depends on if you're buying
coverage on your own or getting it through your employer.
On your own. You can find
a list of health insurance companies offering HSA-eligible plans in your state
at HSAInsider.com or
HSADecisions.org. You can compare several companies policies in most
states at eHealthInsurance.com,
or can search for a local agent who knows which policies are available in your
area at the National Association of Health Underwriters
Web site. The list of companies offering HSA-eligible plans continues
to grow every month.
Through your employer. If
you get health insurance through your employer, you may have seen an
HSA-eligible option during last-year's open-enrollment period (generally in the
fall). If not, talk to your benefits manager to see if HSAs will be on your
health insurance menu. Choosing an HSA could knock down your share of premiums
significantly, and some employers may choose to fund all or part of the HSA for
you -- perhaps even adding a 401(k)-style match.
Would I fund an HSA with pre- or
post-tax dollars?
If your employer offers a
high-deductible health insurance policy, you may be able to make pretax
contributions, like you would with a flexible-spending account. If you open the
HSA on your own, your contributions will be deductible when you file your
taxes, even if you don't itemize.
For 2006, you'll be able to
deduct the lesser of either
-
Your insurance deductible or
-
$2,700 for individuals; $5,450 for families
If you're between the ages of 55
and 65, you can add an additional $700 to the deduction limits in 2006.
Do the tax benefits phase out at
certain income levels?
Unlike many other tax breaks,
there aren't any income limits. Anyone under age 65 who buys a qualified
high-deductible policy can open an HSA.
What's the
difference between the new HSAs and the flexible-spending accounts? It seems
they are for the same purpose.
The tax benefits of both plans
are quite similar, but there are several differences. The biggest and most
important difference is that your HSA balances can roll over from year to year
and continue to grow tax-deferred.
Money in your flex plan must be
spent by the end of the plan year or you lose it. That may sound like a big
negative, but flex plans can save you a lot
of money even if you don't spend every nickel. Also, you can open a
flexible-spending account only if the plan is offered by your employer, and you
don't need to have a high-deductible health insurance policy.
If my employer offers both, can I
fund my flexible spending plan, too?
No. You cannot have an HSA if
you use a flexible-spending account to pay health-care costs or if you have
other medical coverage (say, through a spouse's policy). However, if your flex
plan restricts reimbursements to wellness care (such as annual physicals) and
vision and dental care, you can have an HSA too.
If I set
up HSA through my employer, what happens if I switch jobs?
You can keep the money in an HSA
account even after you leave that job, similar to a 401(k). But you will get
stuck with a 10% penalty -- plus an income-tax bill -- if you use any of the
money for nonmedical expenses before age 65.
What happens if I want to
withdraw the money for nonmedical expenses after age 65?
You won't be hit with the 10%
penalty if you use the money for nonmedical expenses after age 65, but you
would still have to pay income taxes on the money. Keep in mind that you can
continue to withdraw money from the account tax-free for qualified medical
expenses after age 65.
Can a
couple who is planning to retire early open an HSA?
Sure. Anyone under age 65 can
contribute to an HSA if he or she buys a high-deductible health insurance
policy, and you can contribute an extra $700 in 2006 if you're 55 or older.
This catch-up contribution amount will increase by $100 per year until it
reaches $1,000 in 2009.
You can't make new HSA
contributions after age 65, but you can still use the money in your account
tax-free for medical expenses at any age. You'll owe income taxes on the money
-- but no penalty -- if you withdraw the money for nonmedical expenses after
age 65.
Do
contributions to an HSA in any way affect one's ability to contribute to an
individual retirement account?
No. Your HSA contributions won't
affect your IRA limits -- $4,000 per year or $4,500 for those over 50. It's
just another tax-deferred way to save for retirement.
