Sunday, December 15, 2013

How do HSAs Work?

What is a health savings account plan?
An HSA is a special tax-sheltered savings account for medical bills. It is similar to an IRA. Instead of buying high-priced insurance with low co-pays, you buy a low cost policy (with a “high” deductible) for the “big” bills and save the difference–in the HSA–to cover “small bills”. Money deposited into the account is 100% tax deductible and can be easily accessed by check or debit card to pay medical bills tax-free (even stuff not covered by insurance like dental and vision). What you don’t use for medical bills is yours to keep–it stays in your account and keeps growing on a tax-favored basis to a) cover future medical bills; or b) supplement retirement, just like an IRA. In sum, the HSA offers 1) lower premiums; 2) lower taxes; 3) freedom of choice; and 4) more cash at retirement.
Establishing an HSA plan is as easy as 1-2-3…
1. Take out a “high deductible” HSA-Qualified health insurance policy. Your monthly premiums will be low because of the nature of the policy. CAUTION: Not just any policy with a so-called “high deductible” will qualify you for the HSA plan—it must be a policy that meets the specific HSA design specified by Congress.
2. After the HSA-Qualified insurance policy is issued and in-force, then establish the actual HSA savings account at a qualified financial institution. Under the HSA law, you have a wide variety of investment options in addition to fixed accounts, including mutual funds, stocks and bonds. You are always free to maintain the account at any financial institution that is a bona fide HSA custodian registered with the IRS. Blue Cross offers a program through Mellon Bank.
3. Begin funding the savings account. There is no minimum contribution required; however, just like an IRA, there is an annual maximum. Be sure not to contribute more than the maximum amount allowable each year. Click here to learn more about the current HSA guidelines (as established by Congress).
  • When you file your taxes each year, all of the money you have deposited into your own HSA will be tax-deductible on line 25, front page, of your 1040 form (assuming you have qualifying income as a self-employed person or you are participating as an employee at a company with under 50 employees). This will cut your tax bill by an average of $1,200 for a family (and about $500 for a single). It is absolutely correct to say that with an HSA, you are paying medical bills with money you would otherwise have paid in taxes! How cool is that? (see examples below—you also save money on the actual bill in most cases)
  • When you visit a physician, you pay with tax-free money from your savings account. The account is easily accessible by debit card or check. If your provider is a member of the PPO discount network you have joined (with your HSA insurance policy), your bill will actually be reduced before you have to pay it. (Example: $60 Dr. visit reduced to $42. You pay the $42 with tax-free money from your HSA.)
  • When you need to purchase prescriptions, simply visit a participating PPO discount pharmacy (most all major chains participate) and pay your discounted amount on the spot either by debit card or check directly from your HSA account (again, with tax-free money).
  • Some medical expenses not covered by the insurance policy may still be considered allowable expenses under the HSA. For example, dental work, including braces, vision care, including glasses, eye surgery, alternative therapies such as acupuncture, etc. can all be paid for with tax-free money from the HSA.
  • Keep funding the HSA every year to the maximum amount allowable by year (now up to 100% of the deductible amount with the new HSA). This will reduce your taxes each year plus, more importantly, will give you a larger and larger cushion against unexpected “catastrophic” type claims in the future. After only two or three years of good health and steady funding of the HSA, there should be more than enough in the savings account to cover any foreseeable medical expenses without ever having to dip into your pockets. (Note: dipping into your HSA savings account is not the same as dipping into your pockets—your HSA is the functional equivalent of “insurance” coverage for the small bills—what you don’t have to use is yours to keep—which is dramatically different than paying an insurance company a few thousand dollars a year to do virtually the same thing…insure the “small” bills)
  • Remember, what you don’t use for medical bills from the HSA is yours to keep—just like an IRA. The balance continues to grow and grow on a tax-sheltered basis. Once you reach age 65, the account can basically be used just like a traditional IRA (withdrawals subject only to income tax-reporting—no “premature withdrawal penalties”).
We hope you have found this information to be helpful.

Sunday, December 1, 2013

Fable of the Gullible Gull

In the Reader's Digest, October 1950 edition, the Fable of the Gullible Gull is shared as a warning against dependency. The story is told of great flocks of sea gulls starving despite the good fishing waters nearby. Why were they starving? They were starving, because although there were plenty of fish to eat, the gulls did not know how to fish.

For generations the gulls depended upon a fleet of shrimping boats which would toss out the scraps to the gulls, but then the fleet moved.

"The shrimpers had created a Welfare State for the sea gulls. The big birds never bothered to learn how to fish for themselves and they never taught their children to fish. Instead they led their little ones to the shrimp nets. Now the Sea gulls, the fine free birds that almost symbolize liberty itself, are starving to death because they gave in to the 'something for nothing' lure! They sacrificed their independence for a handout."

The fable concluded with this, "Let's not be gullible gulls. We must preserve our talents of self-sufficiency, our genius for creating things for ourselves, our sense of thrift and our true love of independence."

Thursday, October 24, 2013

Possible Changes Coming to Premium Subsidies, Individual Mandate

Two major developments have recently occurred that may significantly affect the roll-out and final shape of the health care reform law. On Tuesday, October 22nd, a federal judge refused to dismiss a lawsuit that is critical to the future of the Affordable Care Act's (ACA) premium subsidies program. The plaintiffs who filed the suit claim that the ACA does not authorize premium subsidies to be awarded to individuals residing in states where the federal government is running the new health insurance exchange. If they succeed, it could cripple the ACA’s future, which relies heavily on eligible individuals in all fifty states receiving subsidies for insurance coverage purchased through an exchange. The statutory provision in question appears to limit subsidy eligibility to individuals residing in states that run their own exchange.  This alone, plaintiffs argue, should dictate the outcome of the case. The federal government, however, has argued that the provision should be read in the context of the entire statute; it would make no sense, the government argues, for Congress to draft the statute in a manner that does not permit individuals in states with federally-run exchanges from receiving subsidies.  

The judge’s decision on October 22nd refused to dismiss the case on standing grounds, finding that four individual plaintiffs were within the “zone of interest” that entitled them to bring the case.  At the same time, the judge refused to prevent the subsidies from being awarded until he issues a ruling.  Instead, he said he can rule on the merits of the case by February 15, 2014 (the current effective date for the individual mandate).  The Judge said he will consider the case on an expedited schedule in order to meet that deadline.

In a separate development, on the evening of Wednesday, October 23rd, the Administration announced that it would be "delaying" the ACA individual mandate by at least six weeks. Under previous guidance, the Administration indicated that individuals would be required to enroll in a health plan by February 15th, 2014 to meet the March 31st coverage deadline to avoid a penalty, as there is a delay with processing the application and beginning coverage. This most recent announcement seeks to align those two dates, most likely making March 31st the final application date for enrollment as well. It is thought the Administration is taking this step to alleviate confusion over two dates, but also possibly buy themselves potentially another six weeks to allow further repairs to the widely-inaccessible exchange site. Written guidance is forthcoming, so certain details about the delay are unclear, like if waivers will be issued for those applying after February 15th.

Next Steps: The review of the premium subsidies, and also the need to delay the individual mandate and the inaccessibility of the exchanges, has reinforced the idea that the law is very much in need of repair to function in a way that won't harm consumers or the insurance industry. Most notably, the unavailability of premium subsidies outside of exchanges has placed consumers, especially the most needy, in a predicament. NAIFA President, John Nichols, recently stated, "Those hurt most by the glitches are the most needy. Individuals who aren't eligible for subsidies can easily obtain coverage outside the exchanges on the existing market, which isn't filled with glitches and delays. Unfortunately, lower income Americans can only use their subsidies for coverage purchased inside the exchanges. This is one of the reasons NAIFA argued that the subsidies should be available both inside and outside the exchanges."

As events unfold, such as the mandate delay, the subsidy review, and the continued exchange inaccessibility, NAIFA will look for opportunities to make subsidies available for consumer outside of the exchanges, as well as advocate for other necessary changes.

Monday, October 21, 2013

The news of late stinks!

Even those not involved directly with selling health insurance cannot escape hearing about and seeing the problems with the debut of Obamacare. It is a perfect demonstration of why government should not be trusted with our health care.

People with common sense and reality-based principles understand that government programs are by definition political. Politicians and bureaucrats are not personally accountable for failure, as in the private sector, so failure is acceptable to them. Thus we get cost overruns, fraud and poor service.

Political consideration number one in the launch of Obamacare was the 2012 presidential election. Defenders of the incumbent did not want voters to know there would be a huge jump in the price of insurance for most people not being subsidized. They didn’t want supporters or critics to know about the rectal exam that would be required by the exchange websites. They didn’t want the masses to know about the four, five and up to eight thousand dollar deductibles. They didn’t want people to learn of the limited (skinny) networks that may not include THEIR hospital, doctor or pediatrician. They knew that revealing those details too early would tip voters toward the challenger who promised to stop it.

Federal agencies sat on a pile of major health, environmental, and financial regulations that lobbyists, congressional staffers, and former administration officials later admitted were being held back to avoid providing ammunition to the critics.

The explosion of federal regulations was already crushing our economy and disgusting citizens who care about freedom. So before the election, Nanny did a slow-mo partial shutdown, if you will, throwing every Obamacare deadline years behind schedule. And yet nobody accepts any blame for their actions

When you are never blamed for failure, failure is acceptable. All that matters is political advantage. The worse your performance, the more important politics becomes. 

It is now looking like the system is so broken that only a few thousand people have been able to sign up.  At this rate, it will take 20 years to implement.  Experts are saying it will take many months to fix, way after the deadline for penalties for not signing up.

Another political consideration: Voters would freak out when they logged on and discovered that being affordable was not a real goal of ObamaCare.  Instead, voters would discover that the law had devised a system of redistributing bad luck, and in this case, the bad luck was going to fall on the young, people on Medicare Advantage, people working in small business, union workers, and the middle class.  The good luck was going to fall on a small slice of supporters in a narrow income bracket, plus people in ill health.

And like they say, elections have consequences. No matter what your profession, butcher, baker, candlestick maker; politics is your business.

Wednesday, October 2, 2013

It's not like a box of chocolates

Buying health insurance inside the health insurance exchange (HIX) is NOT like ordering a box of chocolates online.

Already there are people getting very frustrated with the system; web servers crashing, customer service phones keeping you on hold for 30 minutes and then unceremoniously dropping the call. Keep in mind, the website isn’t going to run out of health insurance policies. There are plenty enough to go around. And there is no glory in saying “I got mine the first week!” You should make your decision before Christmas, though. December 23rd is the cutoff for a January 1st effective date.

You may want to have this information with you when you sit down at your computer to explore the Washington Health Plan Finder website. Don’t log onto the site until you have plenty of time to go through the process. It is going to take you some time just to create an account. The good thing is that once you have created an account you can leave and come back later to pick up where you left off.

Remember to dance with the fellow who brought you! When you get into the website look for the tab to select an agent/broker and find my name, RICHARD EK

Buying Health Insurance Inside the Exchange (HIX)

Premium tax credits are available for people with household incomes no more than 4 times the Federal Poverty Level. Obtaining a tax credit (subsidy) is probably the only reason to buy health insurance inside the HIX. If household income exceeds 4 times the FPL it makes sense to buy outside the HIX.
How Do the Federal Poverty Levels Work?
Federal Poverty Guidelines depend on the total number of persons in the household. For healthcare purposes the same figures are used in the 48 contiguous states and in the District of Columbia, while higher values (reflecting higher living expenses) apply to Hawaii and Alaska. The 100% column shows the federal poverty guideline for each family size, and the percentage columns that follow represent income levels that are commonly used to determine health care costs for health programs like the Affordable Care Act.
2013 Federal Poverty Guidelines for 48 Contiguous States and DC
Federal Poverty Guidelines Used to Calculate Premiums, Cost-Assistance and Taxes in 2013 - 2014:
 Household Size
 For each additional person, add

What Do They Mean By "Household Size"?

For most families it is yourself plus the number of people that you claim as dependents on your income tax return. This may include children, parents, or other relatives who qualify as dependents on your tax return. Children of divorced parents are counted as the family of the parent who claims them as a dependent (even if the other parent has to pay for the child's health insurance). Do not include children who earn enough to support themselves, and so are no longer eligible as dependents, even if they still live at home.

What Does Income Include?

Expected 2014 gross income (before taxes) including wages, tips, net profit from self-employment, interest, rental income,  and other investment income, most pensions, social security payments and alimony.  This will be the amount called "Modified Adjusted Gross Income" shown on your tax return in line 4 of Form 1040EZ, line 21 of 1040A or line 37 of form 1040. If your only income is from a job it is the number shown in box 1 of your W2 form. Include income of all dependents (for example a child's summer earnings or dependent's social security) even if they filed a separate tax return.

Health Insurance Cost Calculator
or visit and click on “Health Ins. Cost Calculator”

Health Plan Finder (Washington)

Medicaid is Apple Health
Big changes are in store for health insurance coverage in Washington. Because of the Affordable Care Act (also known as Obamacare), more people will be able to get preventive care, like check-ups and cancer screenings, treatment for diabetes and high blood pressure, and many other health care services they need to stay healthy. And we’re changing the name of Medicaid. We’re calling it Apple Health.

You may have already heard of Apple Health for Kids. A while back we combined all our children’s health services into one program that’s streamlined and easy to remember — Apple Health for Kids. Apple Health for adults is the same idea. We will gradually combine all our adult Medicaid clients under the Apple Health umbrella.