Insurance Quotes & Advice

A Health Savings Account(HSA) is a special medical account with preferential tax treatment eligible to individuals or families enrolled in High Deductible Health Plans(HDHP). 

 For 2008, individuals are qualified if they are enrolled in a health plan with at least an annual deductible of $1,100, for families the amount is $2,200 and are allowed to contribute a maximum of $2,900 and $5,800 respectively during the calendar year.

Money contributed to a HSAs are tax deferred and can be invested and gain in value like an IRA.  Funds withdrawn and used for qualified medical expenses receive no federal tax liability.

Despite the positive tax benefits and the lower cost of premiums of HDHPs, HSA have been slow in gaining popularity. A number of healthcare providers surveyed reported that only a fraction of those eligible actually open a HSA.

HSA were created in an effort to combat the growing problem of healthcare in this country, namely the cost.  By giving more control and accountability to consumers, it was believed that it would reduce the cost for routine medical care.

A common criticism of the plan is that it only benefits the young and healthy or the wealthy, which can use HSAs as tax shelters.  Many believe those of the lower income classes which would be more likely to qualify for HSAs due to the higher occurrence of HDHPs, don’t earn enough and currently lack incentive to invest in these plans.

The latest report issued by the Medicare Board of Trustees stated that the program will become insolvent by 2019.  Last year’s report also set in to motion the 45% cost trigger warning which forces the President and Congress to address the issue sometime this year.

When Congress created a universal prescription drug benefit with the Medicare Modernization Act of 2003 (MMA)–adding an estimated $8 trillion to the program’s long-term unfunded liability–it enacted a “cost containment” mechanism designed to control excessive general revenue funding for Medicare.

That amount becomes “excessive” when it funds more than 45 percent of the total Medicare outlays. The “trigger” for presidential and congressional action is when two consecutive Medicare trustees’ reports project that the “excessive” threshold will be met within seven years. 

The Medicare program was initially to be funded through the use of payroll taxes but the explosive growth of healthcare costs has far outstripped it’s ability to fund the program.  Most of the attention lately has been given to Social Security but in contrast that program isn’t expected to become insolvent until 2041.

The program’s growing financial woes has been accumulating for years and the cost trigger warning does little in of itself to address the long term unfunded liabilities, as it only concerns the 45% general revenue funding level.  To deal with the program’s liabilities, the government can either raise taxes, cut benefits or lower healthcare costs.

Obviously controlling healthcare costs would be the best possible solution, but seeing as no one in the government has figured out how to do that yet, that only leaves the two unpalatable options.  What ever they do decide to do, they need to do it quickly because time is running out.

In what has become more and more commonplace, employers are shifting much of the burden of healthcare insurance to employees.  Individuals are having to pay more these days as companies try to control the escalating costs of healthcare by cutting back on benefits.

While this trend started a few years back in the private sector, public sector employees are also starting to find their benefits being reduced.  As real estate prices have fallen across the country, municipalities are finding it harder to maintain their budgets with shrinking revenue from property tax rolls.

Not only current employees are feeling the pinch but many companies have also reduced benefits for retirees as well.  It can be especially difficult for those individuals who are retired and are not yet eligible for Medicare benefits. 

It has also seemed like healthcare policy in this country has shifted the focus from the elderly to the uninsured.  Americans are seeing insurance costs rising across the board as they get older

It has become a difficult choice for employers in both the private and public sector.  In these  economic conditions, they are basically forced to either reduce employee benefits or cut back on jobs.