INTRODUCTON – The term “health insurance” is commonly used in the United States to describe any plan that helps pay for medical expenses, whether or not through privately purchased insurance, social insurance or a non-insurance social welfare program funded by the government. Synonyms for this usage include “health protection, ” “health care coverage” plus “health benefits” and “medical insurance policy. ” 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 years. In the 1970’s most people who had health insurance had indemnity insurance. Indemnity insurance is often called fee-forservice. It is the traditional health insurance in which the medical provider (usually a doctor or hospital) is paid a fee for each service supplied to the patient covered under the policy. An important category associated with the indemnity plans is that of consumer driven medical care (CDHC). Consumer-directed health plans allow individuals and families to have greater control over their health care, including whenever and how they access care, what kinds of care they receive and how much they spend on health care services.
These plans are however associated with increased deductibles that the insured have to pay using their pocket before they can claim insurance plan money. Consumer driven health care plans consist of Health Reimbursement Plans (HRAs), Flexible Spending Accounts (FSAs), high insurance deductible health plans (HDHps), Archer Healthcare Savings Accounts (MSAs) and Wellness Savings Accounts (HSAs). Of these, the Health Savings Accounts are the most recent found witnessed rapid growth during the last decade.
WHAT IS A HEALTH SAVINGS ACCOUNT?
A Wellness Savings Account (HSA) is a tax-advantaged healthcare savings account available to taxpayers in the United States. The particular funds contributed to the account are certainly not subject to federal income tax at the time of down payment. These may be used to pay for qualified medical expenses at any time without federal taxes liability.
Another feature is that the money contributed to Health Savings Account move over and accumulate year over season if not spent. These can be taken by the employees at the time of retirement without any tax liabilities. Withdrawals for certified expenses and interest earned are not subject to federal income taxes. Based on the U. S. Treasury Office, ‘A Health Savings Account is an alternative to conventional health insurance; it is a savings product that provides a different way for consumers to pay for their particular health care.
HSA’s 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 energy to increase the efficiency of the United states 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 Savings Account was established under the Medicare Prescription Drug, Improvement, and Modernization Act passed by the U. Ersus. Congress in June 2003, with the Senate in July 2003 and signed by President Bush on December 8, 2003.
The following individuals are eligible to open the Health Savings Account –
– Those people who are covered by a High Deductible Health Plan (HDHP).
– Those not included in other health insurance plans.
– Those not enrolled in Medicare4.
Also there are no income limits on that may contribute to an HAS plus there is no requirement of having earned revenue to contribute to an HAS. Nevertheless HAS’s can’t be set up by those who are dependent on someone else’s tax return. Also HSA’s cannot be set up independently simply by children.
What is a High Deductible Wellness plan (HDHP)?
Enrollment in a High Deductible Health Plan (HDHP) is really a necessary qualification for anyone wishing to open a Health Savings Account. In fact the HDHPs got a boost by the Medicare Modernization Act which introduced the HSAs. A High Deductible Health Plan is a 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 include first dollar medical expenses. Therefore an individual has to himself pay the first expenses that are called out-of-pocket expenses.
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In a number of HDHPs costs of immunization and preventive health care are omitted from the deductible which means that the individual is usually reimbursed for them. HDHPs can be taken both by individuals (self utilized as well as employed) and employers. Within 2008, HDHPs are being offered by insurance companies in America with deductibles ranging from at least $1, 100 for Self plus $2, 200 for Self plus Family coverage. The maximum amount out-of-pocket limitations for HDHPs is $5, six hundred for self and $11, two hundred for Self and Family registration. These deductible limits are called IRS limits as they are set by Internal Revenue Service (IRS). In HDHPs the particular relation between the deductibles and the premium paid by the insured is inversely propotional i. e. higher the particular deductible, lower the premium and vice versa. The major purported benefits of HDHPs are that they will a) lower health care costs by causing sufferers to be more cost-conscious, and b) make insurance premiums more affordable for the uninsured. The logic is that when the sufferers are fully covered (i. electronic. have health plans with lower deductibles), they tend to be less health conscious and also less cost mindful when going for treatment.
Opening a Health Savings Account
An individual can sign up for HSAs with banks, credit unions, insurance companies and other approved companies. However not every insurance companies offer HSAqualified 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. Nevertheless , the account is always owned with the individual. Direct online enrollment within HSA-qualified health insurance is available in all claims except Hawaii, Massachusetts, Minnesota, Nj, New York, Rhode Island, Vermont plus Washington.
Contributions to the Health Savings
Contributions to HSAs can be manufactured by an individual who owns the account, simply by an employer or by any other individual. When made by the employer, the contribution is not included in the income of the worker. When made by an employee, it is handled as exempted from federal tax. For 2008, the maximum amount that can be led (and deducted) to an HSA from all sources is:
$2, nine hundred (self-only coverage)
$5, 800 (family coverage)
These limits are established by the U. S. Congress through statutes and they are indexed annually for inflation. For individuals above 55 years old, there is a special catch up provision that allows them to deposit additional $800 intended for 2008 and $900 for 2009. The actual maximum amount an individual can contribute also depends on the number of months he is covered by an HDHP (pro-rated basis) as of the first day of a month. Intended for eg If you have family HDHP protection from January 1, 2008 until June 30, 2008, then end having HDHP coverage, you are permitted an HSA contribution of 6/12 of $5, 800, or $2, 900 for 2008. If you have loved ones HDHP coverage from January 1, 2008 until June 30, 08, and have self-only HDHP coverage through July 1, 2008 to Dec 31, 2008, you are allowed an HSA contribution of 6/12 x $5, 800 plus 6/12 of $2, 900, or $4, 350 for 2008. If an individual starts an HDHP on the first day of a month, then he can contribute to HSA on the first day by itself. However , if he/she opens a merchant account on any other day than the very first, then he can contribute to the HSA from the next month onwards. Contributions could be made as late as Apr 15 of the following year. Efforts to the HSA in excess of the share limits must be withdrawn by the person or be subject to an excise tax. The individual must pay income tax on the excess withdrawn amount.