Health Savings Account Medical Plans
What do they mean for Retirees?
By Andrew Devore
If you are currently over the age of 65 and on Medicare, this brief article may not be for you (but your children could greatly benefit, so you may wish to keep reading). However, if you are an EARLY RETIREE
, then by all means read on.
This article will explain the key points as to why a Health Savings Account Medical Insurance Plan is far more beneficial compared with the traditional type of health insurance plan you likely are used to. At the end of this short article, you may have more questions. Please contact the author through the website link at the end.
First a brief background on HSAs. Health Savings Accounts
were first passed into law by the US government in December 2003 as a way for the average American to deal with the growing costs of medical care, especially during retirement when one's income generally drops drastically while one's medical expenses can increase greatly. Of course Medicare helps, but in addition to the costs of Medicare Part B & Part D Premiums, there are numerous kinds of medical expenses that Medicare does not cover. One of these expenses, for example, is long term care and long term care premiums
. Health Savings Accounts were designed to help curb some of these costs in addition to acting as a general retirement account and tax savings vehicle.
Medical Insurance is today's newest form of an investment vehicle.
Health Savings Account Medical Plans Vocabulary
Here is a bit of vocabulary to review in order to make life easier. These terms all basically mean the same thing.
- Health Savings Account
- HSA Health Savings Plan
- Health Savings Plan
- HSA Qualified Plan
Regardless of the name used, a Health Savings Account (HSA) is always a two component entity.
- the insurance plan
- the savings account associated with it
These two parts reflect a fresh new concept in health insurance called consumer driven health care. The idea is that instead of paying the insurance companies a bloated premium to cover more minor health care expenses, it is far better for the consumer (that's you and me) to pay him or herself first by contributing to a personal account and then paying for these minor expenses from the account if and when they arise. To illustrate this concept, just as we really do not expect our car insurance policy to pay for oil changes or minor auto repairs, or homeowners insurance to replace the carpet every time we spill wine, Health Savings Account (HSA) Insurance Plans are not intended nor designed to pay for routine doctor visits, prescriptions, and relatively minor doctor & hospital bills. This results in HSA premiums being generally 25%-50% lower than traditional health insurance premiums.
Still however, many HSA Health Savings Plans plans do cover annual physicals, OBGYN exams, and immunizations before the deductible must be met. HSAs ultimately are designed to protect you and your family's finances in the event of a catastrophic medical claim. This is what health insurance is really best suited for in order to receive the best return on one's investment (ROI) when paying each month.
HSA IRS triple tax advantages
All of the money that you contribute into your Health Savings Account is 100% tax deductible. The money then grows 100% tax free and you can invest it into any medium you like such as stocks, bonds, gold, mutual funds, real estate trusts, etc. Finally, you may immediately make tax-free withdrawals to pay for virtually any medical expense. These three combined factors can mean serious savings every year. One of countless real world examples has a client saving $3,198 every year simply from switching over from a Blue Shield Spectrum PPO 750 Plan to a Shield Spectrum PPO HSA Savings Plan $2,400.
Both of these policies provide access to the exact same PPO network of doctors, hospitals, and specialists. They both have a yearly $4,000 out-of-pocket expenditure limit.
The idea is to simply transfer the money that you are saving each month with a lower-premium HSA plan directly into your HSA account. This doesn't cost a penny to do. Better yet, for the maximum benefit you can contribute up to the maximum annual limits. There are special catch-up contribution provisions if either you or your spouse are between the ages of 55 and 65. Please visit the Web sitebelow, to get more details about Health Savings Accounts and also have your questions answered.
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