INTRODUCTON – The term “health insurance” is usually 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 well being program funded by the government. Alternatives for this usage include “health coverage, ” “health care coverage” and “health benefits” and “medical insurance policy. ” In a more technical sense, the term is used to describe any form of insurance coverage that provides protection against injury or even illness.
In America, the health insurance industry has changed rapidly during the last few decades. In the 1970’s most people who experienced 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 enable individuals and families to have greater control over their health care, including when and how they access care, what types of care they receive and how much they spend on health care services.
These plans are however associated with higher deductibles that the insured have to pay from their pocket before they can claim insurance policy 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 and they have 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 funds contributed to the account are not subject to federal income tax at the time of deposit. These may be used to pay for qualified healthcare expenses at any time without federal tax liability.
Another feature is that the funds contributed to Health Savings Account move over and accumulate year over calendar year if not spent. These can be taken by the employees at the time of retirement without any tax liabilities. Withdrawals for qualified expenses and interest earned will also be not subject to federal income taxes. Based on the U. S. Treasury Office, ‘A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their particular health care.
HSA’s enable you to pay for current health expenses and save intended for future qualified medical and retiree wellness expenses on a tax-free basis. ‘ Thus the Health Savings Account is an hard work to increase the efficiency of the American health care system and to encourage individuals to be more responsible and prudent in the direction of their health care needs. It falls in the category of consumer driven health care insurance options.
Origin of Health Savings Account
The Savings Account was established under the Medicare Prescription Drug, Improvement, and Modernization Act passed by the U. H. Congress in June 2003, by Senate in July 2003 and signed by President Bush on December 8, 2003.
The following individuals are eligible to open a Health Savings Account –
– Those who are covered by a High Deductible Health Strategy (HDHP).
– Those not covered by other health insurance plans.
– Those not enrolled in Medicare4.
Also you can find no income limits on who may contribute to an HAS plus there is no requirement of having earned revenue to contribute to an HAS.
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Nevertheless HAS’s can’t be set up by those people who are dependent on someone else’s tax return. Furthermore HSA’s cannot be set up independently 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 particular HDHPs got a boost by the Medicare insurance Modernization Act which introduced the particular HSAs. A High Deductible Health Program is a health insurance plan which has a particular deductible threshold. This limit should be crossed before the insured person may claim insurance money. It does not cover first dollar medical expenses. Therefore an individual has to himself pay the original expenses that are called out-of-pocket costs.
In a number of HDHPs costs of immunization and preventive health care are ruled out from the deductible which means that the individual can be 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 firms in America with deductibles ranging from quite $1, 100 for Self and $2, 200 for Self and Family coverage. The maximum amount out-of-pocket limits for HDHPs is $5, six hundred for self and $11, 200 for Self and Family enrollment. These deductible limits are called IRS limits as they are set by Internal Revenue Service (IRS). In HDHPs the relation between the deductibles and the premium paid by the insured is inversely propotional i. e. higher the deductible, lower the premium and vice versa. The major purported benefits of HDHPs are that they will a) lower health care costs by causing patients to be more cost-conscious, and b) make insurance premiums more affordable for the uninsured. The logic is that when the patients are fully covered (i. electronic. have health plans with reduced deductibles), they tend to be less wellness conscious and also less cost conscious when going for treatment.
Opening the Health Savings Account
An individual can sign up for HSAs with banks, credit unions, insurance companies and other approved companies. However not all insurance companies offer HSAqualified health insurance programs so it is important to use an insurance company that offers this type of qualified insurance plan. The employer can also set up a plan for the employees. However , the account is always owned from the individual. Direct online enrollment within HSA-qualified health insurance is available in all claims except Hawaii, Massachusetts, Minnesota, New Jersey, New York, Rhode Island, Vermont plus Washington.
Contributions to the Health Savings
Contributions to HSAs can be created by an individual who owns the account, simply by an employer or by any other person. When made by the employer, the share is not included in the income of the employee. 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 through all sources is:
$2, 900 (self-only coverage)
$5, 800 (family coverage)
These limits are established by the U. S. Congress through statutes and they are indexed annually regarding inflation. For individuals above 55 years old, there is a special catch up provision which allows them to deposit additional $800 for 2008 and $900 for 2009. The actual maximum amount an individual can lead also depends on the number of months he is covered by an HDHP (pro-rated basis) as of the first day of a month. For eg If you have family HDHP coverage from January 1, 2008 until June 30, 2008, then cease having HDHP coverage, you are allowed an HSA contribution of 6/12 of $5, 800, or $2, 900 for 2008. If you have family HDHP coverage from January 1, 2008 until June 30, 08, and have self-only HDHP coverage through July 1, 2008 to December 31, 2008, you are allowed an HSA contribution of 6/12 x $5, 800 plus 6/12 associated with $2, 900, or $4, three hundred and fifty for 2008. If an individual opens an HDHP on the first time of a month, then he can give rise to HSA on the first day by itself. However , if he/she opens a free account on any other day than the 1st, then he can contribute to the HSA from the next month onwards. Contributions could be made as late as April 15 of the following year. Contributions to the HSA in excess of the factor limits must be withdrawn by the individual or be subject to an bar tax. The individual must pay income tax on the excess withdrawn amount.