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 Affordable
Group Health Insurance Plans
The greatest percentage
of overall health policies issued
are on a “group basis”.
All eligible members of a group
are covered regardless of physical
condition, age or gender. This is
generally the lowest cost to the
insured and in Texas, the employer
is required to pay a minimum of
50% of the premium.
And tax considerations
shift the some of the cost of covering
employees to the government. A pretax
Section 125 cafeteria plan can save
the employer FICA taxes due to the
employees having less taxable income,
and the employee benefits by paying
less in income taxes. The related
health accounts are described below:
Health Reimbursement
Accounts
Health reimbursement arrangements,
also known as "health
reimbursement accounts"
or "personal care accounts,"
are a type of health insurance plan
that reimburses employees for qualified
medical expenses. The U.S. Department
of the Treasury issued guidance
on health reimbursement accounts
in a revenue ruling in June 2002.
Because these plans are just emerging,
their designs are still evolving.
Health reimbursement
accounts consist of funds set aside
by employers to reimburse employees
for qualified medical expenses,
just as an insurance plan will reimburse
covered individuals for the cost
of services incurred. The guidance
provided by the Department of the
Treasury makes it clear that health
reimbursement accounts are not a
new type of account designated within
the Internal Revenue Code. Rather,
employers qualify for preferential
tax treatment of funds placed in
a health reimbursement account in
the same way that they qualify for
tax advantages by funding an insurance
plan. (Employers can deduct the
cost of an insurance plan -- and
now a health reimbursement account
-- as a business expense under Internal
Revenue Code section 162.)
Health reimbursement
arrangements are open to employees
of companies of all sizes, unlike
medical
savings accounts that are only
available for small business employees.
A health reimbursement account provides
"first-dollar" medical
coverage until funds are exhausted.
For example, if an employee has
a $500 qualifying medical expense,
then the full amount will be covered
by the health reimbursement arrangement
if the funds are available in the
account. Under a health reimbursement
account, the employer provides funds,
not the employee. All unused funds
are rolled over at the end of the
year. Former employees, including
retirees, can have continued access
to unused reimbursement accounts.
Health reimbursement
accounts remain with the originating
employer and do not follow an employee
to new employment.
Medical Savings
Accounts
An MSA, or Medical
Savings Account, is an option
available to those who work for
an employer with 50 or less employees
or those who are self-employed as
long as they have a high-deductible
insurance plan. Medical savings
accounts can be used along with
your health insurance as long as
the deductible
is high and is your only insurance
plan. The deductible must be $1,600
or more annually per individual,
and $3,200 or more annually per
family. All your medical costs can
be paid from the MSA before reaching
your deductible, except for premiums,
unless you are between jobs and
without income. Any money put into
the MSA are tax-exempt and you get
to keep any money that you don‘t
spend. Money in the MSA can be also
be withdrawn for non-medical expenses,
but is subject to a 15 percent tax.
An FSA, or Flexible
Spending Account, is like a
medical savings account, but these
don’t have to be used with
high-deductible insurance plans.
Anyone whose employer offers these
plans are eligible to have an FSA.
However, any money not spent on
medical expenses is lost to you
once in the account, and you cannot
withdraw any money for non-medical
expenses.
Health Savings
Accounts
Health
Savings Accounts are fairly
new since they were only signed
into law in December of 2003. They
are actually a better version of
medical savings accounts or MSAs.
An HSA is an account, similar to
an IRA, devoted solely to health
expenses and used with a high deductible
health insurance policy. The idea
is the high deductible insurance
policies cost less and the money
saved can be put into the HSA account.
The funds are then used for medical
fees until the deductible is met.
Any unused portion remains in the
account and earns tax-free interest.
The insurance is used for medical
problems that exceed the deductible
of the policy.
Advantages
of HSA Accounts
There are many other tax advantages
with an HSA:
within a limit, money deposited
into an HSA account is exempt from
income tax; some states also make
the money free from state tax; the
money withdrawn to pay medical expenses
is also tax free; HSA money is portable
and can be moved with you when changing
jobs; and again, money not used
is allowed to stay in the account,
earning interest that is not taxed.
Also, after the age of 65, you can
withdraw your money from the account
for any reason.
Disadvantages
of Health Savings Accounts
That leads into a few disadvantages:
until the age of 65, any money that
is not spent on medical needs out
of the account is added to the person’s
gross income for tax purposes and
will generate an additional 10%
tax. Also, you must always have
a high deductible health insurance
policy in place, with the deductible
a minimum of $1000 for single coverage
and $2000 for family coverage. There
is also a stipulation that in the
insurance policy, out-of-pocket
expenses cannot be more than $5000
for individuals and $10,000 for
families. One more negative issue:
there could be potential problems
for employers when initially working
with the new HSA and the existing
health plan.
Can I get a
HSA Plan?
In order to utilize a Health
Savings Account, you must be
under 65 years of age and you cannot
be claimed as a dependent under
anyone else’s tax return. You
must have a high deductible health
insurance policy at the time of
deposits into the HSA account. You
also cannot have other health insurance
at the same time, except the following
types: specific injury and accident,
disability, long term, dental and
vision.
What can a
HSA do for me?
There is no doubt that the
new Health
Savings Accounts will provide
lower premiums for health insurance,
be a great investment vehicle, and
provide tax benefits for those who
are able to use them. Just the ability
to use pre-tax dollars to pay for
medical fees is a huge improvement.
Because the high premium of regular
health insurance is a stumbling
block to many people’s ability
to afford health insurance, the
use of HSAs might be the edge they
need to manage insurance now.
Group insurance
is written under a Master Policy
for the group, with each individual
of the group receiving a Certificate
of Insurance that contains a summary
of benefits. Should an employee
become terminated or downsized,
or have their hours reduced to the
point they no longer qualify as
full time employees, then the provisions
of COBRA
may come into play.
COBRA states all
employers with 20 or more employees
must provide a health coverage “continuation
option” to all covered employees
and dependents for up to 18 months.
In addition, HIPAA
(Health Insurance Portability and
Accountability Act of 1997) was
designed to provide coverage for
people with preexisting conditions.
HIPAA guarantees the continuation
of health benefits to individuals
who have been covered for 12 months
immediately preceding a change of
employment and who choose to participate
in the new employer’s group
health plan.
FOR A GROUP INSURANCE
QUOTE PLEASE CALL TOLL FREE 877-732-1793
OR COMPLETE OUR SECURED
ON-LINE APPLICATION.
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