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Alabama Health Savings Accounts (HSA)

Health Savings Accounts (HSA Plans) is the government's way of giving you some help with health insurance premiums and medical expenses. The plans provide the opportunity to receive a sizable tax deduction and to use pre-tax money to pay for medical expenses. The tax advantages and the lower cost of the health insurance premiums, make HSA plans an attractive health insurance choice for everyone.

The contributions you make to your health savings account come right off of your gross income dollar for dollar. You do not have to be self-employed or itemize to get these savings.

Alabama HSA PlansWhat is a Health Savings Account?

A Health Savings Account (HSA) is a combination of a high deductible PPO Alabama health insurance plan and a special tax-advantaged savings account. You buy a low-cost high deductible health insurance plan and in addition, put money into a special savings account. For every dollar you put into the savings account, you can take a dollar off of your gross income at tax time.

You are self-funding with the government's assistance. It is a better deal than the big corporations get. If you are in a higher tax bracket, these plans are impossible to beat.

(You can call me at this point if you want and I will give you the explanation personally over the phone - 800-272-0512 from 9 AM to 8 PM or keep reading)

Longer More Detailed Explanation - But worth reading

There are two parts to a HSA plan. One is the high deductible health insurance plan that you must have to be able to open up the health savings account or HSA. The other is the actual savings account.

Let me anticipate two common questions:

1. You cannot use your current health insurance and just get a health savings account. These are special plans with a particular structure. We sell HSA health insurance plans. We are not a bank that sets up the savings accounts.

2. You cannot go to any bank and set up a health savings account. A Health Savings Account (HSA) is a trust or custodial account, and may be offered by insurance companies, banks, and organizations approved by the Internal Revenue Service (IRS). We have a long list of alternatives for you

Back to my explanation.

The health insurance plan is there to pay for the "big stuff". It is a full major medical PPO plan and will handle most situations. The savings account is used to pay for the "small stuff". A physician visit, prescription, etc., will be paid for with the savings account money.

You are paying for a high deductible health insurance plan AND putting money into a tax deductible savings account.

To avoid confusion let me restate it another way

Many people confuse the two money streams. You are paying an insurance premium every month for a high deductible PPO plan. At the same time you are putting additional money away in a special savings account. The money you spend on premiums can be a business deduction if you are self employed. The money you put into the savings account is deducted from your gross income (it does not matter if you are self-employed).

Will an Alabama HSA plan save me money?

This is the part where I show you the savings so read this carefully.

Look at the potential savings with this example:

We will use a family of 4 living in Birmingham. Male is 40 and female 35 with two children.

This plan has a $5,200 family deductible and then after the deductible, everything is covered 100%. The plan costs $366 a month. We are assuming a 28% tax rate for this illustration. If their tax bracket was higher the savings would be higher.

They will deposit into their savings account $300 month in addition to paying a premium for the health insurance.

Monthly Cost of Insurance $ 366.00 (monthly premium)
Health Savings Deposit $ 300
Total Monthly Payment $ 666.00 (Remember, I said payment not cost. Part went into your savings account and not to the insurance company.)
The government is letting you take the savings deposit off of your gross income. Tax Deduction for Savings Deposit (Savings Deposit x 28%) $84.00 a month

Cost of the Insurance After Tax Savings ($366 premium minus the $84 tax savings) $282.00

Don't forget, the $300 in the savings account is still your money and earning interest. You never gave it to the insurance company. You essentially took it out of one of your pockets and put it into another.

At the end of the year, there is $3600 in your account for your minor medical expenses minus what you spent. The government has given you over $1000 in tax savings. In other words, you received 28% interest (not even including the interest that the account earns) on each dollar that went into the savings account. You could have put in even more and saved more. Where the heck are you going to get 28%+ interest on your money? If you are in a 35% tax bracket you will really make a killing.

A typical family might spend $500 a year from the account on medical expenses. That means that $2500 rolls over into the next year. It does not disappear. It is your money and stays there until you use it or withdraw it.

You have the best of all worlds; protection from catastrophic medical problems, pre-tax money for all your medical expenses and significant tax relief.

If you are in the right tax bracket you cannot lose with an HSA plan. It is, if you will please forgive me, a no-brainer.

What is covered with the HSA plan?

This is a traditional Alabama PPO plan and it covers what most major medical plans cover. However, in addition to usual medical expenses, you can use the money in you medical savings account for:

- Medical expenses as defined by IRC § 213(d), including but not limited to: physician’s visits, Rx drugs, chiropractic, dental, vision, many “alternative” therapies such as acupuncture, and of course all other traditional in-patient and out-patient medically related expenses.

- COBRA premiums

- Health premiums paid while individual is receiving unemployment compensation

- Long-term care insurance premiums

Who is eligible for an Alabama HSA?

Just about every tax payer.

What Are the Benefits of an Alabama HSA

1. Value

You save more money with high deductible medical insurance. The first $1500 to $2500 of medical insurance benefits cost more in premiums than is returned to you in claims. In contrast, the money paid for health care through an Alabama HSA will be subject to nominal administration fees.

Typically, a family might spend $5,000 a year in health insurance premiums and get less than $500 in actual benefits. If you cut your premiums to $3500 a year and put the difference in your Alabama HSA savings account, you will not only lower your premiums, you will have also lowered your taxable gross income by $1500. It is a win-win situation.

2. Better Choices

HSA's preserve freedom of choice in terms of choosing doctors, hospitals and other health care providers. Patients become consumers of healthcare without the need for referrals, co-pays, etc. Also, a physician's choice of therapies can be made based on their value to the patient, not on the basis of the patient's limited insurance coverage.

3. Increased Access to Services

Certain services not typically covered under traditional benefit plans, such as long-term care, eye-care and dental care, can be accessed through an HSA. HSA's place fewer restrictions on the range of medical services covered.

4. Better Patient-Physician Relationships

With a HSA plan, the physician-patient relationship is freed from the intrusion of third-party payers. Physicians don't face external pressure to withhold beneficial care or to obtain third-party authorization for proposed treatments, an often time-consuming process.

5. Savings

With a HSA, you may carry balances in your account over from one year to the next. If medical expenses are low, the HSA allows you to accumulate and invest funds tax-free. HSA balances can become important savings vehicles for purchasing long-term care insurance and other post-retirement needs not covered by Medicare.

Who can make contributions to a HSA?

Either a qualified individual or an employer can make contributions.

How much can I contribute to my HSA?

You can put up to $2,900 if you are single or $5,800 if the plan covers two or more people. If you are 55 to 65 you can put in an additional $900 (for 2008).

Can I invest the money any way I want?

Most HSA plans offer a savings account that pays an interest rate higher than the current bank rate. There are other companies that are set up to handle this savings account for you and permit a broader range of investments. The idea is though, to have the money available for medical expenses and not flush it down the toilet with the latest dot-com stock.

What happens to my HSA at the end of the year?

The money in your account belongs to you. You can roll the money over for future medical expenses or save for retirement.

How do I get money out of my HSA for medical expenses?

Some plans use a checking account and others a debit card. You can also write a personal check and reimburse yourself from your HSA account.

How do I get a Alabama HSA Plan?

Unfortunately, many health insurance agents and carriers have avoided Health Savings Account plans. SInce the premiums for these plans are lower, many commissioned agents do not sell HSA plans. It also requires more than an "order taker" to properly explain these plans and how to best utilize their features. Use the Get Quote button at the top of this page to reach an HSA specialist or call us direct at 800-272-0512.

Is an Alabama HSA Plan right for me?

- A desire not to pay high health insurance premiums

- A desire to reduce federal income taxes

- The willingness to assume the risk inherent with a higher “deductible” amount (offset by lower premiums & taxes)

- The discipline to fund the savings account instead of over-paying for traditional health insurance

- The ability to sleep at night without any “co-pays” for little bills (if this is not you, then the HSA is not for you!)

- An interest in saving additional tax-sheltered money toward retirement

Call us at 800-272-0512 for a fast, free quote.

Martin Unger - President

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