One of the most widely publicized and hotly debated forms of insurance in America today, health insurance is the subject of intense political and social debate. A rapidly evolving and extremely complex subject, health insurance is also one of the most important benefits offered by employers, and government agencies.
Types of Insurance
Medical Insurance typically covers and specifies payment levels for doctor visits and treatment, medications, hospital stays, emergency room visits, surgical treatment, and so forth. There are wide variations in coverage plans, with numerous combinations of covered and excluded items, different coverage levels, deductible amounts, and other variables that make it impossible to offer a general statement regarding all coverage plans. Most plans offer an open enrollment period annually, during which prospects may select from different coverage plans. Careful selection of the appropriate plan for each individual is a critical task.
Dental Insurance is sometimes included in medical plans, but more often it is a separate policy. Virtually all dental plans cover annual or semi-annual cleanings and check-ups, with many plans increasing the covered percentage with regular appointment attendance over time. Routine treatments such as cavity fillings, bridges, and the like, are also typically covered, though the amount of coverage can vary. Braces are sometimes covered for minor dependents, and more rarely for adults. Cosmetic procedures are typically not covered in basic plans.
Vision insurance is often offered as a separate plan to go along with medical insurance. Vision plans typically cover an annual check-up, with glasses or contacts covered to a pre-determined limit every year or two. Necessary medical procedures to protect or correct eye health are usually covered by major medical insurance. At this time LASIK or other corrective procedures are rarely covered.
One of the biggest trends in medical insurance over the past two decades in the United States has been the rise of managed care as a primary delivery model for medical care. Based on the concept of centralized decision making, pooled resources, and efficient delivery of services, Health Management Organizations, or HMOs, do offer economical coverage, often at much lower premiums than privately managed insurance plans.
Medicare and Medicaid
The United States government has, for many years, funded two particular programs to help extend medical coverage to individuals who may not be able to otherwise access the necessary health care. Medicare is designed to help senior citizens at age 65, and Americans permanently disabled for 24 months or more pay for their health care. More recently, the Medicare Part D program was set up to help Medicare members pay for prescription drugs. Medicaid is intended to help low income Americans obtain health care. Medicaid benefits vary from state to state.
Health Matching Accounts
Health Matching Accounts combine a major medical health insurance plan that will pay medical expenses after a patient has paid a deductible, and co-pay for medical care. The unique feature of combining up-front out of pocket (“deductible”) medical insurance plans with an HMA is that a patient can open a tax exempt savings account to fund the deductible. After funding the deductible the sick or injured patient can withdraw money from the Health Matching Account without any tax penalty to pay out of pocket co-pays.
Variable Use HMA
Like a rainy day fund, a person with an HMA puts money aside in his/her own savings account in addition to paying a health insurance premium for insurance that will pay when a catastrophe happens. The major medical insurance plan can be any out of pocket cost health insurance. The combined cost of the medical insurance plan and the HMA savings component are likely the same or less than the cost of a traditional health insurance plan which begins paying medical bills immediately without deductibles. The big savings in an HMA plans are threefold:
- The money invested in the HMA savings stays in the account of the insured person until used to pay qualified medical expenses;
- The money deposited into the HMA savings account, and used for medical expenses is a deductible expense from Federal income taxes.
- The funds deposited into the HMA account are portable, and versatile. The funds move with the account holder. The account holder can transfer funds to variable accounts, at which time the funds become taxable.
Most people only care about the cost of health insurance when they have to pay the premium (i.e., monthly payment for the insurance.) This applies to individuals and families who purchase their own policies and also companies which purchase health insurance on behalf of employees and their families. HMA makes the most sense for these people.
They can choose higher deductibles reduce premiums, and every dollar they save on premium stays in their pocket.
HMA offers a unique feature to employers: they can partially or fully fund the HMA savings account for employees covered by a compatible health insurance plan. Employees can also make tax deductible contributions to their own HMA account, there is no maximum allowed by the IRS. Employers who contribute to an employee HMA account, get a tax deduction, spend less money in total for health insurance than they would spend on a traditional health insurance plan for their employees, and the employee likes this arrangement because any money deposited into their HSA account become theirs immediately. The immediate full vesting for the employees also helps those companies with no retirement accounts (e.g., 401k plan.)
Money in the HMA account can be used for non-medical expenses at which time the funds become taxable… Many employees see this as an opportunity to accumulate money for their retirement – assuming they stay healthy. If they become sick the money is there to pay for medical expenses. HMA – the new way to reduce the cost of financing medical care, and retirement.
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