How Do You Spell HSA?

Spelling was my Achilles Heel.  I couldn’t spell.  I even got a D in spelling on a report card!  And whether I was at home or school, when I asked an adult how to spell a word I would inevitably get the same answer, “Look it up”.  Looking up a word in a dictionary, decades before AI, meant that you took your best guess, failed, and kept on trying until you bumped into the correct spelling.  It was not efficient.  There was one benefit to this exercise.  Opening up a dictionary was like handing me a car with a full-tank of gasoline and access to the freeways.  There were no dead-ends or wrong turns.  And reading a dictionary was far more interesting than whatever project I had been assigned.

Our computers and phones now have spellcheck.  The big dictionary has been replaced by Google, Alexa, and Siri.  The information you need is at your fingertips or by simply asking your electronic assistant.  So I was very surprised when one of my life insurance clients recently asked me some questions about Health Savings Accounts (HSA).  I told him that the information was readily available and that I had covered this on my searchable blog.  He had little interest in reading the blog(!) and felt that I should put the information into a useable format for him and some of his friends and coworkers at a local large business.  I wrote him a letter.  Not only did I answer his questions he even insisted that I create a special page for this on my website.  Instead, I will just post the letter as part of today’s blog.

April 21, 2020

Dear Roger (Name changed so that my attorney can sleep at night):

It is important to remind you, up front, that I am an insurance agent not a CPA.  You should consult with your professional tax preparer about whether or not anything is deductible for you.  The information I am providing is based on my understanding of how these insurance policies impact my clients’ taxes.

The term H.S.A. is normally used to refer to two very separate things.  Part One is a High Deductible Health Insurance Policy.  Part Two is a Health Savings Account.  You can have Part One without Part Two.  You cannot have Part Two without Part One!  This is very important and has been an area of confusion.

A High Deductible Health Insurance Policy (HDHP):

·         For 2020, the IRS defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. An HDHP’s total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can’t be more than $6,900 for an individual or $13,800 for a family. (This limit doesn't apply to out-of-network services.)

·        All covered services must apply to the deductible prior to any copays or coinsurance.

·        The exception has been Preventive Care performed by a network provider.

·        A recently added exception is the diagnosis and treatment for COVID 19 which will be covered without deductible, copayment, or coinsurance.

·        It has been generally ruled that even telemedicine, other than for COVID 19, cannot be provided free or with copayments until the deductible has been met.

Once you have an HDHP, whether it is an individual policy or an employer sponsored group contract, you may open a Health Savings Account.

·        An HSA may be opened through an insurer, a bank affiliated with an insurer, a bank, or an online HSA bank

·        The employer may contribute $0 to the annual maximum

·        An individual or employee may contribute between $0 to the maximum

·         The annual maximum is the same regardless of who is contributing

·        The maximum contribution for 2020 is $3,550 for an individual and $7,100 for a family.

·        The catch-up contribution limit for those over age 55 will remain at $1,000.

Medicare:

A friend of mine, an attorney, had a couple of quick questions about Medicare.  He will be turning 65 soon and needed to confirm that he didn’t have to sign up for Medicare Part B since he plans to stay on his wife’s group health policy.  I verified that his wife works for a company with over 20 employees.  So yes, he doesn’t need Medicare Part B.  But, I asked, is the group plan a High Deductible Health Savings Account (HSA) Qualified Policy and do you contribute to the HSA?  He confirmed that Yes and Yes.  In that case, he must renounce Medicare Part A, too.  You cannot contribute to a Health Savings Account if you have Medicare.  In fact, there is a six month look-back.  He didn’t know.  And if an attorney could have accidentally screwed this up, what are the chances that your average office worker or machinist couldn’t make the same mistake?

The Medicare issue is particularly troubling.  The HR departments do not discuss this with employees.  I have talked with Senator Brown’s office about this. They have looked into correcting this, but there are not enough people pushing on this to see action anytime soon.

I hope that this answers your questions about High Deductible Health Insurance Policies and Health Savings Accounts.

The good news is that now, if you search this blog or ask Google, you might come up with this information.  The bad news is that you won’t spend an hour or two getting lost on other tangents learning all kinds of interesting stuff you wouldn’t otherwise know.

DAVE

www.cunixinsurance.com      

Picture – Old School – David L Cunix

A Tool, Not A Weapon

The Patient Protection and Affordable Care Act (Obamacare) was designed to be a tool, a way to improve healthcare in our country and the health insurance that provides the access and payment for that care.  It certainly wasn’t a great tool.  This blog has detailed many of the PPACA’s flaws and shortcomings, but the goals were always about more care for more people.  Through the last ten years many Americans paid less per month for comprehensive coverage and, unfortunately, many Americans have paid more.  There certainly were ways to improve the law.  Few were ever tried.

As previous national health insurance programs that were designed to cover preexisting conditions such as Medicare Part A, Part B, and even Part D (Rx), the PPACA requires individuals to enroll in a timely manner.  Left to their own devices, many people would delay purchasing insurance until they had an immediate need.

Obamacare has an Open Enrollment Period that currently runs from November 1^st to December 15^th each year.  It used to be a lot longer until the current administration shrunk it to only six weeks in 2017.  There are also Special Enrollment Periods available to Americans who have involuntarily lost their coverage.  The combination of Open Enrollment and Special Enrollments usually meets most people’s needs.

These are not usual times.  States that run their own insurance exchanges have recognized the need to hold an emergency Open Enrollment Period to meet the insurance requirements of their citizens.  Other states, like Ohio, utilize the federal government’s healthcare.gov.  The federal government, read President Trump, is in a position to be a help or a hindrance.  Will Ohioans have an emergency Open Enrollment?  NO!  Donald Trump is happy to convert a tool into a weapon.

Here are some of the people who might benefit from an emergency Open Enrollment:

·         People who never bothered to purchase insurance

·         People who missed the shorter open enrollment period

·         Ohioans who purchased short term major medical and now want comprehensive coverage

·         Ohioans that purchased comprehensive coverage directly from the insurer.  Example – I have a client in her late 20’s.  She is a mechanical engineer making $55K per year.  Since she wouldn’t qualify for a tax credit subsidy, we didn’t have to go through the Exchange to get her policy.  That saves her time and money.  She lost her job.  Too bad.  This doesn’t qualify as a SEP.  If we got the Exchange opened, I could get her a subsidy to help her.

·         Individual policies are HMO contracts that can provide good LOCAL coverage.  If you live in Cleveland and send your child to school in Columbus or Denver or wherever, you will take the child off the Cleveland policy and buy a health plan for the school.  The schools are closed.  The kids are home.  We cannot put the child on the parent’s policy or offer the child a comprehensive policy to purchase.

There is only one reason to not have an emergency Open Enrollment.  By allowing citizens from across the country, many residents of battleground states, to purchase coverage, Trump would be admitting the value of the Patient Protection and Affordable Care Act, the law he is actively trying to invalidate.  His support of the Texas lawsuit which would rule the PPACA unconstitutional and eliminate coverage for, among other things, preexisting conditions has gone virtually unnoticed by the general public.  Much like the Coronavirus, many Americans will ignore the implications of the Texas lawsuit until in impacts them directly.  And again like the virus, when they lose their health insurance coverage it will not be dissimilar to being isolated on a ventilator at the end of a darkened hall.

Without a whole lot of thought or planning, Mr. Trump recently announced that the uninsured would have their COVID 19 related bills covered.  When pressed he declared that the hospitals would have to accept the Medicare funding level, as if that was sufficient.   Worse, the president decided to take the money from the desperately needed funds just allocated to our nation’s hospital systems.  We are back to spending the same dollar a couple of times and hoping nobody notices…

We have tools.  In the hands of the right people, the federal government, in concert with the states and major cities, can marshal the professionals needed to treat our sick, work to reduce our risks, and insure our general safety.  All we need are people who understand how to make our system work for us.  And, we need someone who doesn’t want to convert a tool into a weapon.

DAVE

www.cunixinsurance.com

Picture – Taking A Hammer To The Level - David L Cunix