Ranting (Just a Little)

Some things ought not be politicized, in my opinion; as an accountant, I find several areas in the field of finance that I place in this category. I’m going to talk about one of those areas, not as an accountant (and any advice, implicit or explicit, should not be relied on without checking it out with your accountant), but as a consumer. And while the topic isn’t specific to Morrison Ranch interests, it is germane to our residents.

Part of my frustration arises from the newspaper articles I have read recently about Health Savings Accounts. Because President Bush mentioned them in his State of the Union address on Tuesday night, the reporters seem to think that HSAs are some new program that he’s cooking up. On the contrary, they have just completed their second full year of existence, and their precursor, the Medical Savings Accounts have been around even longer. Another irritant for me is that the reporters use a snide tone to describe the program, and that is where the politics seem to be hindering a good program. I believe that if every person who is eligible to have an HSA used the plan, the health care crisis in America would begin to recede.

There are two basic parts to an HSA plan: the health insurance, and the savings account. The consumer must purchase a high deductible health insurance plan; and then the consumer may put funds up to the limit of that deductible into a savings account. The money in the savings account can pay for the day to day health expenses (even things that aren’t covered by the insurance policy, like eyeglasses), and if there is a catastrophic need, the insurance would kick in after the deductible has been satisfied. If the funds aren’t needed, they can continue to grow tax free and be used the following year (unlike the popular flex accounts that must be used or lost at year’s end). If they are never needed, they can be withdrawn after age 65 with no penalties, so they become rather like an extra retirement account.

Not everyone is eligible for an HSA. According to the Treasury Dept. explanation, the following tells us who is eligible for an HSA:

Any individual that:

– Is covered by an HDHP

– Is not covered by other health insurance

– Is not enrolled in Medicare

– Can’t be claimed as a dependent on someone else’s

tax return

• Children cannot establish their own HSAs

• Spouses can establish their own HSAs, if eligible

• No income limits on who may contribute to an

HSA

• No requirement of having earned income to

contribute to an HSA

If you want to read all the ins and outs of the program from the people who wrote it and enforce it, look here. It is very readable and understandable, not at all like most tax law.

The Mister and I set one up for our family about three years ago, and as our nest has begun emptying, the unused funds have begun growing. When our oldest two daughters completed college and were no longer eligible to be insured on our plan, I encouraged them to set up their own. Just like starting an IRA, time is a key factor in letting the funds grow; and since most high deductible insurance plans don’t include maternity coverage, why not start saving years in advance?

I went to a continuing education seminar on employer options for health care a while back, and my instructor was not a big fan of HSAs. She disparaged them as only good for the healthy and wealthy. I agree that lower income folks can’t build up the funds as quickly as higher income folks, but it isn’t impossible. And if all the healthy wealthy folks managed their own health care, wouldn’t that ease the burden on the system for the frail and underprivileged? A newspaper article mentioned the drawback that they aren’t portable; but actually, they can be. Many employers are willing to pay into your personal HSA rather than making you enroll in the employer’s health plan. It is your account, you manage it, and if you change jobs, you keep it. Some decry the amount of paperwork involved in managing it. Okay, I’m an accountant, and paperwork doesn’t scare me; but I honestly can’t see that it’s any more work than filling out insurance forms for reimbursement.

There are other pros and cons, but one of the President’s proposals on Tuesday involved raising the limit on the funds that can be deposited into the savings account. What a difference it would make if the amount were $10,000 instead of the $5,000 plus for family coverage that it is now.

That’s enough for a little rant. It feels good to get it off my chest.