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The acronym HSA is being tossed around quite a bit nowadays especially since the tax advantages of owning an HSA and a corresponding eligible HDHP (Deductible Health Plan) have been significantly increased under the former Bush administration. Effective December 20, 2006 President George W. Bush signed the Health Opportunity Patient Empowerment Act of 2006, enhancing Americans’ access to tax-advantaged health care savings. The law, part of the Tax Relief and Health Care Act of 2006, provides new opportunities for health savings statement (HSA) participants’ to build their funds. To read about the new adjustments Click here: http://www.treas.gov/press/releases/hp209.htm For the 2009
IRS H.S.A. COLA Adjustments click: http://www.treasury.gov/press/releases/hp975.htm

HSA stands for Health Savings Account, more commonly referred to as a “Medical IRA”. HSA eligible HDHP’s are one of several relatively new Health Insurance concepts that start under the heading of “Consumer Driven Health Insurance”. Health Savings Accounts are a one-of-a-kind way to attractively manage your health insurance costs. They were originally named MSA’s or Medical Savings Accounts designed by Senator Bill Archer (R) of Texas. Bill’s project was to find a way to reduce the cost of health insurance for the self employed without sacrificing calibre coverage for a major medical illness. Bill’s brilliant intent was to eliminate the parts of a Traditional Health Insurance Plan that cost the consumer the most money. These costly benefits include outpatient physician “co pays” and outpatient prescription “co pays”. Bill approached Congress with a proposal that stated in essence that if you remove those two features and keep the major medical coverage in place you could conceivably cut the cost of your health insurance premium considerably. He was totally right!

To illustrate how Bill’s intent works in the real world. We will use a real world example. Tony & his wife are currently paying ,134 a month for Cobra continuation coverage from a previous group plan. In comparison, the monthly premium for an HSA eligible HDHP (High Deductible Health Plan) which covers apiece insured family member up to million dollars is less than half of the premium that they are paying now (1.64 monthly to be exact). This is a yearly savings of ,828.32 or a monthly savings of 2.36. This is a significant difference. However the insured has to give up all of their outpatient co pays. Is this worth it? This was the question posed to Senator Bill Archer (R) when he approached Congress back in the late 1990′s. His answer to Congress was simply “make it worth it”.

In other words, he asked Congress to make it worth it to the insured. Their response was two fold. And it is these two primary reasons that make HSA’s a “no-brainer” for apiece self employed prospective insured and for their corresponding employees. The first thing Congress did was to state that if a policy holder purchases a major medical health insurance policy (HDHP) with a yearly family deductible between ,200 per family (not per person) or as high as ,800 per family we will call that an HSA eligible health insurance plan (HDHP).

They further stated that in order to make giving up outpatient co pays more captivating to the insured we will grant anyone who has an HSA eligible health insurance plan (HDHP) the option to open a tax favored HSA (Health Savings Account) with their local bank or financial brokerage house. Since the insured is saving a considerable amount of money apiece month by giving up their out patient co pays, we will grant them to take that extra premium that they would have normally given the insurance company for the “privilege” of a co pay and place it into a 100% tax deductible statement that will grow tax deferred at an interest rate adjusted by the Fed.

In addition to depositing the amount you save in insurance premiums, you might also deposit in your HSA an amount equal to what the IRS grants for that given year. For the year 2009 the maximum contribution a family can make to their HSA statement is ,950. In addition, any family member who is 55 years of age or older can deposit an additional ,000 annually (more on the age 55 allowance below). This means that the total amount that Tony and his wife (in our example above) can deposit per calendar year is ,950 and they can take a 100% tax deduction for that contribution similar to an IRA.

Furthermore, if they do incur medical expenses that arise throughout the course of the year that are subject to the deductible (i.e. prescriptions, doctor’s office visit charges, etc.) the IRS will allow them to pull out that money that they place into their optional tax deductible, tax deferred HSA savings statement to pay for those expenses. When they use their HSA money to pay for those expenses the IRS will allow them to write those expenses off at a 100% tax deduction. The list that the IRS grants them to spend their HSA money on is very liberal and includes things like dental, orthodontics, eyeglasses, radiokeratonomy (Lasik corrective eye surgery), substitute medicines etc. Click the hyperlink to see the list of allowable expenses and disallowed expenses on the HSA section of the IRS web site here: http://www.irs.gov/publications/p502/index.html

Arguably the most captivating tax advantage to owning an HSA is the fact that the money left over in the HSA statement that was not used on medical expenses at the end of the year is “rolled over” into the next year and awarded a higher rate of tax deferred interest. The insured also has the option to roll those unused funds into no load mutual funds, thereby building an extra tax deferred retirement statement with money they would have normally given to the insurance company apiece and apiece year whether or not they had any claims that year!

It should also be noted that with not having a “co pay” with your plan does not mean that your outpatient physician visits and outpatient prescription drugs will not be a covered expense. With most HSA eligible HDHP’s these charges are a fully covered expense just as they would be with a Traditional Health Insurance Plan. The only difference is these charges will be subject to the “aggregate” family deductible.

Being “subject to deductible” does not mean that you will pay full price for these charges either. If you stay within the vast PPO network that most reputable carriers offer (www.phcs.com) your outpatient physician office visit charges will be discounted by as much as 40%. Your prescriptions will also be discounted significantly as well by staying within the Rx prescription network.

Let’s break that down in plain english. Let’s state your doctor’s office charges you 0 for a “sick visit”. If you use a PPO bourgeois (typically PHCS or MultiPlan) those office charges will be “re-priced” down to roughly . Now compare that to a Traditional plan which provides you with a “co pay”. The difference to you is out of pocket for that doctor’s office visit. But is that all you are really saving?

Not if you add in the monthly premium savings between the two plans. The typical monthly premium savings between a Traditional plan and an HSA eligible plan for a family is 0 to 0 monthly or more. Let’s split the difference at 0 less monthly. This equates to an annual savings of ,000.

Now let’s take that ,000 annual savings and deposit it into a tax deferred, tax deductible interest bearing account. Let’s go a step further and envision you find an HSA statement that bears you NO interest AT ALL (which is not that hard to envision in this economy). You’re still saving ,000 annually and your deducting that amount from your adjusted gross income. This means less reportable income which means less taxes.

Now lets envision you have no major medical claims in year two and you deposit the same amount. Now in year three you have a worse case scenario occur. Now you have ,000 to help pay your “aggregate” family deductible. Moreover, since deductibles with HSA eligible HDHP’s include only one “aggregate” deductible for the entire family there will be no other risk to any other family member for the rest of that year. Unlike Traditional Health Insurance Plans which typically require apiece of three separate family members to pay their own calendar year deductible if they end up in the hospital (or need an MRI, CT, Nuclear Medicine Scan etc.)

The longer you look at HSA eligible HDHP’s the more sense they make. This is why they have caught on like wildfire and will continue to do so. The only inhibitor to the spread of HSA’s is demand of education (as is the case with any other financial vehicle).

To learn more about HSA’s and the current federal legislation that has prefabricated them even more captivating to people over the age of 55 click: http://www.treas.gov/offices/public-affairs/hsa/about.shtml to read all about them on the Federal Governments HSA educational web site. To learn more about H.S.A.’s in a power point presentation format please click here: http://www.hsacenter.com/

If you are an employer and are considering HSA eligible plans for your employees think about this. An individual’s employer can make contributions that are not taxed to either the employer or the employee. The combined income and payroll tax deductibility leads to discounts for health insurance of over 40 % in some cases relative to other forms of insurance. For more details for the employer http://www.treas.gov/offices/public-affairs/hsa/faq_employer-participation.shtml

You and your spouse hold steady jobs and you have both had those jobs for over two years. You don’t have a home to sell to move into a new house, you have perfect credit and a down payment to boot! So nothing should be holding you back on buying your dream home should it? Real estate broker’s hands are tied in today’s market. They are struggling to get even the “textbook” buyer a home loan.

Today’s one-of-a-kind real estate market situation calls for a one-of-a-kind solution. A solution that protects both the buyer and the seller. The seller gets the full asking price for the property. In exchange, the seller retains the mortgage for a period of time. The buyer assumes the payments (mortgage, taxes and insurance) when moving into the property. Further, the buyer assumes maintenance of the property. Both the buyer and the seller become part of a holding company, called the trust. This becomes a business arrangement, which requires the buyer to perform fully and properly. At the conclusion of a specified time, the buyer then obtains a conventional mortgage on the property they have been living in during the specified time, at the price agreed-upon, when the trust was created.

This provides the buyer a “track record” towards limiting for a mortgage. The seller knows they are getting their asking price, and is relieved of the burden of the expenses associated with property, now.

There are other advantages to both the buyer and the seller for utilizing this time-limited trust arrangement. The key point for the buyer and seller is they can move NOW, and apiece party’s interests are protected. While the trust does have finite time duration, it does wage some “breathing room” and certainty to both partners in these difficult times.

To learn more about Owner Financing and the many benefits it has to both buyers and sellers in today’s real estate market, please visit our blog at:

http://www. AustinOwnerFinancedHomes. com

http://www. GreatHomesTexas. com