FRONT STUFF: Health Savings Accounts: Planning for Prosperity; SECTION ONE: HSA and its Competitor, in Brief
Editorial material for book construction.
There are now reported to be 15 million subscribers to Health Savings Accounts, growing at about a million new subscribers a year, with hardly any advertising. It' s really a very simple concept, consisting of two parts. The Savings Account is pretty much like any other savings account, and I understand one New York Bank has 700,000 accounts. You are allowed to make deposits up to $2350 a year, terminating when Medicare begins, at age 66. At that point, any balance in the account is turned into an IRA, and may be used for any purpose after paying income tax. When you make withdrawals for other purposes there is a penalty tax of 20%. They may be used for legitimate healthcare purposes, without taxation. The statutory basis for this is that deposits are tax-deductible, and withdrawals for health are tax-sheltered; the rest of the rules are regulation. Most accounts are linked to a debit card for medical purchases.
Two working parts:(1) Tax-exempt savings fund (2) Catastrophic (high deductible) health insurance.
|HSA in Essence|
Most investment manager are not fiduciaries, they are brokers. That is, they have no legal obligation to put the customer's interest ahead of their own. It is reported that most new subscribers are between the age of 30 and 45. That is, old enough to have some savings, young enough to gather meaningful income before being used. Actuaries report the average yearly cost is about 30% less than conventional health insurance, but price quotes are difficult to get on anything but an individual basis, and there may be some tacit underwriting.