The Case For

"Health Savings Accounts"

By: John Irvine

A big problem for those of us who are self employed is the purchase of a good health insurance plan. The cost of health insurance is spiraling out of control. We watch as companies like General Motors are brought to the verge of bankruptcy by the cost of their benefit packages. We would like to provide health insurance for our employees but the cost has been prohibitive.

The idea that employers would buy health insurance for their employees began during World War II. The United States government had imposed price and wage controls on business. In order to attract the best employees available, the auto industry began offering health insurance thereby going around the restriction of wage controls. It is ironic that one of the companies that started it all is now suffering.

Health insurance has had a profound impact

on the cost of medical care.

A third party is paying the medical bills for consumers. The consumer does not care what the provider is charging because he is not paying the bill. Competition is the natural control on prices. The consumer is the cog in the wheel that makes free enterprise work. Remove the consumer from the equation and allow a third party to pay the bill and you will get out of control spiraling costs.

The insurance industry has attempted to control costs with higher co-pays and deductibles, Heath Maintenance Organizations, and Preferred Provider Plans. After all of these attempts we still have spiraling out of control costs. There seems to be natural laws of economics that simply can not be violated. Remove the most important cog (the consumer) in the free market wheel and free markets fail.

The average cost for a family's group health insurance in America exceeds $1,000 per month or $12,000 per year. These plans typically have co-pays associated with them for drugs, office calls, and hospital stays.

"Health Savings Accounts" are simply an

effort to put free markets back in the process.

The consumer is the only one who can and should shop for the best and most cost efficient service. The consumer is the cog in the free market wheel that makes it all work.

"Health Savings Account" plans just like all insurance come with differing benefits. In this example we will be looking at a top of the line HSA plan. The plan covers 100% of medical expenses up to $8 million after a $5,400 yearly deductible has been met. The plan includes a $250 per week "Accident Indemnity Benefit". The deductible for accidents drops to $100. The plan is individual insurance and you must qualify. The plan is for a forty year old head of household and his family who lives in Lansing Michigan. It is important to know that unless you have access to group insurance you must qualify for most health insurance plans. It is important to buy a good quality health insurance plan while you are still healthy enough to qualify. The health insurance plan that you have at the time that you are diagnosed with a health condition is the plan that you will most likely have for the rest of your life.

The cost of a traditional group health insurance policy for this family would most likely exceed $1,000 per month or $12,000 per year. Of course cheaper policies may be available with higher deductibles and co-pays. We can see that the following example for an HSA insurance plan is substantially less. With a big difference! Over half of the monthly cost is going into a savings account for the insured. In addition, the cost of health care for this family is capped at $8,856.00 because there are no co-pays and once the deductible has been met the insurance covers 100% (Rate example date 2/1/2006).

"Health Savings Account" Monthly Insurance Cost $288.00 x 12 =
Yearly Cost $3,456
Monthly Savings Deposit $450.00 x 12 = Yearly Deposit $5,400
Total Monthly Cost of Savings Deposit & Insurance = $738.00
Yearly Cost = $8,856.00

$5,400 dollars per year is placed in your HSA savings account tax free much like an IRA. You can invest these funds in savings accounts, mutual funds, and many other types of investments. From these funds you can satisfy your deductible. The average family of four actual medical costs is less than $1,500 per year. Of course this is just an average and your expenses could be higher or lower. The difference between your $5,400 yearly deposits ($450 per month) in your HSA savings account and your actual medical expenses are saved and building for your retirement.

If for example you began your HSA at age 40, your actual medical expenses averaged $1,500 per year, and your savings plan returned just 4%... By the age of 65 your account would have a value exceeding $175,000. The savings portion of your HSA is under your control much like a self directed IRA. Your results could be much better or it could be much worse. You could invest this money in a conservative manor or you could get more aggressive.

The important thing about these plans is that the consumer controls the first $5,400 in medical expenses each year. These funds can be used for any medical related expense including vision and dental. The consumer is not just spending the insurance company's money. The money you save is your money building in your account.

This policy has an additional benefit for your children and that is the right to convert to an individual policy once he or she becomes an adult. This does not sound like a big deal but it could be. Should your child be diagnosed with an illness (diabetes for example) he or she could be uninsurable once they become an adult and leave your policy.

Group policies have other problems... Should you become a non-member of the group you may have the option to go on COBRA for a period of 18 or 36 months. If you (for what ever reason) are uninsurable at the time COBRA runs out you are in real trouble. In addition, the reason you are no longer a member of the group is probably because you have lost your job. Where are you going to get the money to pay your premiums? HSA rules let you make insurance payments from your savings account should you lose your job.

Properly insuring oneself is a very important

factor in your long term financial health.

HSA insurance should be something that you take a good look at before making a health insurance choice.

The "Franchise Network SE" has contracted with Pam Griener to operate the "FN HSA Service Center". Pam is recognized as one of the premier experts on HSA insurance. Fill out the form under the "FN HSA Service Center" tab on the left side of the screen. Pam or a member of our "FN HSA Service Center" staff will call at a time convenient for you. After you or your employee are enrolled, our staff will continue to help you with benefit and billing questions.

At the "Franchise Network SE" we are determined to make this process as painless as possible. We are dedicated to give you and your employees the service that you all deserve.

For a personal quote click on this link  http://www.fn711.com/FNHSAServiceCenter.html

For a brochure of our insurance product click below: (print for easy reading)