November Newsletter
VOLUME 27 NO. 11
The following conversation took place during a political candidate’s forum in mid October. A state Senator, running for reelection, was asked, “Which Presidential candidate’s health plan do you favor?” After some thought and comments, he concluded, “Neither.” He went on to explain that he favored a health care program already in place, Health Savings Accounts (HSA). Gem Equipment agrees with the Senator. If they are given sufficient time, HSA’s will alleviate much of the stress that health care costs are causing for citizens of this country. This program, utilized by Gem, includes a high deductible health insurance policy, which is paid for by the company. An employee under this plan can have money withheld from his paycheck to fund his HSA. This money is paid from the employee’s income, before taxes, the same as a 401K contribution. Money can be taken out of the HSA for health care expenses not covered by the health insurance. Any money not used for health care expenses stays in the employee’s Health Savings Account and can be used for his or his dependents health care in future years.
Freedom from Federal Income Taxes is a big benefit included in the HSA program. As noted above, employee contribution is paid from his gross income; before Federal Income Taxes. Any interest earned by the funds in the HSA is Tax free. There is no Federal Income Tax on money withdrawn from the Account as long as these funds are used to pay medical expenses. Money not spent accumulates in the account, providing resources for the Account holder’s future medical bills. This provides the individual with adequate incentive to make sure he is getting his moneys worth for the purchase of medical services. He is also less likely to purchase unnecessary medical services. One would expect that a person holding an HSA would only use an emergency room for a genuine medical emergency. These are the reasons why, for most people, Health Savings Accounts offer an acceptable solution to the problems of high medical costs. Most people who start HSA’s while in their twenties or early thirties, will be adequately financed for health care by the time they reach the age when personal medical costs rise.
Prior to 2005, Gem Equipment offered employees a Preferred Provider Organization (PPO) Health Insurance Plan. The company paid approximately 2/3 of the cost for both employees and their dependents. At the start of that year employees were given the choice of the PPO plan and a high deductible policy with the HSA option. Since the price of the high deductible policy was approximately 2/3 of the price of the PPO policy, Gem was able to pay all of this premium, giving the employees that chose this option the opportunity to save the money they had been paying for their share of the PPO policy. In the ensuing years PPO policy premiums have risen faster than those for the high deductible policy. For that reason in 2007, this company stopped allowing new employees to select the PPO policy option. To end a very serious subject with a note of levity, the computer has insisted that HSA is spelled HAS. Since the computer is quite stubborn, there may be a misspelling in the text above.