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Health Savings Account Plan Comparison Question & Answers

2014 May 3
by Sarah Fields

James asks…

I need help with a homework topic?

What does savings account and other savings programm affect the government. Can some one tell me

Sarah Fields answers:

Savings are the key to capital formation, and every economic theory–even Marxism–teaches that capital formation is necessary to raise wages and stimulate long-term economic growth.

To some degree, the low rate of savings has been overstated. Comparisons between the United States and other nations, for example, sometimes are based only on personal savings rates. Such a comparison does not provide an accurate picture of total savings, however, since it does not include the reinvested earnings of companies. Another common mistake occurs when observers focus solely on the percentage of income that is saved in any given time period. This measurement of “flow” ignores changes in the existing “stock” of savings. Yet increases in the value of stores of wealth, such as stocks and bonds, are just as important to the economy as the additional amounts of savings generated out of annual income.

Nonetheless, there is a strong case to be made that America’s savings rate is lower than it should be. Some believe that Americans are too consumer-oriented and that corporate management ignores long-term needs by placing too much emphasis on quarterly profits. As it turns out, the major culprit is misguided government policy. The tax code and various spending programs combine to depress the savings rate and discourage savings. More specifically:

The tax code, by imposing multiple layers of taxation on capital, reduces the incentives to save and invest and creates a bias toward consumption.

Government programs, especially Social Security, eliminate or reduce many of the traditional reasons that motivate households to save.

In other words, government policy has undermined the incentives to save. The tax code is heavily biased against savers. Taxes on interest, dividends, capital gains, and estates raise the cost of savings versus consumption and drain capital from the economy.

Government spending is equally hostile to savings. Individuals used to save for their retirement; now the government forces them to participate in Social Security. They used to save for health care expenses; now they rely more and more on Medicare, Medicaid, and other government health programs. Families used to save to buy a home or send their children to college; government programs now subsidize those activities as well. Workers used to save in case they lost their jobs; government now has an unemployment insurance program.

American consumers and businesses are not foolish and shortsighted. They are responding logically to the perverse incentives created by politicians. If anything, it is a tribute to the American people that the nation’s savings rate is not even lower. Instead of blaming others, lawmakers who want to boost the savings rate should work to change the policies that undermine the reasons to save. In particular, savings would increase if legislators would:

Eliminate the bias against savings in the tax code, preferably by scrapping the Internal Revenue Code and replacing it with a simple and fair flat tax. A flat tax would abolish the present system’s multiple taxation of capital.

Replace the bankrupt, low-return Social Security system with a system that allows individuals to build up retirement nest eggs in privately managed accounts. If Australia, Britain, Chile, Hungary, and Mexico can do it, so can the United States.

Reform health care entitlements and other government spending programs that weaken incentives for individuals to plan and control their own lives by saving for the future.

HOW TO MEASURE SAVINGS
Savings is a store of wealth and usually can be converted into cash without great difficulty. A traditional bank account is probably the first thing that comes to mind, but there are many types of “savings.” These include stocks and bonds, retained business earnings (the profit not distributed to shareholders), and any income that is invested rather than consumed.

Savings and investment are different sides of the same coin. Savings typically can be converted quickly to cash, though certain types of savings, such as pension funds, and individual retirement accounts (IRAs), are designed to foster long-term savings. Savings usually generate income for the saver. Some people, however, invest in gold, land, and collectibles in the belief that traditional forms of savings are too risky or that these assets will increase in value.

There is no consensus about how to measure savings. Is it the value of all financial assets? Should it include the value of land, collectibles, owner-occupied housing, and consumer durables? The savings rate measures how much income is saved in any given period. This is a “flow” measure. Chart 1 shows the personal savings rate and the gross savings rate (which includes business savings

Richard asks…

Is Obama’s economic policies working, if so why and if not, why, and what can he do to save the economy?

So apparently the stimulus isn’t working, the multiplier effect didn’t really take root as it should have, recipients of the stimulus money seem to be saving their money instead of spending it so that it could have a ripple effect across the economy, seems to me the MPS is at it’s highest in years.

The Health Care bill has had companies saving and hiring less because of future expenses. Banks are already reluctant to lend money and now more regulation will be out there which will make them even more reluctant to lend, which will force companies who rely on lines of credit to cover expenses in the short term will very little monetary options, and could ultimately force them out of business.

The only way he could save us, is to repeal his health care plan and create incentives like the Health Care savings account, and allow interstate commerce of Health Care. Make these insurance companies compete with each other.

No cap and trade bill, it’s a job killer and anyone that took Econ 101, and 102 would know this. Instead subsidize companies in the renewable energy sector, because this will eventually bring increase technological advancement in the field and make it more cheaper than what we have currently.

The financial reform bill should include freddie and fannie, and no new taxes, because in the end the consumer will take the tab.

We could argue all day long about how the Prez’s economic policies will affect the SRAS and AD, but it’s definitely not working.

Sarah Fields answers:

It is not working for a few reasons.
1. Only about 1/2 has been spent. The “stimulus” package was designed to have about 50% spent during the 2nd and 3rd quarters of 2010 and 2012. Not for job stimulus but for vote stimulus.
2. Of the 1/2 that has been spent, it was spent mostly on enriching his friends in Chicago politics and for ridiculous projects that create very few jobs.
3. Obama’s ridiculous spending and ramming health care down our throats, along with his insistence on the HORRIFIC Cap-n-trade has so many people so scare of what he will do next and what we can expect from taxes in the next few years that they are tightening their belts so tight that their butts are puckering.

What can he do?

1. CUT TAXES ACROSS THE BOARD AND PUT AN IMMEDIATE FREEZE ON SPENDING
2. Seal the border and aggressively enforce immigration laws, including HUGE fines for anyone caught employing and/or housing illegals and immediately cut off 100% of entitlement to illegals.
3. IMMEDIATELY repeal the Health Care bill and promise to scrap cap-n-trade.

ADDED: The second guy with the mathematical name uses a campaign comparison as evidence that Obama’s idiotic policies are working?? WOW! Just because McCain was an idiot, too, does not mean that the idea was sound. McCain was FAR TOO LIBERAL for most republicans. That is part of why Obama won. Conservatives stayed home. Is it working? HELL NO!

ADDED: I just love Sageands answer. I will just pick on the two most laughable.
>>>600,000 new private sector jobs….yeah, in districts that do not exist. This is the most laughable claim they have made….and they have made several.
>>>Unemployment dropping…NOT! There are people dropping off of unemployment because they have given up on looking, but from 10% to 9.5% is not a drop, and when reality is included, unemployment is still rising.

Sandra asks…

Whats better health insurance – PPO or HSA for a young male?

I’m a student almost out of college looking for health insurance. Most plans are either PPO or HSA. What is the difference here and what is generally better? I’m a pretty healthy male, only 22 years old as well. I’m from CA too if that makes any difference.

Example plan comparison:

PPO
annual deductible $3500
Out of pocket max (in addition to annual deductable) $3500
coinsurance 50% of negotiated fee
office visits 50% of negotiated fee
drug coverage – brand and generic

HSA
annual deductible $3500
Out of pocket max (in addition to annual deductable) $1500
coinsurance 0%
office visits 0% after deductible
drug coverage – brand and generic

The premium is only a difference of $7..which one would be better for me?

Sarah Fields answers:

Most HSA plans are also PPO’s. A very few are indemnity. The HSA is normally just a high deductible PPO that allows you to open the HSA account, in which you can save money to be used for medical expenses similar to an IRA, and allows tax incentives.

In general, an HSA plan is very good if you are young and healthy and can put some money aside in the savings account.

Contact a local agent that works with the companies that you are looking at as well as all of the other major companies in your area. The agent can compare those two plans and tell you exactly what you are getting and, more importantly, what you are not getting with each plan. The premium will be the same whether or not you use an agent.

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