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Health Savings Account Plans Individuals Question & Answers

2014 April 7
by Sarah Fields

Maria asks…

What insurance companies should I look for?

So I’m 21 and am looking for health insurance. I don’t work and only go to school part time. What health insurance should i look for that will offer good coverage and a low pay? Free will be great but whatever works. Thank you!

Sarah Fields answers:

Only you can determine what is the best health insurance plan. I say that because you are the one that has to make the decision of what the right balance is between affordability and policy benefits.

For example, if you choose a plan that covers everything i.e. Doctors office visits, prescription drugs, preventative health benefits, maternity coverage as well as low deductibles, low co-pays and optional vision and dental benefits your monthly premiums will be significant. Is the most comprehensive policy coverage the best health insurance? You have to decide.

On the other hand because you are young, presumably healthy and probably use the health care system sparingly you could consider a Health Savings Account plan that covers only the major health catastrophe. Is this approach the best health insurance policy? You have to decide.

If you’d rather have more comprehensive individual health insurance coverage, such as preventive care coverage, consider a PPO or HMO plan with a lower deductible. Consider higher co-pays for doctor’s office visits and perhaps not cover prescription drugs. Either of these approaches will result in a lower monthly premium. You then can use the monthly premium savings to pay for the occasional doctor visit or prescription and still come out ahead. Is this approach the best health insurance policy? You have to decide.

You need a trusted adviser to help you through the process of purchasing health insurance so that you understand what you are purchasing. That adviser can answer questions as to what is and is not covered by the policy, explain deductibles and co-pays and show you the hospitals and doctors that participate in the network. Armed with knowledge of the coverage available and the associated costs you can decide what is the “best” policy. Check with the agent that writes your home or auto insurance he/she can provide you a health insurance proposal that takes into account your budget and health situation.

Some are going to suggest you go to their web site so that they earn a few pennies on a “click through”. Some may suggest going on line to get a quote but you probably already know that there is more to a good health insurance policy than price. Use the Internet to educate yourself but use an agent to purchase the coverage.

Daniel asks…

When do you have to get health insurance on your own?

I am 22 years old, and I think I need to buy health insurance for myself and get off my parents plan, i am still in shcool and dont have a job, what can i do?

Sarah Fields answers:

Most group insurance plans allow dependents to be covered while a full time student untill age 24 or 25. Have your parents check the the specifics of their health plan. If you are only going to school Part Time, and do not have any health issues, consider whats called a “catastrophic” individual health plan. It has a high deductible, with moderate copay options which will keep you covered for any nasty young person injuries (the most likely claims someone your age will get-like broken bones snowboarding, twisted ankle hiking etc). In other words, the odds of you getting cancer are pretty rare, so why pay high rates? Look up on the internet “individual health plans” and compare. If you have any questions about the terminology, ask again here! Your monthly premiums will be pretty low. Another option: look up Health Savings Accounts.

Mandy asks…

I’m employed by a company but have to pay for my own life and health insurance. Can I deduct the premiums?

Hi,

I work for a company that pays me fringe benefits in my check. What this means is that I have to pay for my own life and Health insurance.

Can I deduct the premiums when I file my taxes?

Thanks in advance for any help.

Sarah Fields answers:

Yes, you may deduct the costs you pay for health insurance given that your total yearly expenses are greater than 7.5% of your adjusted gross income. (so if your AGI is $50,000 you must subtract $3,750 from your total medical expenses. Anything you pay over this amount may be deducted. If your total expenses are under 7.5% of your AGI, sadly you may not claim the deduction.)

However I suggest you set up a health savings account. They work much like an IRA, in that any funds you put into it are before tax. Any funds withdrawn to pay for medical expenses are not taxed. The funds you put in are investable and may earn you interest that is also tax free, given that it is used on medical expenses.

If you withdraw funds before age 65 not for health expenses there is a 10% penalty plus regular taxes (after 65% it would be taxed but no penality). So you may want to put in only a little more than what you anticipate your annual health expenses will be.

To qualify you also need to be in a high deductable health plan ($1,050 deductable for individual/ $2,100 for families) that also has an out of pocket expense cap of no greater than $5,250 indiv. ( $10,500 fam.)

Not be eligable for medicare

and not covered by any other health plan that is not a HDHP

The good thing about a HDHP is that you premiums will be lower than a plan with a low deductable.

If a HDHP does not appeal to you, there is another option to save your max tax dollars. As long as you or your spouse are both NOT eligible to participate in a employer health plan, 100% percent of your expenses paid for health insurance are tax deductable if you are also self employed. However your deduction may not exceed the amount of income you generate from the self employment.

Life insurance is not a deductable item. If you are self employed you may be able to deduct the cost of life insurance. You would need to actually start your own company (even a sole proprietorship). If the beneficiary on the plan is someone other than the tax payer (so a child perhaps. Your spouse would not qualify if you file jointly) the cost is 100% deductable. Keep in mind, all expense deductions can not be greater than the amount generated by the business.

Thats a lot of work. I would just urge your employer to set up a group term life plan for employees. You would get the tax free fringe benefit, and they still get the tax deduction. It’s silly for them not to not offer it.

Note: This information is all the options available to the asker of the question based on the info given that he has to buy his own insurance, and it is not available through his work. Answers above that mention his work deducting pay to go to a health plan do not apply, as he does not have this option.

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