HSAs: Little Understood, But Here To Stay

JUNE 28, 2017 • BEN MATTLIN -Financial Advisor
Quote by Dr. Katy Votava in this article

Back in December 2003—well before there was an Affordable Care Act, let alone talk of repeal and replace—then-President George W. Bush created health savings accounts (HSAs). Still scarcely understood, HSAs have nonetheless grown in popularity. According to the Devenir Group, a Minneapolis-based industry organization, there were nearly 17 million HSAs, with an aggregate value of more than $30 billion, at the end of 2015, the most recent results available.

But as the health care debate continues in Washington, are HSAs still relevant? More importantly, are they a good idea for your clients?

HSAs For Retirement Planning

HSAs are only for people with certain high-deductible health plans (HDHPs). They allow account holders to put aside money to help pay those high deductibles and other medical expenses later, as needed. But advocates insist they are also great savings and retirement planning vehicles.

There are several reasons. First, money that goes in can be deducted from federal income taxes. Plus, it grows tax-free. And it can be withdrawn tax-free at any time if used for qualified medical expenses. “HSAs are the only account type that gives you the tax trifecta,” says Christopher Hershey, a senior financial planning analyst at eMoney Advisor in Radnor, Pa. “Simply put, they are the most tax-efficient savings vehicles available.”

HSAs are similar to flexible spending accounts (FSAs) with one important difference: Health Savings Accounts are not use-it-or-lose-it. “There’s no requirement to deplete the account by a specific date,” says Tim Steffen, director of financial planning at Baird in Milwaukee. “You can use it to pay for any health-care expenses incurred after the date you fund it. This means you can fund it today, let it grow during your working years, and then take withdrawals later in life for expenses you incurred in previous years.”
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Republican health proposal may mean you work longer and save less for retirement

This is what the proposed health-care bill means for older American

BY Robert Powell, Retirement Columnist, Marketwatch
With quotes from Dr. Katy Votava
Published: June 28, 2017


Older pre-Medicare Americans will have to pay more for health insurance and health care should the Senate’s bill to repeal and replace the Affordable Care Act (ACA) — the Better Care Reconciliation Act (BCRA) — become the law of the land.

What’s more, older Americans may have to reduce the amount they save for retirement or use retirement funds to pay for current health-care needs or keep working to age 65 if only to keep their employer-sponsored health insurance plan.

Number of people to lose coverage

The Senate bill would increase the number of individuals who are uninsured by 22 million in 2026 relative to the number under current law, slightly fewer than the increase in the number of uninsured estimated for the House-passed legislation, according to a Congressional Budget Office (CBO) report released on Monday. By 2026, approximately 49 million people would be uninsured, compared with 28 million who would lack insurance that year under current law, the CBO says.

What’s more, the increase would be disproportionately larger among older people with lower income—particularly people between 50 and 64 years old with an income of less than 200% of the federal poverty level, the CBO wrote.

Under the House bill, the American Health Care Act (AHCA), the CBO estimated that more than five million older adults ages 50-64 would lose health insurance.These older Americans would likely have to return to work, or dip into retirement savings, or stop saving for retirement, or go without health care in the worst of cases, experts say.

Wider age bands and less generous subsidies

Older adults across the country, not yet eligible for Medicare but in need of health insurance, can also expect higher premiums under the Senate bill due to wider age bands and less generous subsidies than current law, according to Tricia Neuman, a senior vice president with the Henry J. Kaiser Family Foundation.

Read the entire article here.


Older Americans may have to postpone retirement under Republican health bill

Retirement might not be an affordable option

  BY Robert Powell, Retirement Columnist, Marketwatch
with quotes from Dr. Katy Votava
Published: Mar 11, 2017 11:52 a.m. ET


The House Republican bill to replace the Affordable Care Act (ACA) would allow insurers to charge older workers health insurance premiums five times as much as younger ones and give states the option to set their ratio, according to published reports.

Under the ACA, also known as Obamacare, plans can charge their oldest customers only three times the prices charged to the youngest ones.

Given that possible change, experts say pre-Medicare workers are likely to stay in their jobs longer to keep their employer-sponsored health insurance, even though they may be ready to retire in other ways— financially and emotionally, for instance — to retire.

“It seems entirely plausible that the new rules would discourage older workers from retiring or going out on their own to start a new business — if it means giving up employer-sponsored health coverage,” said Tricia Neuman, a senior vice president and director of the program on Medicare policy at Kaiser Family Foundation.

Read: What the House Republican bill gets wrong about the health insurance market

Under the House Republicans’ proposal, self-employed adults in their early 60s, or who retire and choose to purchase coverage on their own, could face higher premiums for their health insurance with the proposed five-to-one age bands.

 But experts can’t, at present, determine what older Americans might pay under the House Republicans’ bill. “We can’t say with precision what the payment for someone after the Republican tax credit would be because there are a lot of other changes outside of the tax credit,” said Cynthia Cox, an associate director at the Kaiser Family Foundation, noting that doing away with the individual mandate, for example, would have a significant effect on premiums. “I don’t think there is a lot of reason to believe that premium would be significantly lower under this bill than under the ACA.”