2005 - Regarding the article “Medicare Prescription
Drug Act of 2003: Tax Incentives Encourage High-Deductible
Medical Insurance Plans,” by Kenneth A. Hansen, Robert
Dosch, and Steve Carlson (September 2004), I have some questions.
the authors mention that health savings accounts (HSA) can
be used in conjunction with plans without deductibles. How
can a person who does not participate in a high-deductible
plan fund an HSA?
I pay a small premium ($172 per month) for health insurance
that has no annual deductible or out-of-pocket maximum but
does not cover preventive care. If one of my children is
hospitalized, the policy covers the first six days at $500
a day, which is worth the premiums. Some people might say
I am rolling the dice, but to me I am simply paying for
my family’s health expenses as they occur and hope
to use an HSA or a flexible spending account (FSA) to pay
them pretax. This method still costs me the $3,000 (FSA)
and $1,900 for the accident health plan.
I think paying $500–$800 per month for insurance is
beyond what most people can afford. If I earn $50,000 per
year and net approximately $35,000 after taxes, that leaves
me with $2,916 a month to pay bills. Monthly rent of $2,100
and monthly groceries of $600 leaves $216 a month to pay
for health insurance, utilities, and family activities.
In five years, my credit card balances will be $30,000–$40,000
and I’ll consider bankruptcy. This is a situation
faced by millions of middle-income American families for
whom HSAs provide no relief. Addressing this political issue
would go a long way toward fixing the inequalities caused
by the richest country in the world providing the best health-care
coverage to the majority of, but not all of, its citizens.
Dutchess County, N.Y.
answer the first question, except for the additional allowed
insurance items described in the answer to the next question,
funding an HSA requires that the individual be covered for
medical-care insurance only by a high-deductible health
insurance plan. Only when this prerequisite is met can this
same high-deductible health insurance plan offer some preventive
care services (e.g., prostate cancer checkups, annual flu
shots, or mammograms) with no deductible or only a small
deductible payable by the insured.
for the second question, the writer describes insurance
that pays a fixed amount per day, which is an allowable
exception to the exclusive coverage by a high-deductible
health plan and does not disqualify a person covered by
a high-deductible health plan from contributing to an HSA.
Other disregarded insurance coverages are accident insurance,
disability insurance, dental care, vision care, workman’s
compensation, and insurance for a specific disease or illness.
You can start contributing to an HSA if you purchase a high-deductible
health plan, even if you are still covered by the policy
you described that pays a fixed amount per day during hospitalization.
JD, LLM, CPA
University of North Dakota