What is a Health Savings Account (HSA)?

A Health Savings Account (HSA) is a convenient way to store funds specifically for medical expenses. If you qualify for an HSA, you will get to enjoy a few tax advantages as well. While this might sound like an ideal setup, not everyone is eligible for a health savings account. To qualify for a health savings account, you must be enrolled in a high-deductible health insurance plan (HDHP). The details of these plans are revised every year by the Internal Service Revenue (IRS), which sets the bar for:

  • The minimum deductible a plan must have to be considered a HDHP.
  • The maximum amount that a customer who purchases a plan is able to spend out-of-pocket.

The benefits of a health savings account

Here are some of the key advantages of having a health savings account:

  • It covers a large variety of medical expenses: There are many different kinds of medical expenses that are eligible, such as medical, dental and mental health services.
  • Pretty much anyone can make contributions: Contributions to your health savings account don’t have to be made by you or your spouse. Employers, relatives, friends or anyone who would like to contribute to your account can do so. There are limits, however. For example, in 2019, the limit for individuals was $3,500 and $7,000 for families.
  • Pre-tax contributions: Since contributions are generally made at your employer pre-taxes, they are not considered to be part of your gross income and are not federally taxed. This is usually the same case when it comes to state level taxes as well.
  • After-tax contributions are tax-deductible: Any contributions made after taxes are deductible from your gross income on your tax return. Doing so minimizes the amount you would owe on taxes for that year.
  • Tax-free withdrawals: You can withdrawal money from your account for approved health care costs without having to worry about federal taxes. Most states do not tax, either.
  • Annual rollover: Any unused HSA funds that are left over by the end of the year get rolled over to the following year.
  • Portability: Even if you change health insurance plans, employers, or retire, the money in your health savings account will continue to be available for qualifying health care expenses.
  • Having a health savings account is convenient: Most of the time, you will receive a debit card that is connected to your health savings account. This way, you can use your debit card to start paying for eligible expenses and prescription drugs on the spot.

The drawbacks to having a health savings account

While there are many advantages to having a health savings account, there are a few things to consider. For one, in order to qualify for an HSA, you must hold a high-deductible health insurance plan. The tax benefits might entice you to purposely sign up for insurance coverage under one of these health plans but think before doing this. Here are some of the disadvantages to having a health savings account:

  • The High-Deductible Health Plan: These types of health plans can end up being a lot more expensive in the long run, even with an HSA. If you have other options for health insurance that offer lower deductible, definitely consider those and don’t only choose a High-Deductible plan so that you can open an HSA.
  • You need to stay on top of your spending: If you have an HSA, you need to be willing to hold yourself responsible for recordkeeping. Keep track of all of your receipts so that you can prove you spent your HSA funds on eligible expenses.
  • Taxes and penalties: Using money from your HSA on other expenses that do not qualify as eligible health care expenses could result in you owing taxes. If you do this before the age of 65, you will have to pay taxes with a 20% penalty tacked on. If you are 65 or older, you will be responsible for paying taxes, but the penalty gets waived.
  • Fees: Sometimes, health savings accounts will charge additional fees, either per month or per transaction. Check with your HSA institution for more information on extra fees.

How an HSA works

In many cases, if your employer offers high-deductible health plans, they probably offer health savings accounts as well. Talk to your employer to find out what they offer. If your employer doesn’t offer HSAs, then you can sign up for a separate one through a different institution.

You get to decide how much you would like to contribute to your HSA annually, but keep in mind that you cannot exceed the HSA contribution limit. Once you are set up with an account, you will either receive a debit card or a series of checks that are linked to your HSA. Right away, you will be able to use the funds in your account for:

  • Deductibles
  • Copays
  • Coinsurance
  • Other eligible health care expenses that your insurance does not cover.

Generally, you cannot use HSA funds to pay your insurance premiums.  HSAs are not the same as flexible spending accounts, because HSAs rollover. Once you turn 65, you are no longer eligible to make contributions to your account, but you can still use the available funds for eligible out-of-pocket expenses. If you use the funds for non-eligible expenses, you will owe taxes on these amounts.

Investment Opportunities

Another benefit of HSA that you may or may not have heard of is that you can invest the money in mutual funds and stocks. If this is something that you are interested in, seek advice from a financial advisor for more information.

What is a Health Savings Account (HSA)? is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

How Much Does Long-Term Care Insurance Cost?

long-term care can help you or a loved one live comfortably well into their Golden Years

A 55-year-old can expect to pay a long-term care insurance premium of $2,050 per year on average, according to a 2019 price index survey of leading insurers conducted by the American Association for Long-Term Care Insurance (AALTC). That will cover $164,000 in benefits when the policyholder takes out the insurance and $386,500 at age 85. (Policies often include an inflation rider.) However, long-term care insurance costs vary widely, depending on factors like your age, health condition and the specific policies of your insurance carrier. The AALTC estimates that a single 55-year-old can pay around $1,325 to $2,550 a year for a policy. That’s why it’s important to shop around to find the best rates and terms. You should also speak with a financial advisor who can help you plan the future.

How Much Does Long-Term Care Insurance Cost?

The AALTC provides the following estimates of annual premiums based on its 2019 study of different long-term care insurance carriers.

Annual Premium Estimates Status Age Premium Single Male 55 $2,050 Single Female 55 $2,700 Couple 55 $3,050 (Combined cost)

Keep in mind, though, that these are only averages based on a pool of data gathered from leading insurance carriers. The costs of long-term care insurance can vary widely,  depending on several key factors. We explore some of these below.

Health: Some medical conditions will disqualify you from even being able to purchase a policy, including muscular dystrophy, cystic fibrosis and dementia. That’s because insurers will likely lose money on those policies. Generally, the healthier you are, the less likely you’ll ever need to file a claim – and so the lower your premium.

Age: In general, you’ll pay more in long-term care insurance if you take out a policy when you’re older, since you’re probably less healthy and you’re closer to needing the assistance the policy covers. This is why the AALTCI recommends you begin shopping for long-term care insurance between the ages of 52 of 64.

Marital status: When combined, premiums tend to be lower for married couples than they would be for individuals paying for a personal policy.

Gender: Because women tend to live longer than men and make claims more frequently than their male counter parts, women tend to pay more for insurance premiums. The AALTCI study showed that a single female pays an annual premium of $3,050 on average while the single man that age paid $2,050.

Carrier policies: Each insurance carrier sets its own rates and underwriting standards. In fact, costs for the same services can vary widely from one company to another. This is why you should gather quotes from various carriers. You can also work with an experienced long-term care insurance agent who can gather these for you and help you understand the differences between insurance policies. They can also help you determine the kind of coverage you’re likely to need, so you don’t over-insure.

Should I Get Long-Term Care Insurance?

Long-term care costs can climb high, so you'd want to start saving now.

The average 65-year-old today has a 70% chance of needing some kind of long-term care eventually, according to the Urban Institute and the U.S. Department of Health and Human Services. Of those who need it, most would use it for about two years, but around 20% would require it for more than five years.

The smart money, then, would prepare for this significant cost. To give you a sense of how much bills can run, below are the estimated annual costs of different types of long-term care services, according to Genworth Financial, which has been tracking them since 2004.

Estimated Annual Costs Type of Services Price Private room nursing home $102,000 Assisted living facility $48,612 Home care aide $52,624 Home care homemaker $51,480

What’s more, costs have been rising faster than even inflation. Genworth found that the average cost of home-care services increased about $892 annually each year between 2004 and 2019. The average cost for a private room in a nursing home jumped by about $2,468 each year during the same time period, currently putting the average cost of a semi-private room in a nursing home at $89,297 per year. As noted before, about 20% of Americans will require more than five years of care.

Unfortunately, with these costs, many retirement nest eggs will come up short. And contrary to popular belief, Medicare covers only limited medical costs, e.g., brief nursing home stays and narrow amounts of skilled nursing or rehabilitation services. The scope for Medicaid is even smaller. On average, it covers about 22 days of home care services if you meet very low income thresholds.

Of course, there’s no way of knowing how much long-term care coverage you’ll need. But knowing what long-term care insurance does and doesn’t cover is key to making sure you’re not over- or under-protected.

What Does Long-Term Care Insurance Cover?

Long-term health insurance typically covers services not provided for by regular health insurance. This can include assistance with completing daily tasks like eating, bathing and moving around. In the industry, these are known as activities of daily living (ADLs). Long-term care insurance policies generally would reimburse you for these services in such locations as:

  • Your home
  • Adult day care center
  • Assisted living facility
  • Nursing home

Some policies also cover care related to chronic medical conditions such as Alzheimer’s disease and other cognitive disorders.

But keep in mind that these are generalizations. There is no industry standard that sets ADL requirements for claim eligibility or what kinds of illnesses long-term care insurance will cover. Each insurance carrier makes its own rules.

So it’s essential to understand when coverage kicks in – and for how long. Policies used to provide coverage for life, but now most cap benefits at one to five years. If possible, some experts recommend extending the initial period when you are not compensated for costs (it’s often 90 days) in exchange for a longer period on the other end of receiving benefits. You also will want to know how premiums may increase over time and whether the cap on benefits will, too. Some carriers allow you to place an inflation rider that increases your daily benefit every year. That increase can be up to 3%.

How Does Long-Term Care Insurance Work?

After you apply for long-term care insurance, the insurer may request your medical records and ask you some questions about your health. You can choose the type of coverage you want, but the insurer must approve you.

When the company issues you a policy, you begin paying premiums every year. Once you qualify for benefits, which is often defined by not being able to perform a set number of ADLs, and the required waiting period has passed, you can file a claim. The insurance company then reviews your submitted medical records and may send a nurse to perform an evaluation before approving a payout. Once approved, you will be reimbursed for paid services, up to the cap on your policy.

Ideally, you’ll stay healthy and your long-term care needs will be minimal. Though your premiums will add up over time, this is one situation where you hope not to get your money’s worth. On the bright side, to lessen the hit to your wallet, the government may give you a tax break.

Tax Relief for Long-Term Care Premiums

If you don't lock in your long term care insurance cost when you are relatively healthy, it will only rise as you age and your health declines.

Some or all of the long-term care premiums you pay may be tax deductible at the federal and state level. But you must make these payments toward a tax-qualified insurance policy. Also, you must meet certain income thresholds.

Maximum Deductible Premium

Age Maximum Deduction 40 or under $420 41 to 50 $790 51 to 60 $1,580 61 to 70 $4,220 71 and over $5,220 How to Buy Long-Term Care Insurance

You can purchase long-term care insurance directly from carriers or through a sales agent. The agent can help you shop around for comparable rates. This professional can also help you understand how different policies work and what they offer.

Also, you may be able to get long-term care insurance through your employer. Some allow you to purchase policies at discounted group rates. However, you should get quotes from multiple insurance companies. In some cases, you may find better rates for more suitable policies that aren’t through your employer.

How to Calculate Your Long-Term Care Insurance Costs

Some websites such as Genworth Financial provide interactive calculators that can estimate what long-term care premiums may be like in your area. Prices and policies can vary, depending on the state.

Tips on Paying for Long-Term Care 

  • If you have a health savings account (HSA), you may want to start socking away more money in it for long-term care. Also called health IRAs, these plans allow your money to grow tax deferred. (But you have to have a high-deductible health plan to open an HSA). To find out more, check out our report on the best HSAs.
  • Don’t go it alone. A financial advisor can help you devise an insurance plan and figure out how you’re going to pay for it. If you are in the market to buy insurance now, some advisors are also licensed insurance agents. Use our matching tool to find the right advisor for you.

Photo credit: ©iStock.com/FangXiaNuo, ©iStock.com/tumsasedgars, ©iStock.com/syahrir maulana

The post How Much Does Long-Term Care Insurance Cost? appeared first on SmartAsset Blog.

Source: smartasset.com

What Health Insurance Doesn’t Cover: Your Guide

Insurance of any kind can be confusing, but when it comes to medical insurance, it’s really tricky to tell what’s covered and what isn’t. Whether you’re shopping around for a new plan or recently just got on a new health insurance plan, it’s good to know the ins and outs of your health insurance coverage before you end up with a large stack of medical bills that you can’t afford. In this article, we’ll discuss the things that medical insurance surprisingly doesn’t cover so that you can make better decisions about your medical expenses. 

What health insurance does cover

In accordance with the Affordable Care Act (ACA), the Health Insurance Marketplace must now cover a specific set of services at little or no out-of-pocket expense to you. They are also required to cover at least 10 essential health benefits. These essential health benefits (EHBs) include:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization and surgery
  • Maternity and newborn healthcare
  • Mental health treatment and substance abuse disorders including counseling and psychiatric treatment
  • Pharmaceutical drugs
  • Rehabilitation services that provide care for those suffering from disabilities and injuries. 
  • Laboratory services (blood and urine testing, etc.)
  • Preventative and wellness services
  • Pediatric services

In short, a lot of the basic care that you will get on a regular basis should be covered by your health plan. Most of the time your doctor won’t suggest treatments that are not covered by your insurance. In a lot of cases, they will try to familiarize themselves with your health insurance plan so that they can lead you in the right direction. However, don’t leave the all the responsibility in the hands of your doctor. It’s important that you make time to read through your health insurance policy and look for any holes before getting services. 

What health insurance doesn’t cover

If you have a good insurance plan, most of your basic medical needs will be covered, but you might be surprised to know the services that generally are. Here is a list of services that health insurance does not cover:

  • Nursing home services: Most nursing home services are not covered by standard health insurance or even Medicare. However, nursing home care is covered by Medicaid. Many people are confused about this, because they confuse short-term care from a skilled nursing facility with long-term nursing home care. These two things are very different. For example, if you were to suffer from a fall or some other type of injury that required you to get surgery, you would need short-term care in a rehabilitative facility to help you get back on your feet. That kind of care is covered. Full-fledge nursing home care on the other hand, wouldn’t be covered because most health insurance providers place time limits on how long they will cover nursing home services. That being said, Medicare will only cover skilled nursing if the patient stayed for at least three days before staying in the skilled nursing facility. Additionally, the patient must be admitted to the facility for the purpose of seeking treatment for a short-term illness or injury as opposed to a chronic one. 
  • The shots you get before traveling abroad: At some point, health insurance companies decided that they would only cover services and procedures considered to be medically necessary, and travel vaccines didn’t make the cut. Now, we’re not talking about your standard health vaccines like the tetanus or flu shot; those are covered. But for those of you who like to travel, the cost of your Typhoid or Yellow Fever vaccine is coming out of your own pocket. This rule of thumb goes for the vast majority of health insurance policies, including Medicare.
  • Cosmetic surgery: Once again, health insurance policies will usually only cover what is “medically necessary.” It’s safe to say that Botox and lip injections will not be covered by your health insurance policy. However, there are certain surgeries that dance on the line between medically necessary and cosmetic. For example, if you wanted plastic surgery on your nose because you thought it was too big, that’s considered cosmetic. But if you had to get work done on your nose due to issues with your sinuses, then that’s probably going to be considered medically necessary. 
  • Acupuncture & alternative therapies: The rules surrounding acupuncture and other types of alternative therapies such as chiropractic care aren’t as black and white. Coverage for such services like massage therapy, acupuncture, and chiropractic care aren’t part of the requirements for most individual health care plans. However, depending on what state you live in, your health insurance plan might cover chiropractic costs. Say you are involved in a car accident that caused you to suffer from back injuries as a result. There is a good chance that your health insurance plan will cover these services. However, if you are a regular at the chiropractor just because you enjoy it, then it probably won’t be. While the standard Medicare plan does not cover acupuncture, there are some Medicare Advantage cans that can. Keep in mind that with most plans who do cover these types of services, there is usually a limit on how many visits you get. 
  • Dental, Vision & Hearing: If you are shopping around for health insurance plans with your employer, note that dental, vision and hearing services are not covered under a regular health insurance policy. If you want to get insured for these services, you will have to buy separate insurance plans for each one. Keep in mind that a lot of times, these insurance policies don’t have any limits on how much they can charge you in out-of-pocket expenses, so research different dental offices before receiving services. Some people choose to not include a dental plan at all. If you wear glasses or contacts, however, it’s probably worth looking into your options for vision insurance.
  • Weight loss surgery: If you’re considering having weight loss surgery, you might be in luck if you have Medicare or Medicaid. While there is currently not a requirement at the federal level for health insurance plans to cover bariatric surgery, Medicare and many Medicaid plans do cover it. Aside from those two plans, more than half of the states in the U.S. do require there to be at least partial coverage for bariatric survey as an essential health benefit (EHB). Remember that even if the state you live in mandates coverage for this procedure, you may still be responsible for some of the medical bills related to your weight loss surgery. 
  • Preventative screenings: Before we go any further, there are A LOT of preventative tests that are covered by your health insurance policy, but there are some that aren’t. This is where things get confusing for a lot of people. For example, mammograms, cholesterol screenings, and colonoscopies will be covered. But if you need to get Prostate Specific Antigen (PSA) screening, it most likely will not be covered.

  • Certain medications: Once again, there are a ton of prescription medications that are covered by most health insurance plans, since pharmaceutical services are one of the essential health benefits (EHBs). However, health insurers get to choose what to cover and what not to cover. Most healthcare insurance plans will choose to cover the minimum. This means that they will pick a drug from each class to cover, and not cover the rest. Many times, the generic version of the drug you are prescribed will be covered by your health insurance, while the name brand will not.

What Health Insurance Doesn’t Cover: Your Guide is a post from Pocket Your Dollars.

Source: pocketyourdollars.com