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So What's Really Driving the Increase in Health Insurance Premiums?

I am sure you are all wondering right?

While many people may believe that insurer profits are the driving force behind increasing health insurance premiums, research reveals very different reasons for the high cost of health insurance.

A May 2009 report titled "What's Really Driving the Increase in Health Care Premiums?" addresses the issue. The report, issued by the WellPoint Institute of Health Care Knowledge, compiles research from sources such as PricewaterhouseCoopers, the Robert Wood Johnson Foundation, the Kaiser Family Foundation, The Bureau of Labor Statistics and the Congressional Budget Office.

According to the report the "key drivers" of spiraling U.S. health care costs are:

• Advances in medical technology and subsequent increases in utilization;
• Price inflation for medical services that exceeds inflation in other sectors of the economy;
• Cost-shifting from people who are uninsured and those receiving Medicare and Medicaid to the private sector;
• High cost of regulatory compliance; and
• Patient lifestyles, such as smoking, physical inactivity and obesity.

Citing PricewaterhouseCoopers research from 2008, the report found that only three cents of every health care premium dollar is spent on health insurer profit.

According to the Institute's report, newer medical technologies tend to increase costs because they are generally more expensive than the older technologies they replace. While the availability of more advanced, superior technologies can yield better results for some patients, these technologies and diagnostic tests may be used inappropriately in some situations where existing, older technologies are more effective and accurate.

A copy of the full report is available by clicking on the link below.

http://www.wellpoint.com/pdf/Premium%20Cost%20Drivers.pdf

IRS Releases 2010 Adjusted HSA Amounts

Eligible individuals with self-only coverage under a high-deductible health plan (HDHP) may contribute an annual maximum of $3,050 to their Health Savings Account (HSA) for 2010. Eligible individuals with family coverage (coverage for two or more individuals) under an HDHP may contribute up to $6,150 to their HSA. Individuals age 55 or older who are not enrolled in Medicare may contribute more to the account per year.

To be considered qualified for an HSA, the HDHP must meet certain IRS regulations. For 2010, to qualify as an HDHP.

• The minimum deductible amount must be $1,200 for self-only coverage and $2,400 for family coverage; increased from 2009 requirements.
• The out-of-pocket maximum must be no higher than $5,950 for individual or $11,900 for family coverage; increased from 2009 requirements.
• The HDHP must be set up with a combined medical/pharmacy deductible. This deductible must apply to the out-of-pocket maximum; no change from 2009 requirements.
• All medical and pharmacy services must be subject to deductible and out-of-pocket maximum except for preventative services.

For more information and to obtain a quote on a Health Savings Account Compatible Plan, please contact me!

Illinois Insurance Update

Effective June 1, 2009, all individual and group health insurance and HMO contracts (including dental and vision) that offer dependent coverage must follow a new Illinois law which gives a person with an insurance policy that covers dependents the right to elect coverage for qualifying dependents (even if they are not full-time students) who are not married up to age 26 or up to age 30 for unmarried military veteran dependents who are Illinois residents. This will take effect for new insurance policies issued on or after June 1, 2009. For example, for a plan with a January 1 open enrollment date, this new law will first take effect beginning January 1, 2010. The new law does not require employers to pay the cost of the dependent coverage or to provide dependent coverage if not previously provided.

An unmarried individual who meets the age requirements above can be eligible for dependent coverage under this new law even if that person cannot be claimed as a dependent on the employee's income tax return. However, if the dependent does not meet the IRS definition of a dependent under IRC Section 152, the employee will need to be taxed on the fair market value of the portion of the insurance premiums related to that individual that are paid by the employer. Employers need to verify at the time of enrollment that tax-free health coverage is appropriate and that only tax free treatment provided to the employee includes spouses and dependents as defined under IRC Section 152. The taxation of the imputed income related to these premiums protects the tax free treatment of the reimbursements received under the plan.

Currently, the IRS has not offered an formal guidance on the calculation of the fair market value, other than the information offered in PLR 200339001 and PLR 9603011 which references the treatment of coverage for Domestic rule would be to follow a reasonable method for calculating the fair market value using an actuarial computation that could be done by your insurance provider or using the greater of the increase in incremental cost of coverage or COBRA premiums for self-only coverage.

If you have questions about this new law and how it will work for your particular situation, we recommend that you contact your carrier directly for clarification on the matter as it pertains to your situation and their policies.

Information was received via Sikich LLP, Certified Public Accountants and Advisors

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What is a Health Savings Account Plan

Health Savings Account is a tax-favored savings account combined with a qualifying high-deductible health insurance plan. By allowing you to deposit tax-deductible funds into a health savings account that you can use to cover medical costs, Health Savings Accounts enable you to take control of your own health care decisions. One of the key aspects to health savings accounts is a system that is responsive primarily to individual consumers, rather than to third-party payers. This concept is know as consumer driven health care.

First, you need to purchase a high-deductible health insurance plan that qualifies and can be partnered with a Health Savings Account. Many carriers offer them now and the plans are all pretty similar with some having the option for deductible waiver for Preventative Care Visits to cover things like mammograms and pap-smears along with other routine testing, and some not. Deductibles that I normally sell are around $2500 for individuals and around $5000 for a family, however, there are many other options lower and higher to choose from.

What's not to like about a Health Savings Account (HSA)? Contributions are deductible, the account accumulates tax-free, and withdrawals used for medical expenses are tax-free. I personally cringe when I see someone paying nearly a $1000 a month to insure their family, yet they are hardly even utilizing the benefits that they are paying so much for. My first suggestion to them always is to look at going with a high deductible health savings account compatible plan and put into their own HSA Account the money they are saving on their premiums. Why give it to the insurance company? Pay a smaller premium to the insurance carrier and with the money you are saving set up the HSA Account and control your own health expenditure's.

Lower your health insurance premiums by 30-50%, yes you can lower it that much! Our typical client saves between $80 - $250 per month when they switch from a traditional health insurance plan to a Health Savings Account plan, some save even more!

Reduce your income taxes up to $1600 to $1800 a year - all Health Savings Account deposits are 100% tax deductible, and can be withdrawn to pay for medical expenses tax-free up to $3000 for a single person and $5950 for a family.

Build a medical retirement account of several thousand dollars - the funds in your HSA are always yours, and grow tax deferred like an IRA. At age 65 the money can be withdrawn penalty free for any reason.

So, have you been thinking that you need to get in control of your health care expenditure's? Are you tired of paying too much for insurance you never seem to utilize, or are you one of those uninsured that think nothing will happen to you and you don't need ANY health care coverage? HSA's are changing the way Americans think about health care, and their money, and giving new options to those uninsured individuals.

If this is something you feel you should investigate, don't hesitate, I give absolutely free consultations and will let you know if this is an option that makes sense for you. I work for you, not the insurance companies, but I get paid by them, you won't pay a penny to me. I am licensed throughout the U.S. in several states and am only a phone call away!

Lorraine Allen
REGIT, Inc.
1200 Roosevelt Rd.
Suite 115
Glen Ellyn, IL 60137
Toll Free (800) 537-9786 x1067
Direct (630) 652-1067
Fax (630) 495-1881
E-mail - lallen@regitinc.com
LinkedIn - www.linkedin.com/in/lorraineallen