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Health Savings Accounts Provide Affordable Health Insurance Solutions
Author: Wiley P Long
Millions of Americans have recently been faced with the task of finding their own affordable healthcare plans for themselves and their families after they have lost their jobs. Already in 2009 alone, an estimated that 7 million Americans who lost their jobs as a result of the recession will have to pay COBRA health insurance premiums in order to maintain their health insurance plans.
The good news for these millions of recently unemployed workers is that a new government Act - the American Recovery and Reinvestment Act (ARRA) - has been put into place in many states to help these individuals and their families afford to pay for their COBRA healthcare. However, the ARRA and COBRA only provide temporary financial relief and, for many, the programs are about to end. Health Savings Accounts may be viable healthcare solutions for these employees.
Working with COBRA
COBRA is a program that allows employees who have lost their jobs through no fault of their own to continue with the same healthcare plans that they had been receiving through their employers. The COBRA program is temporary and, while employees are able to maintain their same health insurance plans, employees do have to pay more for the health insurance premiums on their COBRA plans than they paid while they were employed.
Historically, COBRA premiums have been difficult for laid-off workers to afford on their own. Yet, because many workers were able to quickly find reemployment after being laid off, many workers chose to use the COBRA option as a temporary health insurance solution while they were between jobs.
However, with current challenging economic conditions, it has not been possible for many workers to find reemployment, which means that they have had to pay high COBRA premiums for longer periods of time - or opt to forgo health insurance altogether. Therefore, while COBRA programs have been an affective short-term solution to help workers get through a temporary job loss, they are not able to provide affordable or long-term health insurance.
American Recovery and Reinvestment Act
In order to help workers more easily afford COBRA (and retain healthcare coverage) the federal government instated the American Recovery and Reinvestment Act (ARRA), which has been adopted by some states.
Under the ARRA, workers who lost their jobs during the recession are only required to pay 35 percent of their COBRA health insurance premiums, while the federal government pays the remaining 65 percent. This Act is adopted on a state-by-state basis and has been an effective short-term solution for millions of Americans. However, the state COBRA coverage only lasts from six to nine months, depending on an individual's state. Federal COBRA coverage lasts up to 18 months, in most cases.
For many Americans currently enrolled in COBRA health insurance programs, COBRA and/or ARRA financial support is about to expire. Americans who are still unemployed are now challenged to find affordable healthcare plans for themselves and their families. It is especially important for them to enroll in a new health insurance program before their COBRA benefits expire so that they will be able to maintain healthcare coverage at all times.
Health Savings Account Options
For individuals who have lost their jobs, a Health Savings Account is generally a very affordable and effective health insurance solution. Health Savings Accounts are used by individuals in all industries and financial situations to save money, including small business owners, businesses, unemployed individuals, families, financial-savvy employees, and more.
A Health Savings Account is similar to an IRA in that individuals set aside money into the health savings account that they can then invest in high interest-yielding stocks, bonds, money markets, and more. The money that an individual puts into the health savings account is tax-deductible and can grow tax-free. When an individual needs to pay for a qualifying health-related expense, he or she can withdraw money from the health savings account to pay for it without paying tax.
One of the many benefits of a Health Savings Account is that individuals can use the funds from their accounts as they wish. However, if they withdraw money for a non-healthcare related expense, they will pay taxes on the funds that they withdraw. When they leave funds in their Health Savings Account, the money can grow completely tax-free for life.
In order to establish a Health Savings Account, individuals need to open a qualifying high-deductible health insurance account. Health Savings Accounts can be used by individuals and families. There are also maximum annual contributions for individual and family Health Savings Accounts, which are subject to change every year.
Health Savings Accounts are not only affordable health insurance solutions for individuals who have COBRA accounts that are about to expire, but they are also excellent solutions for many laid-off workers. For many individuals, Health Savings Accounts are more affordable and financially smart health insurance solutions than COBRA plans. Individuals should speak with an insurance advisor to find the right insurance solutions for themselves and their families.
By Wiley Long - President, HSA for America - The nation's leading independent health insurance firm specializing in individual and family HSA Insurance plans that work with Health Savings Accounts.
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