Tag Archives: Tax Benefits

Private Health Insurance

Private Health Insurance may be obtained on a group basis.  A company may choose to cover its employees.  On the other hand private health insurance may be purchased by individuals for their own account. According to the United States Census Bureau, about 60% of Americans are covered through an employer.   Approximately 9% purchase private health insurance directly.

Employer-Sponsored

As part of an employee’s benefit package, employers pay for private health insurance on behalf of their employees. Most private health insurance in the United States is therefore employment-based.  Employers in general pay about 85% of the insurance premium for their employees and 75% for their employees’ dependents. The employee pays the remaining part of the private health insurance premium due.

Regarding private health insurance in the United States, the range of products is similar to those provided through employers. However, average out-of-pocket spending is higher in the individual market. Examples are higher deductibles, co payments and other cost-sharing provisions. A major medical health insurance policy is the most commonly purchased form of individual health insurance.  It is primarily a catastrophic plan. However, qualified preventive benefits are still covered at 100% without any waiting period or copayment.

Most consumers in the individual market do not receive any tax benefits. Self-employed individuals receive a tax deduction for their private health insurance for additional tax benefits.

Age and health status affect premiums significantly in states that allow individual medical plan underwriting. The Patient Protection and Affordable Care Act, which came into effect in 2014, prohibits any discrimination against or charging higher rates for individuals based on pre-existing medical conditions.

The Hartford Courant, the largest daily newspaper in the U. S. state of Connecticut, reported in August 2008 that competition was increasing in the individual health insurance market. More insurers were entering the market with an increased variety of products as well as a broader spread of prices.

New Types of Private Health Insurance

High-deductible health plan (HDHP)

These plans primarily provide for catastrophic illness.  They thus have higher deductibles than traditional health plans. Very little coverage is provided for everyday expenses.  Therefore they have potentially high out-of-pocket expenses. Various forms of savings plans are coupled with these plans.

Tax-preferenced health care spending account

In 2003 President George W. Bush signed into law the Medicare Prescription Drug Improvement and Modernisation Act.

This law created:

Health Savings Accounts (HSAs) which are tax-deductible. In order to deposit pre-tax funds in an HSA, a consumer must be enrolled in a high-deductible insurance plan. There are a number of restrictions on benefit design. The minimum deductible is $1200 for individuals and $2400 for families.

Untaxed private bank accounts for medical expenses, which can be established by those who already have private health insurance. Withdrawals from HSAs are only penalised if the money is spent on non-medical items or service. In order to deposit pre-tax funds in an HSA, a consumer must be enrolled in a high-deductible insurance plan.

There are a number of restrictions on benefit design. The minimum deductible is $1200 for individuals and $2400 for families. In order to deposit pre-tax funds in an HSA, a consumer must be enrolled in a high-deductible insurance plan. There are a number of restrictions on benefit design.
To deposit pre-tax funds in an HSA, a consumer must be enrolled in a high-deductible insurance plan. There are a number of restrictions on benefit design.

Limited benefit plan

These plans pay for routine care and especially relevant do not pay for catastrophic care.

Discount Medical Card

This option is becoming more popular. These cards are not insurance plans but provide access to discounts from participating healthcare providers. While some offer a degree of value, there are serious potential drawbacks for the consumer.

Due to the higher prices of and limited access to private health insurance, discount medical cards are growing in popularity. After private health insurance price hikes, some small businesses and individuals drop their private health insurance.  They then obtain discount medical cards.

A person with a pre-existing condition may find the card attractive as the pre-existing condition may make them only eligible for high-priced policies. No medical examinations are required. All people regardless of age or pre-existing condition pay the same cost.

Unfortunately there are consumers who are under the wrong impression.  They believe that the cards are insurance policies. There is no data on how many people have a discount medical card. Promoters of discount cards are generally not regulated or licensed. This results in few standards that apply to sales or sales methods. Marketing materials that are used include scare tactics, misleading information and exaggeration to attract buyers.

Short Term Health Insurance

These plans have a short policy period (typically months) and are intended for people who only need private health insurance for a short time period.  Temporary health plans offer individuals and families an affordable solution.  The application process is quick and easy.   There is peace of mind that comes with knowing you have health insurance should an accident or unexpected illness occur.

This type of coverage helps protect your health and finances when you are in between major medical insurance plans. Because temporary health insurance plans are not intended for the long term, their benefits are less robust than major medical plans. They are not considered qualified plans under Obamacare and, therefore, do not include the essential health benefits. A temporary health insurance plan will not prevent you from owing a tax penalty for going without minimum essential coverage. Additionally, temporary plans may still deny applicants or limit coverage based on pre-existing conditions.

Health Care Sharing

A health care sharing ministry is an organisation that facilitates sharing of healthcare costs between individual members who have common ethical or religious beliefs in the United States. Twenty eight states have laws that recognise health care ministries as distinct from health insurance organisations.  240, 000 Americans participate in health care sharing. Among those 240, 000 participants, more than $180 million are shared per year to pay for one another’s medical bills.