Tuesday, August 30, 2005

HSA and LTCi...

As we continue with the theme “Better Living Through Acronyms,” we turn to how HSA’s can serve another purpose: funding for long term care insurance.
Over the past several posts, we’ve discussed how an ageing America needs to deal with the long term impact of increased life expectancy, and how Health Savings Accounts enable folks to make informed and pre-funded choices about their health care. But these two ideas are also inextricably intertwined [ed – that’s pathetic].
Did you know that you can pay for Long Term Care insurance (LTCi) out of your HSA? And when you do, Uncle Sam is subsidizing your premium. So there’s a double benefit at work: saving premiums on your health insurance by purchasing that High Deductible Health Plan, and using some of those savings to fund insurance against a catastrophic long term care claim. Not bad for a plan that was supposed to destroy the health care system as we know it.
Why is this so important? Well, as Boomers age, the need for long term care increases, as does the cost of that care. According to accepted industry “common knowledge,” 1 out of every 3 retirees are going to need some form of long term care before they pass on. Of course, this doesn’t necessarily mean a long stay at a nursing home: it could mean adult day care, respite care, someone checking in once or thrice a week, as well. And those aren’t necessarily free. And if there’s even a mild stroke, for example, it could take months for a full recovery.
This takes on added import when one considers that, according to a study by MetLife, LTCi is the fastest growing benefit being offered by Fortune 500 companies. These plans are usually offered on a “voluntary” basis; that is, the employer offers the plan (underwritten by an insurance carrier) but doesn’t pay any of the premium. These are usually deducted from an employee’s paycheck, but could come right out of the HSA.
Younger Boomers can also reap rewards from this technique: funneling those tax-advantaged dollars into insurance against a future claim. One particularly intriguing technique now being used is for such folks to purchase limited-pay LTC policies. These plans guarantee that after you’ve paid premiums for, say, 10 years, no more premiums are due, and the policy is fully “paid up.”
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