America is a country consumed with consumption; we are a nation of profligate spenders. In a recent survey performed by the Employee Benefit Research Institute, less than 43 percent have less than $10,000 in retirement savings. Furthermore, 27 percent of workers have less than $1,000 saved. Sadly, both figures are increases from 2009 and 39 percent had less than $10,000 and 20 percent had less than $1,000 in the prior year. Drilling down on these numbers one finds that 29 percent of the workers who are over 55 years of age have less than $10,000 in their retirement savings. These are somber statistics.
Unfortunately, there’s more. Under the new healthcare law, taxes will be raised on middle-class families in direct violation of President Obama’s promise not to do so. There will be a 3.8 percent hospital insurance payroll tax on investment income, which includes capital gains, dividends, rents and royalties to name a few items. This tax takes effect in 2013. A new 40 percent excise tax on health insurance plans greater than $10,200 for individuals and $27,500 for families and will take effect in 2018.
Mandates on individuals and businesses will also raise taxes on families. When fully implemented in 2016, after the 2012 election, the fine for non-compliance can be up to $695 per person, $2,085 per household or 2.5 percent of taxable income. Healthy uninsured individuals will now, for the first time, be forced to buy insurance plans under this new Act; this is a de facto tax. Employers also have a new mandate to provide health insurance if they employ more than 50 people and have at least one employee who receives a premium tax credit. The fines for non-compliance go to $2,000 per employee, excluding the first 30, or $3,000 per employee receiving the premium tax subsidy.
As a result of these overt and additional hidden taxes, Americans will have less money to spend on health insurance in a climate of little if any economic growth. Employers will pay the penalties and drop the coverage of their employees because it makes economic sense to do so and thus, will drop employee wages by the amount the new Government insurance plan costs. Those that elect to keep coverage for their employees will drop wages by the amount necessary to keep the coverage. The net result will be less income in a stagnant or slowly growing economy in the face of a real threat of a serious drop of the purchasing power of the Dollar. That is change upon which you can count if you do nothing.
So what can we do? One of the things that may address the problems created by this new healthcare law, in its current form, is a health savings account plan, or HSA. An HSA is a tax-exempt savings account that you can open for the purpose of paying qualified medical expenses. These accounts can be established with either banks or insurance companies or IRS approved entities. Eligible expenses include dental and vision care, prescription services, certain medical equipment and expenses applied to health plan deductibles.
What makes an HSA a good idea is that as an owner, and someone who now has skin in the game, you will become a better consumer of health care. You will shop for the best price on things such as MRIs or CT scans as well as the price of outpatient surgery. If you are in good health you are likely to continue to aggregate money in your account, which can be treated and invested like an IRA. In essence, if you continue being in good health you are creating an annuity for yourself and your family. If you do require medical care, your deductible expenses are paid with pretax dollars. Additionally, you can go to your employer and ask that he or she establish an HSA for your company. Furthermore, as it becomes harder and harder to see a real doctor, it is likely that the purchasing power you have aggregated in an HSA will increase your accessibility to the best healthcare. If you are in good health and you are the main provider for your family, you have now taken direct responsibility for the welfare of your family as opposed to putting control of your family’s welfare in the hands of a bureaucrat.
In the end, your health and healthcare are both issues of personal responsibility. The care and protection of your family is also an issue of personal responsibility. The more you can save now and the healthier you can be will only accrue to your benefit and keep your loved ones safe.