The majority of employees with Health Savings Accounts (HSAs) are not aware of the ability to use funds to purchase long-term care insurance a new study finds.
Just under one-third (31%) of respondents to a study conducted by the long-term care insurance trade association knew HSA dollars could be used to purchase insurance protection.
The growth of Health Savings Accounts, first introduced in 2003, has been dramatic. Some 8 million Americans are now covered by HSA-qualified high deductible health insurance plans, over six times as many as were enrolled in March 2005 plans. Experts note this still represents a small percentage of those eligible for the tax-advantaged savings plan.
The average amount invested in an HSA account for individuals between ages 41 and 50 is $6,249 according to the First Quarter 2009 report by Canopy Financial. For a family, the average invested is $9,757. Account balances for those ages 51 and over exceed $11,000.
People understood they could use their HSA funds to pay for medical costs and drugs but few knew they could use the pre-tax dollars to purchase long-term care insurance protection either on an individual basis or when it is offered by their employer. Tax-qualified long-term care insurance premiums can be reimbursed through an HSA, tax-free up to the Eligible Premium amount that is indexed each year.
The 2009 Long-Term Care Insurance Price Index notes that a 55 year-old individual in good health would pay $723 a year for $115,000 in current benefits. The coverage would grow to over $305,000 of protection 20 years from now. The entire cost of their premium could be paid using the tax-advantaged HSA account. This is a significant cost saving advantage available to employees.
Government studies report that for individuals making HSA contributions, about 41 percent did not withdraw any HSA funds within the same year, while about 22 percent withdrew as much or more than their reported contributions. About 93 percent of reported withdrawals were claimed for qualified medical expenses.
Some 8 million Americans own long-term care insurance according to industry experts. Experts predicts that if more people understood they could use their HSA dollars to obtain protection, the number would grow by at least 20 percent.
2009 Eligible Tax Deductible Limits for Long-Term Care Insurance
Age 40 but not yet 50 $ 600
Age 50 but not yet 60 $1,190
Age 60 but not yet 70 $3,180
70 or older $3,980
The American Association for Long-Term Care Insurance is the national trade organization providing consumers with relevant and current information designed to help you make smarter decisions. The Association does not sell insurance products but works with several thousand insurance and financial professionals nationwide. Consumers should visit the Association’s Consumer information center to access free information. Insurance and financial professionals should visit the Association’s Producar’s resource center. Jesse Slome is Executive Director of the Association.
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