Saturday, February 1, 2014

Why does health care and tax time become more complicated as you get older?

What is that about?

A few years ago the company I work for, like many other companies, worrying only about their bottom line, switched to a High Deductible Health Plan - and unlike many other companies, did not even offer an alternative. The majority of companies who do offer a HDHP, will offer a standard PPO or HPO at a higher cost to the employee - and I for one would willingly have paid more to stay with a standard plan, but no, I had to go with the HDHP. The one perk was that my employer would deposit some cash into my HSA quarterly.

High Deductible basically means that the Insurance company pays for nothing until you have paid out of pocket up to a maximum for the year.  Approximately $6000 for myself and my husband. For reasonably healthy people, which we are for our ages, that would mean we would probably end up paying for our own health care, plus our share of the insurance coverage costs, without ever being in a position to claim anything back from Insurance, barring a serious illness or accident. The only perk that goes with it - the Health Savings Account (HSA) - a savings plan into which I could put pre tax money to be used for health care expenses, my own pre tax money. My employer would added a quarterly amount in an effort to sweeten the pill.

But wait ... just a few weeks into the start of the first year, having resigned myself to this ugly, expensive and somewhat frightening health cover, I was told that I was not entitled to an HSA - my HR department, and the company they had engaged to manage the plan, both insisted that IRS rules forbid anyone enrolled in Medicare to hold a HSA - see the IRS rules below, true - and I had just enrolled in part B Medicare. So I immediately unenrolled and continued my year on the HDHP. I might add that neither my husband (also covered by my plan) nor myself went to the doctor during that year. I did go for my annual physical - we were assured that this was the one thing fully covered under the plan, however I ended up paying in full for that as the Insurance Company refused to cover it. I was not aware until the following year that my husband stopped taking his medication for high cholesterol due the exorbitant price of it.

Towards the end of the year I was told by my HR department and the benefits management company that I was no longer eligible for an HSA due to my age.  This time they didn't care that I had unenrolled in Medicare, they read the IRS rules to say if I was eligible for Medicare I couldn't have the HSA, so the following year we decided to do a careful analysis of the difference in cost and benefit to us between my employer's plan and my husband's employer's plan. We decided to go with my husband's plan. Particularly as I researched on the IRS website and found that I could actually use what money I had still in my HSA for medical expenses I just couldn't put any more tax free deposits into it. There was not much of a balance and there were a number of expenses to offset against it, so that was not an issue.

The first quarter I noticed a deposit from my employer in my HSA. It took a while but I got them to reverse that. Next quarter, low and behold, another deposit from my employer. Once again I had them reverse it.

Time came to do my taxes and as I studied my W2 I noticed in box 12b a sum equivalent to the deposits that I had received in error from my employer and had them reverse. Is there no end to the amount of stress and extra work involved in all of this? Now I am obliged to figure out how to have them issue me a corrected W2 and hope that this does't flag me for yet another IRS audit. Lucky for me, I keep careful accounts and file everything so should I be audited, it will be just another inconvenience.

I ask you? Surely this sort of thing should get easier as you get older? I will tell you that Medicare appears to be designed to ensure that only those elderly people who started out at genius status, and haven't lost any of their brain cells fighting with Insurance Companies along the way, will have any way of understanding how to go about selecting cover and what that cover is.

The worst part of all this - so far - I am sure there will be more, is that I found a publication on the IRS web site:  that clearly states, to my understanding, that I was certainly eligible for an HSA once I had unenrolled in Medicare, and my old age was nothing to do with anything, apart from a few wrinkles and aches and pains. But they certainly added some more of both. Below is what the IRS say:

Qualifying for an HSA

To be an eligible individual and qualify for an HSA, you must meet the following requirements.

  • You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.
  • You have no other health coverage except what is permitted under Other health coverage, later.
  • You are not enrolled in Medicare.
  • You cannot be claimed as a dependent on someone else's 2013 tax return.

...
If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse's coverage does not cover you.

I really did meet every one of those requirements, once I had unenrolled in Medicare.  I just hope that when the time comes for me to reenroll in Medicare, I don't hit another series of obstacles. In the meantime, we continue with our coverage through my husband's employer and he has once again got his cholesterol levels under control.