Tuesday, June 20, 2006

I Was Interviewed by the Acupuncture Association of Colorado

I was interviewed by Greg Shim of the Acupuncture Association of Colorado about my book "Health Insurance Off the Grid" last week. He is printing the interview in their newsletter next month, but for the rest of you, here's what we talked about.

I asked Greg's permission and he said it was okay to post this on my blog.

Interview with Daryl Kulak
By Greg Shim, L.Ac., Dipl.O.M.

As a member of the Insurance Committee, I was asked to find out about HSAs (Health Savings Account) and the like. My research led me to Daryl Kulak. Mr. Kulak is the President of the Simplicity Institute in Columbus, Ohio. The Simplicity Institute is a business school for the holistic healthcare community.

In reading his book, "Health Off the Grid" www.healthoffthegrid.com I was amazed at how simple it is to address all the health insurance mess, and also what an incredibly helpful tool these types of accounts could be for our practices! The following is from a series of emails.

GS: Daryl, your book addresses HSA's, flexible spending accounts, and a few other plans. Could your give us a quick overview as to what each of these are and how our patients could use them in our practices?

DK: To be quick about it - Health Savings Accounts - good; all others - bad. I know that's a bit glib, but let me explain.

First let me say I'm not a health insurance agent, so I'm speaking strictly as a fellow consumer here. I had to educate myself about my own insurance options, and in the course of that realized that I had found a great solution by combining certain things together and decided to write this book based on those ideas.

A Flexible Savings Account (FSA) is something usually set up by your employer. It is also know as a cafeteria health plan. It is a savings account, like you'd have at a bank, but it is in the company's name, not yours. That means that when you quit that job, you lose your FSA money. Even worse, most plans are "use it or lose it," which means that at the end of each year, you lose all the money that was contributed into it. Essentially you have to rush around at the end of each year trying to figure out how to spend that money on some type of healthcare. The nice thing about FSAs is that a particular employer might allow you to spend money on various types of alternative medicine, even things that are not usually covered by insurance, such as naturopathic services or hypnotherapy.

A Health Reimbursement Account (HRA) is also usually set up by your employer. It is also a savings account, and it is also in your company's name, not yours. With an HRA, an employer might let you roll over the total amount from year to year. But once you leave that company, your HRA money is gone.

A Health Savings Account (HSA) is a totally different story. An HSA is something you set up for yourself. You can get an HSA if you're self-employed, an employee of a company or even unemployed. It doesn't matter. Even if an employer gives you the option of an HSA, it's still your HSA. An HSA is also a savings account, but you never lose it. You don't lose your HSA money at the end of the year. You don't lose your HSA when you leave a company. It's always with you. The money you put into an HSA is tax deductible for the year you put it in. It gains interest tax free. And when you take money out for medical expenses, you don't pay tax on it then either. I call it a "triple tax deduction."

Acupuncturists are especially well-suited for HSAs. IRS Publication 502 states that acupuncture expenses are legitimate expenses for an HSA. That means that every client you have as an acupuncturist could be paying for all your services with pre-tax dollars (out of their HSA, in other words). The way it would work is a patient would set up an HSA for themselves (and their family), they would fund it yearly (up to a certain limit) and then they could write checks from that account to pay you for the appointments. The patient is saving on taxes, and you don't have to submit any insurance paperwork, it seems like a cash transaction to the practitioner. The patient will definitely need an official receipt for their records, but that's it from your end. Easy, huh?

GS: In today's market, is $2500 still the magic number for a health insurance deductable? My family of 3 has a $6000 deductible, but then everything after that is completely covered. Since I am my family's Family Practitioner, we haven't had to use an MD for years. We currently pay $284 a month for this coverage.

DK: $2,500 is a magic number. That is when you will find that you are paying less overall (insurance premiums + cost of medical services) than if you asked for a lower deductible policy. This holds true in almost every case, except for a few exceptional states like New York and New Jersey, where their laws prevent customers from having cheaper costs for high deductible policies. Don't move to those states, Coloradans!

In Colorado, you will see that almost every policy at the $2,500 deductible is a good deal financially, even if you or your family falls sick every year! Let me say that again. You could be deathly ill every year of your life (I'm not wishing for that, of course) and you'd still be ahead with a $2,500 deductible policy, versus something lower like $500.

Having said all that, an even higher deductible is even better, as long as you don't foresee illnesses for your family. If everyone is fairly healthy, and especially if you're following good, holistic, preventive principles with your health, you should certainly choose a higher deductible like $6,000 or even higher. For our family, I've chosen $10,000. This sounds ridiculously high, but over the past 5 years, we've spent so little on Western medicine that it's been worth it. Even if we have a sick year sometime, we'll still be better off on the whole.

Daryl’s book can be purchased from his website www.healthoffthegrid.com as either a dowloadable eBook or a mailed hardcopy. I bought a copy to lend to my patients so they can learn about HSAs and healthy health insurance. I also have a person I trust that I can direct patients toward to set up low cost HSAs and high deductable insurance plans. We can now both help our patients be well AND help them save thousands of dollars every year on their health insurance. This is the kind of ethical marketing that really gets me excited about running a business!

Daryl Kulak also has a free podcast available on iTunes and at www.holistichealthnation.com.

A note on IRS Publication 502, page 15:

Nutritional Supplements
You cannot include in medical expenses the cost of nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. unless they are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician. Otherwise, these items are taken to maintain your ordinary good health, and are not for medical care.

I spoke with IRS employee #9310685 from Medical Deductions and with IRS employee #5903363 from the Complex Tax Department, and both of them said that if a patient comes in with a diagnosis from a physician, then all herbs, supplements, and natural medicines (such as homeopathic injections) fall under qualified medical expenses, and are therefore purchasable with a Health Savings Account. If your patient does not have a specific diagnosis, then only the acupuncture is a qualified medical expense.

The part at the end is Greg's too. It seems like the IRS has changed the nutritional supplements text in Publication 502, and in a very favorable way. Nice!

The Acupuncture Association of Colorado's Website is here.

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