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"Value" of Health Savings Account ?
Old 10-14-2011, 09:26 AM   #1
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"Value" of Health Savings Account ?

Megacorp offers an HMO and a qualified Health Savings Account program.

The HSA has the $6k that's like a "medical IRA" - put money in tax free, take out for medical expenses.

Looks like I could put away $3k additional in HSA that I would not for HMO -- so I guess that $3k avoid roughly $1k in taxes paid.

Maybe this is anal but, I guess that that $1k in savings should be included in comparing the two programs ?

Looking for any opinions on traditional HMO vs. HSA. I know a lot depends on plan and one's health condition.

The analysis I did showed the HSA wins for low/medium/ and high medical "consumption" cases.

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Old 10-14-2011, 10:19 AM   #2
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You don't say what your employer is offering. Two definitions:

* An HMO is a type of provider organization -- generally you are restricted to using the providers in the HMO, go outside to another hospital/doctor and it's not covered.
* An HSA is a healthcare financing arrangement -- some banks offer their arrangements to anyone, others won't work with you if you have an employer-sponsored plan.

So what deductible and coverages are you being offered? How high is the deductible? What amount, if any, is your employer putting in to cover the deductible? Is there a flexible spending account option available to you to compare to? If you don't opt to use your employer's HSA "bank suggestion," do you lose any matching funds?

You need to compare the HMO to the other plans offered by your employer to decide which type benefits meet your family's needs. This is more important than any tax deduction or savings option.

You need to decide if you can afford to fund a high deductible. Once you put the money in, do you really want to take it out? You can, tax free -- but you lose the power of compounding. You also need to investigate the fees charged by the HSA to determine if its the best use of your money. Is the bank who sponsors the HSA competitive? (See the question above about matching funds)

Getting a tax deduction is meaningless if you are socked for non-deductible fees for a savings account or an investment option, and your family can't get the care you need at a reasonable cost.

Some personal experience for you: When my employer first offered a HDHP (High Deductible Health Plan) the difference in premium compared to its other options was insignificant when compared to the deductibles -- that is less than $20/month premium reduction for a 15X increase in deductible. So the plan wasn't attractively priced, and their HSA bank would have taken $100 in fees the first year.

Also, search HSA here and you will find a long discussion with many opinions.

-- Rita

Only got A dimple, would have preferred 2!
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Old 10-14-2011, 10:54 AM   #3
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I would check if the HSA is a PPO or HMO. If it is a PPO, I would choose it over the HMO almost without question. When I am ill, I want the option to select my doctor or specialist without being restricted to their network (ie the doctors with low bids).
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Old 10-14-2011, 11:04 AM   #4
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Gotadimple ( BTW, I have 2 of them) has some excellent info, and I will only add the perspective financially only on why I have an HSA. I am hard headed and believe I am going to stay healthy until 65 and then I can fall apart. Currently on no medications or have any medical issues. I max my HSA of $3050 out each year, which started 2 years ago. I get almost a $1000 tax savings on my income each year. Once I turn 65, hopefully this will be a nice little war chest, and I will use the money tax free to pay for my Medicare premiums. Think it like a 401k going in, and a Roth coming out. Can I afford my 5k deductible on a worse case scenario? Yes, but I wouldn't be happy about it because I bet I haven't spent 5k on my healthcare my entire life (not counting 40 years of vigilant teeth cleanings). My .8% interest earned on my HSA isn't raining dollars, but after I build up a two year cushion, I will be a little more aggressive with the rest. Watch out for an HSA with pesky fees, so compare!
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Old 10-14-2011, 07:34 PM   #5
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I was skeptical about the high deductible/HSA option offered by my employer at first. After the first year, they made the HSA a bit more attractive and I took the plunge. Since our medical costs have been modest the last couple years, I'm very happy and it has worked out well for me.
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Old 10-15-2011, 07:50 AM   #6
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I have an HSA into which the company puts $1K to & I add another $6K($5K?). The premium savings + the $1K in my case have been worth more than the out-of-pocket cost increases the regular health plans. Yes, we've had to use a portion of the $6K the last two years, but easily less than the premium savings. The HSA money will carry-on after I retire next year.
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Old 10-15-2011, 08:17 AM   #7
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Originally Posted by gerntz View Post
I have an HSA into which the company puts $1K to & I add another $6K($5K?). The premium savings + the $1K in my case have been worth more than the out-of-pocket cost increases the regular health plans. Yes, we've had to use a portion of the $6K the last two years, but easily less than the premium savings. The HSA money will carry-on after I retire next year.
They made the decision easy for us. My employer also contributes $1000 a year to our HSA if we choose that option. And the traditional PPO has an $800 deductible compared to the HDHP's $2500. But there's a $1200 difference in payroll deductions -- and the $1000 HSA contribution means a $2200 "savings" with a deductible that's $1700 higher. Even I can do that math.

"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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