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Buying policy now: HSA or not?
Old 03-01-2013, 01:14 PM   #1
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Buying policy now: HSA or not?

Hi --

I've read a lot of threads, and am still somewhat confused.

My situation: took unplanned ER in mid-Feb (turned down forced relocation across the country), with health care benefits continued til Feb. 28. While I've been planning toward ER for a while (reading this forum, learning about portfolios and low-cost investing, living well below my means, etc) with an eye to 2014 or 2015, I have not done any health insurance research yet.

And now time of of the essence, since COBRA from my former employer is north of $700/month for one person! I need to apply for an individual policy from BCBS-TX in the coming week, so I don't have time for in-depth research.

Healthy, no pre-existing conditions. 55 yrs old. Make very little use of medical services. I'm really not looking to cover routine expenses, but rather to be well protected (against bankruptcy!) in the case of a massive medical expense.

My instinct is to go with a HD/HSA plan (maybe a $5000, deductible, 0% coinsurance) to build a nice little pre-tax medical nest egg, but now I've read the threads about HD plans, HSAs and PPACA and am baffled.

QUESTION: Does it make sense to buy a HD/HSA plan now? Or given that 2014 is looming, should I look at other plans?

Can someone please point me in the right direction for researching this? Or perhaps discuss this question?

Again, my apologies for asking something that has likely been discussed elsewhere, but my unsophisticated use of the search function didn't turn up the answer to this particular question.

Cheers,
BarbWire

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ER'd for two weeks ....
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Old 03-01-2013, 01:50 PM   #2
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If the HD/HSA makes sense, go with it. It will be your low cost option and allow you to build your pre-tax nest egg. Since they are selling you this product now, you should be good for atleast a year.

My HD/HSA plan is up for renewal this April. Still waiting to see if it is even offered. I have seen nothing to suggest it will be canceled this year. So, I will renew.
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Old 03-01-2013, 03:08 PM   #3
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I have a HD policy with HSA and the HSA is a great way to squirrel away tax free dollars. I can put in $4250 and DW can as well (separate HD plans). Unlike an IRA where you eventually pay taxes on the deferred money, HSA money is tax free as long as you use it on medical expenses. If we don't use it directly, we will use it to pay Medicare plan premiums.
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Old 03-01-2013, 03:23 PM   #4
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IIRC, the deduction for the HSA deduction will be prorated for the months OP actually has the policy the first year.
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Old 03-01-2013, 03:44 PM   #5
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Hi --

Thanks for the replies. I emailed a broker who handles BCBS-TX and asked about HD/HSA accounts and the impending PPACA changes in 2014, and received the following reply:

From what we have been told, you will be able to keep your current coverage and not be penalized if it does not meet new healthcare deductible requirements. We will know more in July, when Blue Cross introduces the new Individual and Smalll group plan options. If it turns out you cannot keep current coverage, you will be allowed to roll over to one of the new plans.

So, they don't really know what will be offered. I suppose I can't go too wildly wrong with taking an HD/HSA policy now; at least I should be able to squirrel away a bit of HSA money, even if the rules change. What this does seem to mean is that if my policy offering is discontinued, I will not have to go through underwriting again but can convert to a new plan from BCBS-TX.

Thanks again for the replies.
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Old 03-01-2013, 03:48 PM   #6
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Quote:
Originally Posted by Accidental Retiree View Post
IIRC, the deduction for the HSA deduction will be prorated for the months OP actually has the policy the first year.
At the moment, they have a testing period and last month rule.

Last-month rule. Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year.

Publication 969 (2012), Health Savings Accounts and Other Tax-Favored Health Plans
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Old 03-01-2013, 04:27 PM   #7
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Thanks for the clarification.
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Old 03-01-2013, 08:56 PM   #8
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Quote:
Originally Posted by BarbWire View Post

QUESTION: Does it make sense to buy a HD/HSA plan now? Or given that 2014 is looming, should I look at other plans?

Can someone please point me in the right direction for researching this? Or perhaps discuss this question?

Again, my apologies for asking something that has likely been discussed elsewhere, but my unsophisticated use of the search function didn't turn up the answer to this .
BarbWire, welcome to the forum and ER!

HSA will continue to be an option in 2014. If you can afford the deductible, it is and will continue to be an attractive option. You don't need to keep the same policy from this year to next, any HSA eligible policy will do.

You need to start a new policy within 58 days of your previous policy end date. BCBS (or any other insurer) is under no obligation to offer you an individual policy, and they will underwrite. OTOH, the Cobra option policy alternative is guaranteed. You should keep that option open until you have new coverage.
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Old 03-02-2013, 10:00 AM   #9
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Hi Michael:

Thank you for the welcome. In fact I've been reading this forum for 2-3 years but have very rarely posted -- and on those rare occasions I had very naive questions. This forum is a great learning tool.

My plan is to have COBRA for March while I get the individual policy question sorted out. Since it is a "Cadillac" plan that includes dental and vision, I can quickly schedule a dental cleaning and an eye exam what will help take some of the sting out of the high COBRA fee for that month (looks like about $350 more than I will end up paying solo.)

What I will avoid is having a period of no coverage at all. Too many fools on the road drive and text after spending the evening in the bar...

My task this weekend is to figure out why the BCBS agent I spoke to on Friday is urging me to look at their "Saver" policies rather than an HDHP/HSA combo. Time to make a spreadsheet for detailed comparison...

Cheers!
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