How our HSAs saved us over $10,000

[golftrek]

My husband and I (both age 62) have High Deductible HI policies. We established HSAs several years ago. We have funded the HSAs to the max. Last year, using Turbotax, I estimated our Federal and state income tax savings due to the HSAs was around $1,200.

We have just applied for the subsidy on the HealthCare.gov and qualified for subsidies of approx $9,000. The only reason we qualify for the subsidy is that we can deduct our HSA contribution in determining our Modified Adjusted Gross Income.

Between the income tax deduction and the subsidy we figure our HSAs will save us around $10,200 next year. And in addition we have over $50,000 (invested in Vanguard mutual funds) in our HSAs growing tax free that we can draw on if we need it.

I highly recommend you look into an HSA if you are under 65.

Jo Ann

 

[daylatedollarshort]

Thanks for the tip. We are looking forward to our first ever HSA with a Bronze plan next year. It is way cool how the HSA reduces income which in turn increase the ACA subsidies.

 

[frank]

my wife has an hsa and I was wondering what is the max contribution for a year? another thing is how do you go about investing with vanguard through an hsa account?

 

[Marita40]

I am opening one for the first time this coming year and understand that the maximum for a single person is $4300--$3300. plus a $1000. catch up.

 

[REWahoo]

my wife has an hsa and I was wondering what is the max contribution for a year? another thing is how do you go about investing with vanguard through an hsa account?

Investment options are limited to those offered by the financial institution administering your HSA account. Here's one that offers Vanguard as an investment choice. You'll also find info on contribution limits: Health Savings Account - HSA Administrators

Note: you can choose whatever institution you wish to administer your account. I've used this one for several years and had no issues with them.

 

[imoldernu]

A resource that offers some details:

HSAs- Health Savings Accounts and the States

And another study that considers the relationship to Medicaid.

http://www.cato.org/publications/commentary/hsas-are-no-solution-medicaid

The entire area of healthcare is in a state of flux, with some major changes likely over the coming years. (not just in Obamacare).

In our case, because of a number of health events between age 50 and 65, an HSA (as written today) would have cost us much more in out of pocket expenses, but that is part of the choice.

If I were age 30 to 40 today, I would probably take a good look at the plans... especially considering the mobility in employment, but after a cursory look at the plusses and minuses, would do a lot of studying before making the decision.

For those who are not yet in Medicare, this is a website that explains some details in the system that most people don't know about or understand. It also details many safety nets that are available in dificult situations.

http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/MSP_Fact_Sheet.pdf

 

[golftrek]

My HSA is with HSA Administrators and has several Vanguard investment options. The contribution limit for 2013 is $3300 EACH and a make up contribution of $1000 if you are over 55.

Jo Ann

 

[audreyh1]

Limits:

For 2014, Higher Limits for HSA Contributions, Out-of-Pocket Expenses

We are looking forward to opening an HSA account next year, and we will probably go with HSA administrators and leave the money to stay invested until Medicare age.

We will both qualify for the catchup contribution, so we will probably save over $2000 in income taxes for 2014 (assuming 25% tax bracket).

 

[audreyh1]

In our case, because of a number of health events between age 50 and 65, an HSA (as written today) would have cost us much more in out of pocket expenses, but that is part of the choice.

Do you mean because tax deductions would have been limited? Not necessarily.

If you have the savings, you can still have an HSA, yet pay medical expenses out of your regular savings and get the full tax deduction. You aren't required to use your HSA to pay for medical expenses in any given year.

 

[jowi]

In our case, because of a number of health events between age 50 and 65, an HSA (as written today) would have cost us much more in out of pocket expenses, but that is part of the choice. http://www.cms.gov/Outreach-and-Edu...-MLN/MLNProducts/downloads/MSP_Fact_Sheet.pdf

This might be the case for you if you had access to a non-HSA health insurance plan that paid out well, either through your employer or privately. But as the plans stand now that are available to me on the exchange (or previously to this year), getting a lower-deductible plan only means it takes the $$ I "saved" on my deductible and tacks it onto my premiums.

So I could pay (using round #s for sake of argument) 1,000 per year for a high deductible HSA plan that has a 6K deductible and max OOP and I could think, "Well, this is crappy insurance for me because I need a lot of health care due to health issues." So then I go and look at other plans in open enrollment and pick out the best plan with no deductible, a "Platinum" plan. But that plan's annual premiums are $7,000 per year. So, how exactly is that different from the first situation?

In fact, last year when I compared, it was even MORE expensive for the good plan - so more like comparing the $1000 to $8,000 - I'd be $1000 ahead had I chosen the 'crappy' insurance.

This is how it's priced. Maybe not everywhere to this extreme, but it's been pretty much my experience. Then add on the tax savings and especially if it brings you down into qualifying for a subsidy, it makes sense that a HDHP with HSA is your best choice.

 

[walkinwood]

Thanks for the tip. We are looking forward to our first ever HSA with a Bronze plan next year. It is way cool how the HSA reduces income which in turn increase the ACA subsidies.

+1

 

[audreyh1]

Thanks for the tip. We are looking forward to our first ever HSA with a Bronze plan next year. It is way cool how the HSA reduces income which in turn increase the ACA subsidies.

Same here. We don't qualify for the subsidy, but sometimes we hit thresholds that cause extra taxes (like AMT), and this will really help.

 

[Birdie Num Nums]

My HSA is with HSA Administrators and has several Vanguard investment options. The contribution limit for 2013 is $3300 EACH and a make up contribution of $1000 if you are over 55.

Jo Ann

I thought for 2013 it is $3,250 ($4,250 if 55+), not $3,300/$4,300: a $50 difference.

 

[REWahoo]

I thought for 2013 it is $3,250 ($4,250 if 55+), not $3,300/$4,300: a $50 difference.

2013 and 2014 limits:

 

[Texas Proud]

Is the deduction based on having the policy the full year

IOW, if I start Jan with a policy that qualifies and I put in the full amount.... and then get a job that does not have a policy that qualifies.... do I have to take some of the contribution out

 

[rbmrtn]

Does anyone have the exact definition of what a "HSA qualified HDHP" is ? the best I can find is this

HDHP - High Deductible Health Plans

You must be enrolled in a High Deductible Health Plan (HDHP) to be eligible to open and fund a Health Savings Account (HSA). An HDHP – as defined by the Treasury Department’s 2013 guidelines – is a health insurance plan that meets the following criteria:

Minimum Deductible Amounts for HSA-Compatible HDHPs

For individual coverage: $1,250
For family coverage: $2,500
Maximum Annual Out-of-Pocket Amounts for HDHPs

For individual coverage: $6,250
For family coverage: $12,500
In addition, an HSA-Compatible, High Deductible Health Plan can only provide first dollar coverage for benefits that are considered preventive care, such as an annual physical. For all other benefits, such as office visits or prescriptions, the insurance cannot go into effect until the member has met the annual deductible.

From here HSA Health Insurance Plans - High Deductible Health Plans - HDHP - HSAConnect

From what I have read, bronze plans were basically modeled after HDHP and should be able to use HSA. Others have said the insurer must identify the plan as being HSA qualified. Mine is not labeled HSA but seems to meet all the criteria.

 

[audreyh1]

Does anyone have the exact definition of what a "HSA qualified HDHP" is ? the best I can find is this

HDHP - High Deductible Health Plans

You must be enrolled in a High Deductible Health Plan (HDHP) to be eligible to open and fund a Health Savings Account (HSA). An HDHP – as defined by the Treasury Department’s 2013 guidelines – is a health insurance plan that meets the following criteria:

Minimum Deductible Amounts for HSA-Compatible HDHPs

For individual coverage: $1,250
For family coverage: $2,500
Maximum Annual Out-of-Pocket Amounts for HDHPs

For individual coverage: $6,250
For family coverage: $12,500
In addition, an HSA-Compatible, High Deductible Health Plan can only provide first dollar coverage for benefits that are considered preventive care, such as an annual physical. For all other benefits, such as office visits or prescriptions, the insurance cannot go into effect until the member has met the annual deductible.

From here HSA Health Insurance Plans - High Deductible Health Plans - HDHP - HSAConnect

From what I have read, bronze plans were basically modeled after HDHP and should be able to use HSA. Others have said the insurer must identify the plan as being HSA qualified. Mine is not labeled HSA but seems to meet all the criteria.

Our Bronze plan is labeled as "HSA eligible" on one brief overview document, but not on another more complete overview document. Yet it meets all the criteria.

 

[MichaelB]

Interesting and timely question. Browsing the IRS definition (here) I found this nugget

Family plans that do not meet the high deductible rules. There are some family plans that have deductibles for both the family as a whole and for individual family members. Under these plans, if you meet the individual deductible for one family member, you do not have to meet the higher annual deductible amount for the family. If either the deductible for the family as a whole or the deductible for an individual family member is below the minimum annual deductible for family coverage, the plan does not qualify as an HDHP.

So, the same plan might be HSA eligible for an individual but not for a family. This would lead the insurer to be careful in the language. For couples only over age 50 it makes sense to have separate HSA policies anyway, because that way each is eligible for a catch-up contribution.

 

[audreyh1]

According to the instructions for form 8889 (still 2013), all that matters are the deductible limits - nothing about any insurer declaration.

High Deductible Health Plan

An HDHP is a health plan that meets the following requirements.

Self-only coverage Family coverage
Minimum annual deductible $1,250 $2,500
Maximum annual out-of-pocket expenses* $6,250 $12,500

* This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. Instead, only deductibles and out-of-pocket expenses (such as copayments and other amounts, but not premiums) for services within the network should be used to figure whether the limit is reached.

An HDHP can provide preventive care and certain other benefits with no deductible or a deductible below the minimum annual deductible. For more details, see Pub. 969. An HDHP does not include a plan if substantially all of the coverage is for accidents, disability, dental care, vision care, or long-term care. An HDHP also cannot be insurance that you are permitted to have in addition to an HDHP.

Instructions for Form 8889 (2013)

 

[imoldernu]

Do you mean because tax deductions would have been limited? Not necessarily.

If you have the savings, you can still have an HSA, yet pay medical expenses out of your regular savings and get the full tax deduction. You aren't required to use your HSA to pay for medical expenses in any given year.

Tax wasn't involved, and to be fair it was a long time ago... For four years in a row, unusual medical expenses that would have eaten up any deductable. Doesn't affect taxes that aren't owed.
I shouldn't be posting on these ACA sites, as it doesn't affect us. NOMB.

 

[Birdie Num Nums]

... For couples only over age 50 it makes sense to have separate HSA policies anyway, because that way each is eligible for a catch-up contribution.

You meant over 55, right? (Actually, it's 55+.)

 

[golftrek]

Sorry, I gave the wrong deduction amount for 2013--It is $3250 for 2013 and $3300 for 2014 EACH plus 1000 EACH if you are over 55. Sorry, hard to keep up!

Jo Ann

 

[audreyh1]

You meant over 55, right? (Actually, it's 55+.)

Yes - that is what he means.

 

[audreyh1]

Sorry, I gave the wrong deduction amount for 2013--It is $3250 for 2013 and $3300 for 2014 EACH plus 1000 EACH if you are over 55. Sorry, hard to keep up!

Jo Ann

I think a couple filing jointly is limited to $6250/2 = $3325 plus $1000 each catch up contribution for 2014. That niggling little $50 difference is because the family limit is applied to a two individual household even if their health plans and HSAs are independent.

 

[MichaelB]

You meant over 55, right? (Actually, it's 55+.)

Yes - that is what he means.

Right Both ages are memories for us, fading quickly, so it's hard to tell the difference sometimes.