Private HSAs?

[Peaceful_Warrior]

My family (me, wife, son) is generally healthy, and when we use medical services they're usually out of pocket so we have to cover the deductible anyways. I'm wondering...

Has anybody here chosen high-deductible health care & an HSA even though they had a good medical plan through work?

Right now we're paying about $300/month for our medical benefits through my company, but if I can cut the costs significantly and put the rest into an HSA then that seems like a no-brainer to me since we're paying our costs out-of-pocket anyway.

Thoughts?

[Peter]

You can't go the HSA/HDHP route if you are already covered by another health plan. So normally, employees of a company that has a health plan wouldn't qualify.

But perhaps you're saying you would discontinue the company health plan ... something you can do if you own the company, I suppose?

Peter

[Tracy42]

I like this idea a lot. Seems to be a way to secure low-cost private health insurance while you are healthy and avoid the potential of being uninsurable later when you are ready to early retire. If you have the option to decline coverage through your eimployer, so that you were in fact not covered under any other health insurance plan, it seems like that would work. Tracy

[Peaceful_Warrior]

So I'm thinking one possibility is to sign up for a private HDHP while still employed, then when open enrollment comes around I drop my company coverage and then sign up for an HSA.

Is there any reason that wouldn't work?

I find this approach rather appealing since my family is in good health, we're young, and this would provide health coverage even when I'm in between jobs or, say... FIRE.

Originally Posted by Peter

You can't go the HSA/HDHP route if you are already covered by another health plan. So normally, employees of a company that has a health plan wouldn't qualify.

But perhaps you're saying you would discontinue the company health plan ... something you can do if you own the company, I suppose?

Peter

[Darryl]

Not sure about how to make the jump from the Company plan to the Private HSA, but I like your thinking.

I switched from the Co. HMO to the Co. HDHP/HSA last year and came out thousands of dollars ahead. The HSA is the best benefit to come along in years.

[Rich_in_Tampa]

Do your homework. I think that most high deductible plans/HSA require that you give up prescription coverage, vision etc. Also, if you have a medical reimbursement plan (use-it-or-lose-it funds for medical expenses uncovered by your basic plan) that may be affected.

[mykidslovedogs]

What Rich in Tampa is saying about HSAs is NOT correct. MOST HSAs are required to provide prescription drug coverage after the deductible is met. In fact, I haven't seen any HSA plans yet that have no coverage for prescriptions. (People often mistake deductible expenses as expenses that are not covered. If there was NO coverage for the prescriptions, then they wouldn't reduce the deductible and they wouldn't be covered after the deductible is met.)Typically, the cost of prescriptions filled throughout the calendar year will REDUCE your deductible as the prescriptions are filled. Additionally, you will receive significant discounts for your prescriptions when you use in-network pharmacies. For example, on a traditional copay style plan, you may pay a $50.00 copay for a brand name drug AND the cost of that copay WILL NOT reduce your deductible. Conversely, on an HSA that same prescription might only cost about $60.00 with your network discount AND the cost WILL reduce your deductible AND you will be able to use tax-advantaged dollars out of your HSA account to pay for that prescription....Plus, the premiums that you pay for your health insurance can be as much as half or even less than half of what you are currently paying on your HMO or PPO Copay plan.

I have a very unhealthy client who once paid more than $3000.00 dollars per year on a copay plan in prescription drug copays alone. The cost of those copays did not reduce her deductible on her healthplan. Additionally, she had approx. $4000.00 in other out of pocket expenses on her traditional copay plan in the form of deductible, coinsurance and office visit copays. After she switched to a 2000 deductible HSA on a group healthplan, her premiums were cut in half AND she met her deductible with her prescription costs alone. After her deductible, coverage kicked in at 100% for all further calendar year expenses, including prescriptions. Between her and her husband, they ended up saving about $10,000/year in medical expenses and tax savings.

Typically vision is not a covered benefit on individual healthplans of anykind unless you purchase it as a separate benefit. With an HSA you can use the money in your HSA account to pay for vision expenses TAX-FREE. You can also use the money in your HSA account to pay for dental and many other eligible expenses.

Additionally, when you first sign up for an HSA compatible healthplan, you can make a one-time rollover with no penalty from an IRA account to an HSA savings account, so you will be able to have much of your high deductible already taken care of with savings that you already have.

Most people are unaware of all of the incredible advantages of HSAs. When you do a side-by-side comparison of a traditional copay plan design next to an HSA compatible healthplan, oftentimes, the overall savings on an annual basis is HUGE.

One more thing. A few HSA compatible plans such as the Blue Cross and Blue Shield Lumenos HSA plan (available in Colorado, and I am not sure about other states) or the Humana One HSA plan offer 100% coverage for preventive services NOT SUBJECT TO THE DEDUCTIBLE!. This is almost unheard of on a traditional copay design. Oftentimes, you pay 20% of your preventive exam on a copay plan or at minimum, an office visit copay. The Blue Cross Lumenos Plan EVEN PAYS FOR PREVENTIVE COLONOSCOPIES 100% NOT SUBJECT TO DEDUCTIBLE.

[Rich_in_Tampa]

Originally Posted by mykidslovedogs

What Rich in Tampa is saying about HSAs is NOT correct... (People often mistake deductible expenses as expenses that are not covered. If there was NO coverage for the prescriptions, then they wouldn't reduce the deductible and they wouldn't be covered after the deductible is met.)

So, per MKLD, if your current policy covers prescription costs at say a $25 deductible, and your new HSA makes you pay for it in full but gives you credit toward your deductible, it is considered "covered" by the insurance company.

OK, got me on a technicality I guess - in one case you pay only $25, in the other case you pay the whole cost and may get credit for it if you have the good sense to get sick enough to approach your 5k or 10k deductible. You be the judge.

In any case, I stand by my "NOT correct" advice: do your homework. MKLD's reply is a good example of insurance-speak.

[mykidslovedogs]

What I described above is not a "technicality". There is a huge difference between "covered" and "not covered". Insurance is meant to be protection against bankruptcy. If something is not covered, it does not reduce your maximum out of pocket. If it is covered, then you have protection for those expenses if you happen to reach your out of pocket maximums. (Insurance was NEVER meant to be protection against any and all medical costs - this perception has been created by the rich benefit plans that have been offered by employers over the years.)

On a copay plan, you may pay a low copay when filling each prescription, but you make no headway towards your max out of pocket, as copays are almost always unlimited. Therfore, your out of pocket expenses on a traditional copay plan CAN end up being even higher than on an HSA, AND you get to pay higher premiums too. On an HSA, you might meet your deductible rather early with a major medical illness, freeing you up with 100% coverage for ALL OTHER MEDICAL EXPENSES after deductible for the rest of the calendar year.

If you had no coverage for prescriptions, you could potentially be out THOUSANDS AND THOUSANDS OF $$. On an HSA that pays 100% after deductible, you limit your losses for ALL HEALTHCARE COSTS to your deductible. Choose a deductible that is affordable to you. Coming up with 2K or 3K is a lot better than being uninsured and going bankrupt because of a $100,000 heart attack!. For goodness sakes, if worse comes to worse, one could always take out a loan to pay for their deductible if they "had the good sense to get sick enough to meet it".

For many people, the risk of a 2K or 5K deductible is WELL WORTH it when you take into condiseration the incredible month to month premium savings over the traditional copay plan design. Remember, only a very small percent of the population ever get chronically ill. The overwhelming majority of people never even come close to spending $5k per year on heathcare (aside from premiums), so why pay huge premiums just to protect yourself from easily affordable out of pocket expenses? I would never buy a $500 deductible copay plan with $5 drug card just so I could get my lipitor for $5. It would be crazy to pay those $800.00 premiums. Instead, I'd rather buy a 2K deductible HSA for $300/mo and pay $80 (not the full amount, but the network discounted amount) for my lipitor, tax-free!


The best thing to do is a side by side analysis. Also, on an HSA, let's say you get something like MS. Medication for this type of disease can be extrememly expensive. (approx . $1500.00 per injection.). If you have a $2000 deductible, you might meet your deductible after filling just one or tow prescriptions. After that, all coverage on your health insurance for office visits, other prescriptions, lab, hospitalization, etc..will be 100%. Tell me how that is worse than a copay plan! On a copay plan, you might have to pay copays for each prescription PLUS meet your deductible for lab and hospitalizations, PLUS continue to pay more copays for office visits and specialists.

[brewer12345]

Originally Posted by Rich_in_Tampa

In any case, I stand by my "NOT correct" advice: do your homework. MKLD's reply is a good example of insurance-speak.

MKLD speak with forked tongue.

To OP, it al comes down to what is in the fine print. Make sure you read it and understand it before jumping into the HSA pool (which may or may not be a good choice).

[mykidslovedogs]

Originally Posted by brewer12345

MKLD speak with forked tongue.

To OP, it al comes down to what is in the fine print. Make sure you read it and understand it before jumping into the HSA pool (which may or may not be a good choice).

I pride myself on my honesty and sincerity, and I have saved many of my clients thousands of dollars by helping them switch to HSAs. I spend a lot of time with them to make sure they understand all of the fine print as well as how to use their healthplans properly.

Brewer is right about the fine print. There are plenty of less than reputable carriers out there. Sticking with a big name such as Blue Cross, Humana or UHC is always recommended.

HSAs are not always for everyone, and I never said they were. Some people, such as Rich, simply cannot and will not ever understand the concept. I've had clients who would prefer to spend twice as much in premium in order to have the peace of mind of low copays for prescriptions (even when the overall cost of premiums plus copays is much higher than the lower HSA premium plus paying the discounted rate for the prescription.) As you can see above, I did state that the best thing to do is lay out the two plans side by side and do a "side by side" comparison. In MOST cases, there will be a significant savings in switching to an HSA, not to mention the opportunity to save towards retirement by taking advantage of the tax savings in the HSA account.

[brewer12345]

Hmmm, well you seem to spend a lot of time here taking the insurance industry's side, as al good agents are expected to do. Since we know which side your toast is buttered on, you'll have to excue me for being suspicious of your often slanted take on things.

[mykidslovedogs]

Originally Posted by brewer12345

Hmmm, well you seem to spend a lot of time here taking the insurance industry's side, as al good agents are expected to do. Since we know which side your toast is buttered on, you'll have to excue me for being suspicious of your often slanted take on things.

Well, insurance is my area of interest. Especially since personal insurance can make all the difference in being able to retire early! My opinions may seem slanted to you, just as your opinions seem slanted to me! We just happen to be on opposite sides of the spectrum. I tend to lean towards personal responsibility and less government interference.

BTW, the HOUSE just passed a bill to change small group rates to community rating in the State of Colorado. Watch out! Premiums are about to skyrocket for EVERYONE in our state. We had this before a few years ago, and we only had three competitors in the marketplace. Premiums were rising at 25-50% annually, and carriers were dropping out of the market like flies (Aetna and Pacificare lost so much money, they had to drop out of the small group market). Then, we had some smart Republicans come in and give carriers some rating flexibility...upto a 25% discount for healthy groups, and upto a 10% rate-up for unhealthy groups. At the moment the bill was passed, Aetna, Pacificare and about 3 other new competitors came into the marketplace, and rates DROPPED for everyone, even though some groups had to pay a little more than others due to health status. Now, it looks like the DEMS are going to wipe out all of the good changes Colorado had over the past few years. What a shame!

[brewer12345]

Originally Posted by mykidslovedogs

I tend to lean towards personal responsibility

As long as it results in fat agent commissions and insurer profits. I gotcha.

[Rich_in_Tampa]

Originally Posted by mykidslovedogs

BTW, the HOUSE just passed a bill to change small group rates to community rating in the State of Colorado. Watch out! Premiums are about to skyrocket for EVERYONE in our state.

And thousands of people who previously had their lives paralyzed by inaccessibilty of health insurance may actually be able to get coverage. Win some, lose some.

[FinanceDude]

Originally Posted by mykidslovedogs

Sticking with a big name such as Blue Cross, Humana or UHC is always recommended.

This is true. However, I KNOW Blue Cross is a "franchise" provider, so their coverages vary DRAMATICALLY from state to state. Wisconsin, where I live, is the "home" of Blue Cross. Surprise, surprise, their coverages are great.

My firm is based out of Kansas City, and we have Blue Cross. However, this IS NOT the Blue Cross I know.........their coverage sucks................ :P :P :P

[mykidslovedogs]

Originally Posted by Rich_in_Tampa

And thousands of people who previously had their lives paralyzed by inaccessibilty of health insurance may actually be able to get coverage. Win some, lose some.

....Not necessarily because the rates will be higher than they were before...for everyone, including the people who couldn't afford the coverage in the first place!....And the small group employer may be more likely to drop the benefits altogether, since they will be even less affordable than they were before.

The only advantage the DEMS will get out of community rating will be that everything will be more "FAIR" now, because we will ALL pay the same, more expensive rates. (Total group rates always go up for EVERYONE with community rating, and it makes it harder for employers to be able to afford the benefits, so many employers drop them - What a wonderful solution!).

[brewer12345]

Originally Posted by mykidslovedogs

....Not necessarily because the rates will be higher than they were before...for everyone, including the people who couldn't afford the coverage in the first place!....And the small group employer may be more likely to drop the benefits altogether, since they will be even less affordable than they were before.

Don't worry. President Clinton will solve the problem in a few years by nationalizing the whole system.