Question regarding HDHP, MSA, etc.

[mjr24]

I'm a 33 year old healthy male....self-employed with no health insurance...make good money.

I do have 4 impacted wisdom teeth that I scheduled surgery for next month.....$2,250 total if I am paying cash.

I was looking into getting a HDHP to help with that cost and to possibly establish a MSA....primarily for the tax deduction. However, the online quotes (with the minimum $1,250 required deductibles) are around $150-200/month still.

At least in terms of the surgery for next month...would you agree a HDHP really isn't going to help (as I'm sure most insurance companies call it a pre-existing condition.....or at the very least they probably require that you have the insurance a certain amount of time before they will pay out for stuff)?

Even if I scheduled the surgery in a year....I'd still pay $2400 in premiums and have to spend another $1250 for the deductible (or $3650 total) before they'd pay for anything.....so I'd be losing money there.

I guess I'm not sure if I am understanding the MSA deduction correctly.....can I deduct that $2250 if I only have a HDHP for a month and don't reach the deductible for it? Or is the simple presence of having a HDHP...regardless of how long you've had it or whether you have enough to meet the deductible....enough to deduct the $2250 (meaning I could pay $150 for 1-2 months, get surgery done, then cancel HDHP right away after but still be able to deduct $2250)?

Do I have any better options? Or is it preferable to just pay cash if I have it (which I do)? Thanks.

 

[MichaelB]

Mjr24, I don't believe health insurance policies cover wisdom teeth extraction. That would need a dental policy. If you have a dentist you should discuss this and ask what dental insurance he or she takes. Or, you can try to negotiate a cash price. Good luck.

 

[seabourne]

I think that Michael is correct that the insurance itself won't cover the work, but being able to pay for the work with tax-advantaged money (i think you mean an HSA - health savings account) may be worthwhile, or if not directly save you money, mostly pay for getting your health insurance.

Example - pay HDHP at $150/month 8 months this year = $1200
add $2250 to HSA account = 25% tax deduction = -$562.5
pay for surgery with HSA cash (no change, you're going to pay in the default)
net result = 8 months health insurance for $637.5 = $79.69/month

You can also add more to the HSA this year (max $3250 in 2013 I believe, but might be less because you aren't covered all year) and increase tax savings (another $250), but the above applies to the wash - nothing but paying for this surgery. I assumed a 25% marginal tax rate - your rate may be higher, and thus make this even better.

Hope that helps.

 

[ERhoosier]

Must respectfully disagree that buying HI is "losing money". Especially since you "make good money", I view HI as a basic foundation of life in US. Reasons range from simple access to care (for many providers uninsured go to the back of the line, if accepted at all), to protection of your nest egg from cost of catastrophic illness/injury, to big provider discounts for stuff you must pay for (e.g. deductibles, non-covered services). In my experience, providers (inc labs, diagnostic ctrs, etc.) will seldom match 'BlueCross' discounts for cash-paying customers (except for charity, collections actions, bankruptcies, etc). And under ACA next yr you will pay a "tax" (as SCOTUS said) if you do not have a "qualified" HI plan.

You are basically correct that MSA (or HSA) deduction limit is scaled based upon portion of the yr you were covered. Details here-
Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans

For more general background on HI here's a couple sources that might help-

Home | HealthCare.gov
The Basics - Kaiser Health Reform