Anyone using HSAs?

[lazyday]

Looks like you don't need earned income to have and contribute to a Health Savings Account.

Unfortunately, it seems that it isn't enough that your plan is high deductable:

The annual out-of-pocket (including deductibles and co-pays) for 2005 cannot exceed $5,100 (self-only coverage) or $10,200 (family coverage).

http://www.treas.gov/offices/public-affairs/hsa/faq_basics.shtml

My current, inexpensive, high deductable plan allows annual expenses to go higher than that. But, the tax benefits of the HSA might make it worth upgrading to more expensive insurance.

Here's a company that will let you invest in Vanguard funds, with a $35 or $60family annual fee: http://www.health--savings--accounts.com/admin-hsa.htm
I haven't looked for hidden fees yet, or reputation of the company.

If able to get a full 2005 and 2006 contribution in, one could have a $5350 account in January, and the annual fee would be already under 1% if you don't spend it. Double that balance for a family plan, if your deductable is high enough.

 

[retire@40]

HSAs would be a lot more useful if they were made available to everyone, regardless of deductibles.

If the government had a simple design for HSAs to say "every individual may contribute up to $5000 a year into an HSA," more people would be able to fund their own medical expenses and relieve the insurance companies from making so many unnecessary cash outlays.

But, that's just wishful thinking for now.

 

[justin]

Then there's the ridiculous and almost useless "Flexible Spending account" (FSA) for medical expenses that is everything but flexible. You have to anticipate in advance all of your medical expenses for the year during your annual enrollment for the FSA.

The problem is that regularly recurring expenses are easy to plan for. It's the unexpected "emergencies" that will cause serious budgetary problems for most families (even a few thousand dollars in unexpected medical expenses). You can't keep a balance in your FSA from year to year. Since it is use it or lose it, one must be overly conservative in estimating medical expenses and nothing should be set aside for a "rainy day".

It would be nice if the tax code was streamlined for these medical savings accounts (HSA and FSA) to create one type of account - a MIRA (medical IRA) or something - where you could put in $X thousand per year. The balance would remain in the account from year to year, and you can invest it how you want. It would assist all participants in coping with unexpected emergencies and help us save for medical expenses in retirement. That would be too simple though.

I'm bitter right now (it's annual FSA enrollment time). My family is scrambling to determine our certain medical expenses for next year right now. Root canal/crown or extraction of that tooth. Lasik? Is there a baby on the way?

 

[Martha]

And don't forget the medicare drug plan.

The more complicated these things are, the less likely they will be used. If they aren't used, more tax revenues for the government.

 

[justin]

The cynic in me agrees with you, Martha. The clever folks in our govt have figured out a way to "cut taxes" by offering all these options, yet make it too complicated or unappealing to even use these options.

On the other hand, wouldn't it be nice if people could save for their health care expenses and actually pay their medical bills instead of "oops, can't pay. Bankruptcy here I come!". It may not help the poor much, but for middle class folks who have money available to save for unexpected medical expenses, there isn't really any incentive currently, unless you happen to fall into one of the current loopholes.

 

[TromboneAl]

I just started my HSA plan in September. I will make my 2005 and 2006 contributions in January, and will start shopping for an HSA company in a few days.

Complexity: Drug plans, health insurance, cell phone plans. It's a real sickness.

 

[moretolife]

My company uses the flexible spending plan. From what I little I know about this, HSA's seem better.

I am still reeling from having withdrawn $1,000 more than needed in my flex plan (I think). Usually, our costs are predictable. But now I am waiting until Medicare and BCBS work out who pays what. So I don't know if I am in trouble or not.

I hate flex plans!

 

[justin]

FSA's are pretty crappy. The head of human resources at work told me she doesn't contribute to hers because the hassle of filling out claims reimbursement forms and the potential to forfeit your contributions if you don't use them up outweigh the tax savings. I'm almost thinking along the same lines. I may save $100-200 in taxes, but is it worth the trouble and risk of losing money? The health savings accounts are infinitely better than FSA's.

 

[Martha]

Well I use our FSA. Saves a bunch of money at the high marginal tax brackets. I can figure out pretty close what we will spend a year on deductable, copays, dentist and eyes. I usually end up under estimating somewhat, to avoid losing any money. One year I overestimated and got my teeth cleaned in December and new glasses.

 

[justin]

I guess it depends on your circumstances. In my case, I added up all my definite unreimbursed medical, dental and vision expenses and only have $500/yr or so for me and my family. The tax savings on that amount are hardly worth it. On the other hand, when I get my lasik done, I'm going to funnel that $3000 through the FSA for sure. That'll save me about $1000 in taxes.

Something like a root canal/crown can cost $2000 or even $1000 with dental insurance. That usually isn't something you can put off till the next tax year so that you can take advantage of the FSA. Same with baby delivery. The expected expenses I can handle and budget for. The unexpected expenses are more of a problem. (we'll expect the baby, but the exact timing by tax year can be the unknown).

 

[Martha]

Well you could try to time the baby. Say get pregnant round about August so in November you could set aside money in the next year's FSA. Romantic.

My dentist is pretty good at predicting what might be ahead in the next couple of years for replacement filings, crowns, etc. We of the non-flouride generation probably require much more of this kind of work.

 

[lazyday]

I will make my 2005 and 2006 contributions in January, and will start shopping for an HSA company in a few days.

Please fill us in on how it goes.

Myself... guess I have to get moving to see if worthwhile or even possible, to set it up in time for 2005.

 

[MileKing]

My company is offering a high-deductible plan ($2250 deductible for Mrs. MileKing and myself) for the first time starting next year. After doing the analysis (tax savings, premium savings, expected medical costs, etc.) against the alternative offerings, one of which is our current "consumer-driven" health plan (HRA as they are called), we've decided to opt for the high-deductible plan. Company offers an HSA thru Mellon Bank and pick-ups all administrative fees, but interest rate on the account is only 1.3%. Need $4500 in account before you can invest in mutual funds and choices are very limited (currently 3 or 4 Dreyfuss funds).

Looking at alternative HSAs to use with the high-deductible plan (checked hsainsider.com), but none of the HSAs seem very good. They either have high fees (annual fee or transaction fee) or very low interest rates (1.0 % or less) or both, with limited investment choices. Hoping that Schwab or one of the other major brokerages/investment firms start HSAs, but I believe that is a year or two down the road.

If anyone has any suggestions for a good HSA, please post. Thanks!

 

[Martha]

If anyone has any suggestions for a good HSA, please post. Thanks!

There was another thread a while ago with some options for HSAs: http://early-retirement.org/forums/index.php?topic=2072.0

Looks like a couple of people are using www.HSAbank.com.

 

[MooreBonds]

Looking at alternative HSAs to use with the high-deductible plan (checked hsainsider.com), but none of the HSAs seem very good. They either have high fees (annual fee or transaction fee) or very low interest rates (1.0 % or less) or both, with limited investment choices. Hoping that Schwab or one of the other major brokerages/investment firms start HSAs, but I believe that is a year or two down the road.

If anyone has any suggestions for a good HSA, please post. Thanks!

I use HSABank.com If your balance in the savings account is below $3,000, then they charge you a monthly fee. Also, if you open up an investment account, then they charge you an additional small monthly fee. However, I transfered everything from my bank account except $100 (to pay the monthly fees) to an investment account, and put almost all of the money in a preferred stock and a REIT, so my yield even after the monthly fees is about 6.9% tax-free...My goal is to simply save up as much as I can in the HSA to create another retirement-like account, rather than use it to pay medical expenses in the next 5 years. However, after the next 5 years, I'd likely start using some of it for some expenses (and will probably have plenty of expenses for a few newborns in the not-too-terribly-distant-future)

At the time I opened the account (earlier this year), there were only about 45 banks offering HSAs, with just a few offering investment accounts where you can invest in any stock/bond/MF. I'm sure there are tons more now listed on the HSAinsider.com website.

--Peter

 

[Robert the Red]

I have used an HSA for 2005, as an employee of the Fed govt.  In my analysis, it is a good idea for someone who is (a) reasonably healthy, (b) can afford to deposit money into the HSA, and (c) can afford to pay the potentially large out-of-pocket expenses that might happen in the first year or two, before the HSA builds up.  That is likely most of the people posting here (except for condition a, possibly).

As a matter of public policy, they are clearly weighted towards the better-off among us (the income tax savings are minimal to lower income brackets, as is the ability to deposit money into the HSA).  I fit all 3 criteria above, so have gambled that by the time I hit a big out-of-pocket year, I'll have built up a strong cushion in the HSA.

There is more of a paperwork hassle with the HSA, since you have to pay your medical bills (at the rates negotiated by the insurer with the provider), and then get reimbursed from the HSA.  The various insurers may make this process more-or-less easier.  This year, I've paid with credit card and then been reimbursed very quickly, so I've gotten FF miles as  bonus!  Next year, the insurer is switching to a private debit card system to be used to pay medical bills, so I guess I won't be able to get this float for 'free'.

 

[Howard]

Canada is in the midst of a Federal E lection, one major issue is the Privatisation of Health Care,a nd after reading what you guys have to go through, I'm voting to keep it under Government Control.

You guys must need accountants to figure out Health Plans

 

[maddythebeagle]

We have regular insurance through work and the FSA on the side and have to make our allocation by November for the upcoming year. Most folks I talk to dont use since it is a hassle (I find it a problem to use since the company that adm. it changes its mind what paperwork they need periodically....I am starting to think they are just trying to be slow payers....nahh)One good thing about it is you can put dependents on it that you might not be able to put on your regular health insurance.

 

[justin]

Two questions I think you all can help me with.

1. If we have a high deductible plan through work, and can start an HSA at work, can we start an HSA at a private bank, like HSABank? In other words, opt out of the HSA account through the job, and pick our own independent provider for HSA?

2. I was concerned with paying the retail rate at medical service providers with the high deductible plan instead of the insurance co's negotiated rate. The negotiated rates are typically 50% or so of the retail rate in my experience. Is it generally the case that you, as the high-deductible plan insured, pay only the negotiated rate, by paying retail and then getting reimbursed, or by paying the negotiated rate up front? The high deductible plan may be what I am looking for, since I don't mind self-insuring for the first couple thousand dollars.

Help please?!

 

[TromboneAl]

I see HSA's as a loophole that allows me to defer and/or avoid taxes on some of my savings. As far as I'm concerned it has very little to do with health care. For all the money I eventually use for health care, I avoid the tax. For any remaining money, it's just like an IRA (with withdrawals allowed at age 65).

The Blue Cross HSA compatible account was a better deal than the high deductible play I was on.

 

[Martha]

Two questions I think you all can help me with.

1. If we have a high deductible plan through work, and can start an HSA at work, can we start an HSA at a private bank, like HSABank? In other words, opt out of the HSA account through the job, and pick our own independent provider for HSA?

2. I was concerned with paying the retail rate at medical service providers with the high deductible plan instead of the insurance co's negotiated rate. The negotiated rates are typically 50% or so of the retail rate in my experience. Is it generally the case that you, as the high-deductible plan insured, pay only the negotiated rate, by paying retail and then getting reimbursed, or by paying the negotiated rate up front? The high deductible plan may be what I am looking for, since I don't mind self-insuring for the first couple thousand dollars.

Help please?!

Here is the latest from the feds on HSAs: www.treas.gov/offices/public-affairs/hsa/pdf/hsa-basics.pdf

According to this publication, the account is owned by the individual, not the employer and the individual decides which company will hold the account.

One advantage to having such a plan is that even as you chew through your deductable, this is transparent to medical providers and thus you get the insurance company negotiated rates.

 

[justin]

Martha,

Let's say I have a $1200 deductible for my high deductible plan. I have a procedure done that is $1200 retail. The negotiated insurance rate that I'll pay is $600. Have I met my deductible for the year, or do I have $600 left on my deductible before the plan starts to pay? In other words, is the amount allocated to meeting the deductible the amount I actually pay ($600), or the amount that I am charged ($1200) before the ins. co. applies the negotiated rate?

 

[Martha]

The amount you actually pay.

 

[maddythebeagle]

I have heard some individual stories on this board about exclusions but how bad is it going through the underwriting for an individual plan? Is it a case that they really stretch to find things to exclude or is just the major stuff that they hit? Somebody recently said to expect a 20% or so increase in the online estimates of insurance costs.  

 

[sgeeeee]

I researched HSAs about a year ago. I started out thinking they would be ideal for DW and I. We already had chosen a high deductible health insurance policy and the opportunity to save for future medical expenses tax deferred seemed like a great deal. Here's what I found instead.

High deductible isn't good enough. The policy has to be specifically designed to meet federal HSA standards. My insurer, Humana, developed policies to match the federal requirements, but that meant they offered coverage that was different (and more expensive) than my current coverage. So I would have to pay higher premiums to take advantage of an HSA. Then there were the investment choices I could find for the HSAs. The vast majority of HSA plans offered pathetic mm interest rates and high fees which negated almost any savings advantage. There was one company that offered Vanguard funds, but their fees were astronomical. When I ran all the numbers, it was a wash at best.

I intend to shop HSAs again soon (things change sometimes). But my first HSA shopping experience was pretty disapointing.