Pay Provider or reimburse yourself from the HSA?

[Montecfo]

You have to use it up sometime. Once we are Medicare eligible, we are no longer adding to the HSA. I was looking for an easy way to use it in terms of record keeping/proof, and paying regular, predictable Medicare premiums via billpay directly from the HSA seems like a good way. And we should have just enough to bridge the gap between Medicare and starting SS at 70 as planned. That seemed as good as any and don’t want to wait until older for some unpredictable medical expenses after we’re on Medicare as those should be significantly reduced.

We don’t actually need to draw from our IRAs until RMDs. Roth conversions would be the only reason.

So the practical effect for us is to increase the monthly funds available for spending as 1) we are no longer shuttling funds to the HSA Accounts from taxable accounts and b) Medicare premiums are covered until SS takes over plus no longer paying private insurance premiums except for Medigap.

Ok. I was just unsure the need for that specific timing. We will probably tap ours strategically when we want some tax- free cash, but before the Roths. At least that is current thinking. We no longer contribute (no HDHP currently) but it is getting fairly large now, so probably needs a specific role in withdrawal strategy.

Thanks for the explanation.

 

[pb4uski]

... but it is getting fairly large now, so probably needs a specific role in withdrawal strategy....

What got my attention was that if DD/DS were to inheirit it from us that it would be taxable to them so I'm trying to reduce any potential tax burden on them. We still have a healthy balance which should pay for all our Medicare Part B and D premiums, dental and vision and if needed nursing home costs for a year or so.

 

[Sue J]

I put all medical expenses on a reward charge card. I save all the EOBs and also the bill I received from the provider and I note the payment date and method.

I’m a spreadsheet gal so throughout the year I keep a spreadsheet showing all activity including deductible, open items, etc so I just close out that spreadsheet at the end of the year and it proves the paid medical expenses.

I’ve done HSA withdrawals just a couple of times, reimbursing us for a full previous year or a large lumpy expense. I’ve never been asked for any detail by the HSA administrator.

I start Medicare in 2.5 weeks so I can’t contribute anymore but I have a couple years worth of expenses to reimburse if I want to. Will just leave it to sit and grow (Vanguard funds) for now.

 

[jimbee]

Nothing wrong with that.

An HSA has an advantage over a Roth when contributing, because it's a reduction of your taxable income.

Once in your account, both benefit from tax free growth. However, when you die, a Roth passes tax-free to any heir, but for a non-spouse beneficiary, an inherited HSA is taxable.

I agree it's a good idea, just a comment.

 

[jollystomper]

I pay my bills via credit card. It has come in handy as over the years we have had a few medical providers make us pay what they thought was the co-pay before they submitted to insurance, and insurance then said we either owed nothing or less than what we were charged. If they go into the well-it-will take-60-or-more-days-to-reimburse-why-don't-you-just-leave-it-on-your-account-as-a-credit, being able to dispute the charge immediately gets us faster results.

For now we are not touching our HSA, we are still contributing to it. We save our medical bills and have all of them since the account was established, for the time when we do decide to use it.

 

[Montecfo]

What got my attention was that if DD/DS were to inheirit it from us that it would be taxable to them so I'm trying to reduce any potential tax burden on them. We still have a healthy balance which should pay for all our Medicare Part B and D premiums, dental and vision and if needed nursing home costs for a year or so.

Sure. So you want to pull as much tax free out as you can before that point. But otherwise you want to let it grow tax free as long as you can.

 

[Canoesmith]

Dont use the HSA

If you can afford it, pay yourself and hold the receipts. You can reimburse anytime in the future. Now is a great time to leave the HSA alone with this stock market and have it grow tax free. Sometime in the future, if you need $3000, pull it from the HSA in support of the out of pocket expenses you have receipts for. Ive been doing for several years. But you have to have the extra cash to do so.

 

[fireorbust]

I am thinking about paying for medical expenses with a credit card to earn rewards and then reimbursing yourself from the HSA. Are there any disadvantages?

Our HSA is our only tax shelter now that we have no income (to be able to add to our iras). We pay out of pocket and leave our HSA to grow. We look at the HSA as another IRA and once we are 65, we'll use it as such.

Our HSA helps us juggle our MAGI for ACA in the meantime.

I'd pay out of pocket and keep the HSA for a rainy day.

 

[meleana]

Hubby, who just retired (65), has an HSA and now an HRA funded by his employer- just $60 per month.


We always paid all medical expenses out of the HSA with the HSA Mastercard.


We are now paying his Part D premiums from there and I reimburse myself for my retiree medical insurance premiums right now as they are very expensive. Might go on an ACA plan and then continue to reimburse myself from there for those premiums.


For the HRA we will let it build up a bit as it just started and then I plan to use the money to reimburse ourselves for either some of his Medicare Premiums- part B or Plan G- or for dental visits, or out of pocket medical costs like co pays and prescriptions, etc. instead of using the HSA account as we have done in the past.


I am not sure if the money all rolls over year to year, Something I have to check into since this is new to us.

 

[Dave J]

For the HRA we will let it build up a bit as it just started and then I plan to use the money to reimburse ourselves for either some of his Medicare Premiums- part B or Plan G- or for dental visits, or out of pocket medical costs like co pays and prescriptions, etc. .

If I understand the regulations, you can not reimburse yourself for Medicare supplement premiums(ie: Plan G) . Someone correct me if I'm wrong.

https://www.kiplinger.com/article/r...reimburse-you-for-medicare-premiums-paid.html

 

[meleana]

If I understand the regulations, you can not reimburse yourself for Medicare supplement premiums(ie: Plan G) . Someone correct me if I'm wrong.

https://www.kiplinger.com/article/r...reimburse-you-for-medicare-premiums-paid.html

Thanks. Didn't know that. So I guess will be limited to Part B and the Part D. Part D already coming out of our HSA. The rest I was talking about taking from an HRA, not the HSA.



I know that the HRA allows premiums from Medicare plans to be reimbursed automatically in the HRA- so not sure about that one.


I wonder what the reasoning for this is exactly? I don't get it.

 

[imnontrad]

No problem with that strategy. Or you could pay out of pocket and keep the HSA money invested. Unless the law changes, you can use the HSA money to pay for Medicare premiums and you can keep investing it until then.

 

[Dave J]

Thanks. Didn't know that. So I guess will be limited to Part B and the Part D. Part D already coming out of our HSA. The rest I was talking about taking from an HRA, not the HSA.



I know that the HRA allows premiums from Medicare plans to be reimbursed automatically in the HRA- so not sure about that one.


I wonder what the reasoning for this is exactly? I don't get it.

I don't get it either. My SO has a retirement HRA from a megacorp that can reimburse for our Medicare plan G, so that is what we do and reimburse ourselves out of our HSA for our other stuff. Does not make any sense to me, but what can you do?

 

[Murph]

I am thinking about paying for medical expenses with a credit card to earn rewards and then reimbursing yourself from the HSA. Are there any disadvantages?

I pay direct from my HSA (Fidelity). The "log" it creates for the transactions makes it easy to get records of who I paid should the "HSA police" (to quote someone else on this thread) come a-knockin'. If I pay myself, then I need to keep separate records. Bank cards websites might have a filter that would get you close, but I like having all that information in one place.

 

[Tiger8693]

Back to someones post about $100 EOB vs paying actual $85 after a discount. I don't know how in an audit the IRS would know that you paid $85 when you produce the EOB showing a bill of $100?

Also, as far as keeping exact receipts for what has been paid from the HSA, I guess I always assumed that if I started the HSA in 2015 for example, that as long as I had EOB's that exceeded what has been withdrawn that I would be good to go from IRS standpoint? My plan and what I have been doing is to electronically keep medical expenses from EOB's/Insurance website, and pull against that whenever I need to (haven't started pulling yet).

 

[gwraigty]

Back to someones post about $100 EOB vs paying actual $85 after a discount. I don't know how in an audit the IRS would know that you paid $85 when you produce the EOB showing a bill of $100?

Also, as far as keeping exact receipts for what has been paid from the HSA, I guess I always assumed that if I started the HSA in 2015 for example, that as long as I had EOB's that exceeded what has been withdrawn that I would be good to go from IRS standpoint? My plan and what I have been doing is to electronically keep medical expenses from EOB's/Insurance website, and pull against that whenever I need to (haven't started pulling yet).

An EOB simply tells you how much the provider is allowed to bill you. It's not proof of payment. Per the $100/$85 example, I'd guess that the IRS would be interested in seeing the bill for the $100 and a corresponding receipt for paying that $100. Since the receipt would only be for $85.00, I'd guess the IRS would only allow the $85 as a legitimate HSA reimbursement. Why would it be any different?

A similar example using the same numbers is when the EOB shows that the insurance was billed for $100, but only approves a negotiated rate of $85. The provider sends a bill for $85 and you pay the $85. This is how our insurance works. I've never been able to successfully negotiate a discount, because the insurance has already negotiated a discount for us, or that's what they say, anyway.

If you started your HSA in 2015, you can't reimburse yourself for expenses incurred before you opened up the HSA. A quick Google search confirms this from many sources.

 

[Tiger8693]

An EOB simply tells you how much the provider is allowed to bill you. It's not proof of payment. Per the $100/$85 example, I'd guess that the IRS would be interested in seeing the bill for the $100 and a corresponding receipt for paying that $100. Since the receipt would only be for $85.00, I'd guess the IRS would only allow the $85 as a legitimate HSA reimbursement. Why would it be any different?

A similar example using the same numbers is when the EOB shows that the insurance was billed for $100, but only approves a negotiated rate of $85. The provider sends a bill for $85 and you pay the $85. This is how our insurance works. I've never been able to successfully negotiate a discount, because the insurance has already negotiated a discount for us, or that's what they say, anyway.

If you started your HSA in 2015, you can't reimburse yourself for expenses incurred before you opened up the HSA. A quick Google search confirms this from many sources.

Yes, I meant to say keeping records from 2015 forward that I have paid without using HSA funds. I guess we will see if they accept the insurance records if/when they ever audit me to that level....

 

[RunningBum]

I've been keeping meticulous records of my medical expenses to someday be reimbursed, but last year I noticed that you're also supposed to also show that you've paid them. I've mostly only got the bills, not the payment. I've never received a cash discount, but still, if I were to get audited it might be a hassle.

I figure I may just use it mostly to pay medicare premiums and that should be easy to document, and if I need the money sooner, I'll have to take my chances. Might be able to dig up credit card and bank statements for at least some of them.

Chances of getting audited are slim, but I still want to have it be legit just in case. I sleep better that way.

 

[GreenER]

Hubby, who just retired (65), has an HSA and now an HRA funded by his employer- just $60 per month.


We always paid all medical expenses out of the HSA with the HSA Mastercard.


We are now paying his Part D premiums from there and I reimburse myself for my retiree medical insurance premiums right now as they are very expensive. Might go on an ACA plan and then continue to reimburse myself from there for those premiums.


For the HRA we will let it build up a bit as it just started and then I plan to use the money to reimburse ourselves for either some of his Medicare Premiums- part B or Plan G- or for dental visits, or out of pocket medical costs like co pays and prescriptions, etc. instead of using the HSA account as we have done in the past.


I am not sure if the money all rolls over year to year, Something I have to check into since this is new to us.

It's my understanding that you can reimburse yourself from an HSA for Cobra premiums but otherwise insurance premiums for health insurance coverage are not considered a qualified medical expense and hence can't be reimbursed from an HSA. I wasn't sure if your "retiree health insurance" is Cobra or a plan that you've been allowed to buy into longer term.

 

[SecondCor521]

It's my understanding that you can reimburse yourself from an HSA for Cobra premiums but otherwise insurance premiums for health insurance coverage are not considered a qualified medical expense and hence can't be reimbursed from an HSA. I wasn't sure if your "retiree health insurance" is Cobra or a plan that you've been allowed to buy into longer term.

Here's what is HSA reimbursable in terms of insurance premiums:

"You cannot treat insurance premiums
as qualified medical expenses unless
the premiums are for:
1. Long-term care (LTC) insurance,
2. Health care continuation
coverage (such as coverage under
COBRA),
3. Health care coverage while
receiving unemployment compensation
under federal or state law, or
4. Medicare and other health care
coverage if you were 65 or older (other
than premiums for a Medicare
supplemental policy, such as Medigap)."

Source: Instructions for Form 8889, irs.gov

 

[pb4uski]

That aligns with my understanding... it just seems odd that premiums for Part B and Part D coverage would be qualified but that Medigap premiums would not be qualified... I'm not sure what the logic to that is.

 

[aja8888]

That aligns with my understanding... it just seems odd that premiums for Part B and Part D coverage would be qualified but that Medigap premiums would not be qualified... I'm not sure what the logic to that is.

Government rules...? logic??

 

[nvgs123]

I am thinking about paying for medical expenses with a credit card to earn rewards and then reimbursing yourself from the HSA. Are there any disadvantages?

If you can handle it, why reimburse when you can do this:
https://www.madfientist.com/ultimate-retirement-account/