Author Topic: Health Savings Account or nah?  (Read 4969 times)

sillyspends-n-sortasaving

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Health Savings Account or nah?
« on: November 11, 2016, 06:32:20 PM »
Hey Ya'll,

I wanted to gather other people's experience with investing through an HSA.

My employer offers one and I figured it probably does make sense to use that as another platform of saving.  The HSA would be through HealthEquity.

My employer will contribute $250 each year, and I plan to max out my contribution limit and then let that money sit in there and pay for medical expenses out of pocket.  I saw on some prior MMM posts that you can keep medical receipts for years and years and then have your HSA reimburse you later.  Has anyone actually done this?  Also, in the meantime if you pay out of pocket for medical expenses but also have an HSA you chose not to use, does that mean you cannot claim the out of pocket expenses on a tax return since you already get a tax benefit from having an HSA? 

To try and have control over my HSA and dip into investing personally and avoiding fees and costs, I am going to handle the investing myself.

Does anyone here use HealthEquity and recommend certain investments?

MDM

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Re: Health Savings Account or nah?
« Reply #1 on: November 11, 2016, 07:29:01 PM »
My employer will contribute $250 each year, and I plan to max out my contribution limit and then let that money sit in there and pay for medical expenses out of pocket.
Good plan.

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I saw on some prior MMM posts that you can keep medical receipts for years and years and then have your HSA reimburse you later.  Has anyone actually done this?
Have done the "keep receipts" part but haven't gotten to "reimburse" yet.

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Also, in the meantime if you pay out of pocket for medical expenses but also have an HSA you chose not to use, does that mean you cannot claim the out of pocket expenses on a tax return since you already get a tax benefit from having an HSA?
You may claim the medical expenses as an itemized deduction, but that precludes using them for future HSA withdrawals.  One of the qualifications for an HSA withdrawal is that the medical expenses had not been taken as an itemized deduction in any year.

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Does anyone here use HealthEquity and recommend certain investments?
See the Health Equity entry in Health savings account - Bogleheads

Mississippi Mudstache

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Re: Health Savings Account or nah?
« Reply #2 on: November 17, 2016, 09:58:06 AM »
I use the HSA to pay for all medical bills, I get the tax benefit immediately that way.  Other people keep the receipts for some reason - maybe so that they can build an HSA balance to invest - I'm not sure what benefit you get doing that except I guess the capital gains from your investments in the HSA aren't taxed.  I'm more conservative and just try to get the money as quick as possible as I'm not sure how things will play out with healthcare policy going forward, in particular with the new clowns in Washington.

Here is a good website for HSA strategy:

http://www.madfientist.com/ultimate-retirement-account/

Highlighted the main reason for saving receipts and reimbursing at a later time. There are strong justifications for paying expenses out of your HSA immediately as well. For example, if you are eligible for a tax-advantaged IRA, but aren't able to save enough to max it out while simultaneously paying for medical expenses out of pocket, then by all means pay the medical bills from your HSA and fill up the IRA instead. I'm not too worried about HSAs suddenly becoming taxable, but if that's something that worries you, that's another fine reason.

Bottom line, though: if you're eligible for an HSA, then by all means, max it out.

seattlecyclone

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Re: Health Savings Account or nah?
« Reply #3 on: November 17, 2016, 10:56:49 AM »
I agree with Mississippi Mudstache. If you can afford to max out all of your tax-sheltered savings accounts, the optimal thing to do is to pay medical bills from post-tax funds and let your tax-advantaged HSA cash compound for later. If you can't afford to max out all of your tax-sheltered accounts, the optimal thing to do is to max out the HSA, take your medical expenses out of the HSA as soon as possible, and use the tax savings to get closer to maxing out your IRA.

Jardeny

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Re: Health Savings Account or nah?
« Reply #4 on: November 17, 2016, 11:10:13 AM »
I love my HSA, also through Health Equity and use it as intended. As soon as I was able to, I started investing the HSA in VIIIX which has gone from $169 to $199 in the time since I started. So, thumbs up from here.

sillyspends-n-sortasaving

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Re: Health Savings Account or nah?
« Reply #5 on: November 17, 2016, 04:12:38 PM »
I agree with Mississippi Mudstache. If you can afford to max out all of your tax-sheltered savings accounts, the optimal thing to do is to pay medical bills from post-tax funds and let your tax-advantaged HSA cash compound for later. If you can't afford to max out all of your tax-sheltered accounts, the optimal thing to do is to max out the HSA, take your medical expenses out of the HSA as soon as possible, and use the tax savings to get closer to maxing out your IRA.

All very good advice.  I looked at the HSA as another way to put aside tax-sheltered money since maxing out my 401k does not seem possible.  I wanted to do the HSA to lower my tax bracket as well, but for this and next year it will likely just balance out my "additional income," money from an educational award I use to pay for random classes each quarter.  The downside to this is that my tax returns for this and next year will suffer.

sillyspends-n-sortasaving

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Re: Health Savings Account or nah?
« Reply #6 on: November 17, 2016, 04:18:04 PM »
I love my HSA, also through Health Equity and use it as intended. As soon as I was able to, I started investing the HSA in VIIIX which has gone from $169 to $199 in the time since I started. So, thumbs up from here.

Oh, good feedback!  Glad to hear investing through HealthEquity has been good to you.  My employer's benefits materials state that a certain financial threshold has to be met in the HSA account before you invest it, but I cannot find a monetary amount for that.  How soon were you able to invest?

VoteCthulu

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Re: Health Savings Account or nah?
« Reply #7 on: November 17, 2016, 04:46:11 PM »
It's usually worth getting an HSA when it's available, the tax savings alone make it hard to beat unless you regularly spend a lot on health care every year.

My company also uses Health Equity, which is one of the porrer HSA administration companies. They charge me $2.50/month regardless of my balance, and additionally charge 0.033%/month of my invested assets.

As soon as my employment changes I'm going to drop them for a better provider like HSA bank, saturna, or elements.

seattlecyclone

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Re: Health Savings Account or nah?
« Reply #8 on: November 17, 2016, 04:57:43 PM »
I love my HSA, also through Health Equity and use it as intended. As soon as I was able to, I started investing the HSA in VIIIX which has gone from $169 to $199 in the time since I started. So, thumbs up from here.

Oh, good feedback!  Glad to hear investing through HealthEquity has been good to you.  My employer's benefits materials state that a certain financial threshold has to be met in the HSA account before you invest it, but I cannot find a monetary amount for that.  How soon were you able to invest?

My employer uses HealthEquity for HSAs and they make you maintain a $500 cash balance. Anything beyond that can be invested. Your plan may or may not be the same.

Jardeny

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Re: Health Savings Account or nah?
« Reply #9 on: November 17, 2016, 07:34:19 PM »

My employer uses HealthEquity for HSAs and they make you maintain a $500 cash balance. Anything beyond that can be invested. Your plan may or may not be the same.

$1000 min here. Automatic investment for the rest. I like that they have various Vanguard funds available. Health Equity has been my only HSA experience, so there's probably even better alternatives out there, like VoteCthulu is stating, but I intend to maintain an HSA for years to come.

Goldy

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Re: Health Savings Account or nah?
« Reply #10 on: November 17, 2016, 08:43:23 PM »
We get a 1500 match for the family HSA and then we can earn up to 750 per person (2) by completing a bioscreening and some other health tracking tasks.  3k of free money invested!

Mississippi Mudstache

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Re: Health Savings Account or nah?
« Reply #11 on: November 18, 2016, 08:00:20 AM »
It's usually worth getting an HSA when it's available, the tax savings alone make it hard to beat unless you regularly spend a lot on health care every year.

An HSA is even more advantageous when you regularly spend a lot on health care. HSA contributions are tax-free going in and coming out, if you spend the money on healthcare. Other tax-advantaged accounts, such as 401ks and IRAs, which are taxed either going in or coming out, not both. Additionally, if the HSA contribution is payroll-deducted, it saves you an additional 7.65% in FICA taxes - another advantage that retirement accounts do not match.

VoteCthulu

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Re: Health Savings Account or nah?
« Reply #12 on: November 18, 2016, 08:27:39 AM »
It's usually worth getting an HSA when it's available, the tax savings alone make it hard to beat unless you regularly spend a lot on health care every year.

An HSA is even more advantageous when you regularly spend a lot on health care. HSA contributions are tax-free going in and coming out, if you spend the money on healthcare. Other tax-advantaged accounts, such as 401ks and IRAs, which are taxed either going in or coming out, not both. Additionally, if the HSA contribution is payroll-deducted, it saves you an additional 7.65% in FICA taxes - another advantage that retirement accounts do not match.
Perhaps I wasn't specific enough when I said "a lot". I know a few people that surpass the out of pocket maximum every year and would pay many thousands more on a high deductible plan.

All plans are different and you need to do your own math, but at my company you're better off with the ppo plan if you have more than about $6k in medical expenses every year.

Mississippi Mudstache

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Re: Health Savings Account or nah?
« Reply #13 on: November 18, 2016, 08:58:25 AM »
It's usually worth getting an HSA when it's available, the tax savings alone make it hard to beat unless you regularly spend a lot on health care every year.

An HSA is even more advantageous when you regularly spend a lot on health care. HSA contributions are tax-free going in and coming out, if you spend the money on healthcare. Other tax-advantaged accounts, such as 401ks and IRAs, which are taxed either going in or coming out, not both. Additionally, if the HSA contribution is payroll-deducted, it saves you an additional 7.65% in FICA taxes - another advantage that retirement accounts do not match.
Perhaps I wasn't specific enough when I said "a lot". I know a few people that surpass the out of pocket maximum every year and would pay many thousands more on a high deductible plan.

All plans are different and you need to do your own math, but at my company you're better off with the ppo plan if you have more than about $6k in medical expenses every year.

We hit the out-of-pocket maximum every year, and I have never worked under a health insurance plan that didn't favor the high-deductible plan + HSA under those circumstances. Most companies seem to be moving to high-deductible options only, anyway.

VoteCthulu

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Re: Health Savings Account or nah?
« Reply #14 on: November 18, 2016, 09:52:33 AM »
We hit the out-of-pocket maximum every year, and I have never worked under a health insurance plan that didn't favor the high-deductible plan + HSA under those circumstances. Most companies seem to be moving to high-deductible options only, anyway.
I don't live in Mississippi, so your health plans are probably far different than mine, but I can't imagine how bad your PPO plans are if they're worse than a high deductible plan in high usage. If you're spending all the money every year, maxing out an FSA gives nearly the same tax benefits the HSA provides, and the PPOs I've seen have a lower out of pocket maximum that takes much longer to reach (because it covers care at a far better rate than the 70/30 rate our high deductible plan covers after the deductible is reached).

Companies have certainly been moving to high deductible plans HSA qualified plans recently, likely because they're hugely popular with younger workers. I couldn't wait to switch to one when my company finally offered it, despite their choosing Health Equity as the administrator.

Scandium

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Re: Health Savings Account or nah?
« Reply #15 on: November 18, 2016, 10:37:59 AM »
Have done the "keep receipts" part but haven't gotten to "reimburse" yet.

Maybe slightly off-topic, but what does the IRS consider "keeping the receipts"? I've taken a picture and made a 'medical receipt" folder in Google drive. Is this good enough? They don't require any form of paper receipts do they? There's no way I could keep that for 20+years.. This of course only apply in the highly unlikely event that you're audited.

Roboturner

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Re: Health Savings Account or nah?
« Reply #16 on: November 18, 2016, 10:50:35 AM »
Have done the "keep receipts" part but haven't gotten to "reimburse" yet.

Maybe slightly off-topic, but what does the IRS consider "keeping the receipts"? I've taken a picture and made a 'medical receipt" folder in Google drive. Is this good enough? They don't require any form of paper receipts do they? There's no way I could keep that for 20+years.. This of course only apply in the highly unlikely event that you're audited.

pics are good enough, my HSA actually has the ability to load receipt images directly into their database as you get them, then they "unlock" that amount from your HSA stache. I also keep digital copies for myself, but it's a nice enough feature to see that I have, say $1000 out of $4000 total already tagged as a "qualified expense"

Scandium

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Re: Health Savings Account or nah?
« Reply #17 on: November 18, 2016, 11:01:53 AM »
Have done the "keep receipts" part but haven't gotten to "reimburse" yet.

Maybe slightly off-topic, but what does the IRS consider "keeping the receipts"? I've taken a picture and made a 'medical receipt" folder in Google drive. Is this good enough? They don't require any form of paper receipts do they? There's no way I could keep that for 20+years.. This of course only apply in the highly unlikely event that you're audited.

pics are good enough, my HSA actually has the ability to load receipt images directly into their database as you get them, then they "unlock" that amount from your HSA stache. I also keep digital copies for myself, but it's a nice enough feature to see that I have, say $1000 out of $4000 total already tagged as a "qualified expense"

Great. I've read some have that feature. So far my HSA is still in the crappy local bank my employer uses. I'll transfer to HSAbank next year when I have a couple grand there.

Mississippi Mudstache

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Re: Health Savings Account or nah?
« Reply #18 on: November 18, 2016, 12:56:02 PM »
We hit the out-of-pocket maximum every year, and I have never worked under a health insurance plan that didn't favor the high-deductible plan + HSA under those circumstances. Most companies seem to be moving to high-deductible options only, anyway.
I don't live in Mississippi, so your health plans are probably far different than mine, but I can't imagine how bad your PPO plans are if they're worse than a high deductible plan in high usage. If you're spending all the money every year, maxing out an FSA gives nearly the same tax benefits the HSA provides, and the PPOs I've seen have a lower out of pocket maximum that takes much longer to reach (because it covers care at a far better rate than the 70/30 rate our high deductible plan covers after the deductible is reached).

Companies have certainly been moving to high deductible plans HSA qualified plans recently, likely because they're hugely popular with younger workers. I couldn't wait to switch to one when my company finally offered it, despite their choosing Health Equity as the administrator.

I don't live in Mississippi, either, but I've had jobs in South Carolina, Georgia, Mississippi, and Florida. Three out of the four offered PPO in addition to high-deductible plans. All three that offered PPO plans were a worse deal for people who hit their OOP max regularly. Yeah, the OOP max might be lower, but the monthly premiums were so much higher that it was a wash. Add in the tax benefits of an HSA, and the high-deductible plan is a no-brainer. FSA doesn't come close to the benefits of an HSA, because it's use-it-or-lose-it, and the maximum contribution is less than half as much. But as always, do the math, YMMV, etc.

VoteCthulu

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Re: Health Savings Account or nah?
« Reply #19 on: November 18, 2016, 04:45:08 PM »
I don't live in Mississippi, either, but I've had jobs in South Carolina, Georgia, Mississippi, and Florida. Three out of the four offered PPO in addition to high-deductible plans. All three that offered PPO plans were a worse deal for people who hit their OOP max regularly. Yeah, the OOP max might be lower, but the monthly premiums were so much higher that it was a wash. Add in the tax benefits of an HSA, and the high-deductible plan is a no-brainer. FSA doesn't come close to the benefits of an HSA, because it's use-it-or-lose-it, and the maximum contribution is less than half as much. But as always, do the math, YMMV, etc.
The 2016 FSA max of $2550 is 76% of the HSA max of $3350 (roughly doubled for married) and there shouldn't be any risk of losing it if you're spending your OOP maximum. Any additional premiums the PPO costs should also be pre-tax, unlike any higher OOP max you'd need to pay for an high deductible plan.

I agree that you always need to do the math for each plan, which is very hard for anyone expecting to spend either $0 or more than the OOP max, since it's incredibly difficult to get a price for anything until after the procedure.