Author Topic: HSA decision, need advice  (Read 3736 times)

skyler

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HSA decision, need advice
« on: September 07, 2013, 12:13:32 PM »
Re-posting from "Ask a Mustachian" as I received "0" answers...


Kind Mutachians,
I am self employed, currently covered by my spouse's health insurance.

Premiums are continuing to go up and so are the deductibles/co-pays.
I am posting the numbers because we have no idea how this compares to others in US.

Last year we spent $640 for medical visits in out of pocket expenses for co-pays and our share of lab work (prescriptions not included).
Have 5 in our family, all healthy, no pre-existing conditions (spouse used to take HBP medicine, but lost weight and does not need it), children are in elementary school, so occasional colds are the main reason for our doctor visits.

Our total cost for health insurance premiums this year will total $4900 and dental insurance for premiums will total $780. We spent about $570 in co-pays and prescriptions (looking at cc statements).

In the past 2 years, our insurance went from $3600 in premiums to $4900.
Open enrollment is in October and employer already announced prices will go up again and there will only be one provider.

Considering getting a HDHP and starting an HSA to take advantage of the  100% tax deductible contributions.

My Qs:
Does it matter/are there restrictions that my spouse can get health insurance through his employer?

Can we go back and sign up for a traditional plan through the employer after a few years?

It is pretty easy to take on a risk with an HSA when you are single...

I am wondering if any others here that have kids are using an HSA??


Location:USA

ShavinItForLater

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Re: HSA decision, need advice
« Reply #1 on: September 08, 2013, 03:43:21 PM »
I don't have answers to all of your questions, and I suspect the answers may be changing with the Obamacare exchanges coming into play.  In the past it may have been difficult in some cases to opt out of company health plans entirely and then opt in later, but I believe with the latest Obamacare changes they cannot exclude pre-existing conditions and I expect that would also mean you could opt in later.  However this is all speculation on my part, look up the info. or ask your (spouse's) employer for their answer.

I am using a HDHP and HSA, however that is offered to me through my employer, so I did not have your issue of wondering whether I could switch back--in open enrollment every year I could elect any plan.  The premiums are much lower than the traditional managed care plans, and my employer also puts some money into the HSA for me every year.

I switched to the HDHP/HSA about 2 years ago and I think it's been a great decision.  My two kids, DW and I are all in good health so we haven't had a huge amount of health expenses.  We have a good income so we pay everything out of pocket, and have not made any withdrawals from the HSA--I am trying to keep all the health related receipts so that eventually I can make claims against them.  As I understand the rules there is no expiration date on submitting claims--so 20 years from now, I can submit claims from today and get that money out tax free.  Assuming no health catastrophes, I plan to use the rest as another retirement fund.

When I made the decision to change, I did the math on the various scenarios.  The HDHP is all out of pocket (or HSA-reimbursed) up to the deductible, and then essentially everything is covered 100%.  With the various managed care options, there is a co-pay and something like 80% coverage of most other things IIRC.  When I did the math, if we were all healthy, we won by being able to pocket the difference.  If we had some major catastrophe that cost something like $100,000 or $200,000, the HDHP would also win since beyond the deductible, everything was covered 100%.  There was a small range near the top of the deductible where the managed care option would be cheaper--*for that year*.  But if you looked at several years in a row, if there wasn't some sort of chronic treatment going on, the HDHP/HSA would still win.

Seemed to me it was a no brainer as long as I could afford to pay as I went for health care up front.  If I was just scraping by then I could see the argument for the managed care option, to essentially make your costs more predictable and spread out over time (but it would cost more!).

Perhaps there are scenarios I didn't consider, and you would certainly want to understand the specific costs and terms of your plan options.  Just thought I'd share my experience with it.

TheDude

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Re: HSA decision, need advice
« Reply #2 on: September 08, 2013, 04:00:36 PM »
When I was comparing mine I graphed the cost associated with each plan. I ignored co pays with the traditional plan. The graph shows total medical expense of $1-$25000 on the X axis and yearly costs on the Y Axis. What I saw was that with lower premium it was impossible to pay more with HSA plan even with the 6k deductible.

ShavinItForLater

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Re: HSA decision, need advice
« Reply #3 on: September 08, 2013, 04:48:39 PM »
What your graph doesn't show though is that it's possible you could have a $6,000 expense on the first day, which for some people would not be easily paid.  I think over the course of a year or especially multiple years, it becomes less likely to be an issue.  I think a lot also depends on your specific employer's plans--some may subsidize the HDHP/HSA or the traditional plans more than others.

I did come to a similar conclusion though--it seemed crazy to shell out all those premiums when it was highly unlikely to impossible that I would ever get an "ROI" on that compared to the HDHP/HSA option.

TheDude

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Re: HSA decision, need advice
« Reply #4 on: September 08, 2013, 04:51:58 PM »
I agree my graph showed my situation. I think OP should get some numbers for some HSA plans and start graphing.

Mississippi Mudstache

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Re: HSA decision, need advice
« Reply #5 on: September 08, 2013, 06:26:40 PM »
What your graph doesn't show though is that it's possible you could have a $6,000 expense on the first day, which for some people would not be easily paid. 

That's true, but I've never had an issue working out an interest-free payment plan for medical expenses. We had something like this happen when we switched from my wife's employer insurance to mine, because she was quitting her job. Her employer did not offer a high-deductible plan, and that was the only option for my employer. We got slammed with a $3,000 expense right away, but it was no big deal because we were able to what we could afford each month. Now that I have a high-deductible plan and a fully funded HSA, there's no way I would look back. It's a tremendous deal, even though we have much higher than average medical expenses due to a son with some permanent health problems.

skyler

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Re: HSA decision, need advice
« Reply #6 on: September 09, 2013, 05:42:45 AM »
Thank you all,
 
DH was told his employer will be offering a HDHP this year, so I would not have to get it myself as self employed, hoping his comes with some kind of subsidy from his employer.

We decided to wait and see when the plan literature gets distributed in a few weeks to see exactly what the terms are and we will be make a decision at that time.
Loved the idea of graphing the costs, thanx for sharing...


Q:
What do you think about the option of pulling money out of a ROTH if the HSA is not fully funded the first year to cover a high deductible??

We have an EF, about 5k right now. Another option is to put this money into the HSA initially and use our  CC as a backup for emergencies...

Appreciate your thoughts on this...


jpo

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Re: HSA decision, need advice
« Reply #7 on: September 09, 2013, 06:07:12 AM »
I would not pull money from a Roth, emergencies are what that $5k is for, and if you have something that you need to spend the deductible in one shot I'd say that's a reasonable emergency.

Plus if you do need to spend more than you have in your HSA you can always max out the HSA with part of the $5k and then turn around and use the HSA for your deductible, saving on taxes.

skyler

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Re: HSA decision, need advice
« Reply #8 on: September 16, 2013, 02:23:07 PM »
I would not pull money from a Roth, emergencies are what that $5k is for, and if you have something that you need to spend the deductible in one shot I'd say that's a reasonable emergency.


jpo
good point..thanx for taking the time...