Author Topic: HSA plans for Health Care  (Read 7554 times)

JamesL

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HSA plans for Health Care
« on: February 05, 2013, 04:41:01 PM »
Hi everyone, I posted this in my journal but thought I'd share it here because of how great this is.

I'm really excited because I did some research on HSA plans, and right now I'm participating in the EPO plan with my company. It's $23 every 2 weeks, but next year it will be $38 (increased expenses). The HSA/HDHP plan costs $16.50 and won't be increasing, and my company contributes $750 per year into it. I ran some calculations, and based on 5 office visits and 2 lab/x ray, I will have a HSA balance of $900 at the end of the year. That's spending the same per year (contributing 500$ into the account personally + the employer contribution of 750$). So essentially I'm making $900 for free, doing the same thing (and that is being conservative with Dr.'s visits etc). Plus, that accumulates interest, although I'm not sure if my company gives me the choice of investing it in mutual funds or not.

The sad part is open enrollment isn't for another 5 months, but I'm still super stoked about having an HSA plan started in the near future, which will help with ER, and yields another great way of getting "free" money from work! I'm a very healthy individual though so I don't see why it wouldn't be north of $1000 saved per year, while spending the same on health insurance. Just another way of squeezing out another $1000 a year :).

If I didn't want to spend the extra $500 I could technically omit that, have $500 in the account at year end and have saved $528 just by switching plans, but I'd rather invest in HSA for down the road. I might even do over $1000 just because  of it's tax advantages. So many options it's almost overwhelming :)

I should also note my deductible is $2,000, so if I had to have major surgeory and spent $50,000 on the procedure, my out of pocket would be $1166 for the EPO plan, and $1646 with the HDHP W/ HSA plan. So it has a safety net that protects me if something bad happened. Plus most people here ride bikes and probably don't over eat much since that costs money lol, so if you're healthy you save TONS.

In summary. I recommend HSA plans! So look into it with your company. It's tax deductible, on Social Security and Federal taxes etc. And according to About.com:

Contributions to an HSA are tax-deductible. Earnings, such as interest and dividends, in the health savings account are tax-exempt at the federal level. Withdrawals from a health savings account are tax-free as long as the funds are used for qualified medical expenses.

Reference:
http://taxes.about.com/od/deductionscredits/p/HSA.htm

Phoebe

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Re: HSA plans for Health Care
« Reply #1 on: February 05, 2013, 05:09:03 PM »
I love my HSA!

It should also be noted that once you hit 65 years old you can take the money out of your HSA for anything (not just medical expenses) penalty free.

JamesL

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Re: HSA plans for Health Care
« Reply #2 on: February 05, 2013, 05:21:06 PM »
Oh wow, thanks for that information Phoebe! Roth IRA and HSA are both some seriously powerful tools.

I think it might go in this order for investing priorities:

Employee match>HSA>Roth IRA>401k

Maxing out the first 3 might be enough to get you from 60-90 though, depending how early you start and when you retire.


tooqk4u22

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Re: HSA plans for Health Care
« Reply #3 on: February 06, 2013, 12:03:06 PM »
Entering my second year with HDHP HSA plan and so far it has been good.  We have been relatively healthy and have not taken all distributions from the account for the little expenses.

Initially it was laziness/procrastination but as time went on I manage it such that I don't sweat the small stuff and intstead build the HSA stash for when/if a large deductible year comes - and if it doesn't the money is invested and will continue to grow tax deferred.


TN_Steve

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Re: HSA plans for Health Care
« Reply #4 on: February 06, 2013, 12:46:44 PM »
Note that if you plan to keep the $$ in the account (i.e., young/healthy and/or substantial outside funds), you are not tied to the HSA custodian selected by your employer.  Among the options out there for long-term investors are HSA Administrators, which allows you to invest in selected Vanguard Funds, for a total max. annual cost of around $100 (less if small account), and HSA Bank, which has a TD Ameritrade Option and amounts to a total max. annual cost (before any investing expenses) of about half HSA Administrator.  (White Coat Investor has a recent analysis of all such providers at his blog, and the bogleheads keep abreast of the topic as well.)

We just switched from Administrators (which, confusingly, has a contractual relationship with Bank) to Bank, while keeping a nominal amount in employer's choice to ease the contribution and transfer next year.

Gives much better investing options and net costs than were available in the default plan.  (And you can have debit/check options at these choices as well, if you think you'll draw some of the money down).

steve

JamesL

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Re: HSA plans for Health Care
« Reply #5 on: February 06, 2013, 03:28:27 PM »
Thanks for the input guys.

Steve, can I open an account with Administrators and simply start staching money in that account without going through my employer? Open enrollment isn't until July and I felt like I had to go through my employer for this process.

TN_Steve

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Re: HSA plans for Health Care
« Reply #6 on: February 06, 2013, 03:40:17 PM »
James, I am not sure.  My wife has HDHP & HSA through work, so that's as far as we looked.  Technically, her employer puts the 6250 in for the year, so for administrative convenience, we now keep the old account going, even though its $46 or so a year . . ..

I know that HSA Bank (and Administrators) offer individual HSA's, including check/debit payments;  if you get your insurance through the employer, however, I don't know how it would work.  I'd recommend that you check out their sites, as well as the Boglehead discussions.   

Sorry that I can't be more helpful.

Steve

BlueMR2

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Re: HSA plans for Health Care
« Reply #7 on: February 06, 2013, 03:49:09 PM »
The one our employer offers is a "use it or lose it", so I don't get into it (our healthcare out of pocket is near zero every year).  Are there any rollover type ones that I *could* get into and stock a little cash into, just in case?

TN_Steve

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Re: HSA plans for Health Care
« Reply #8 on: February 06, 2013, 05:28:00 PM »
BlueMR2,

"use it or lose it" plans typically are HRAs, not HSAs.  (I have HRA at work for me alone; wife's HSA is for rest of family).

I suspect that you could get your own HDHP and accompany it with HSA (if you hurry--all health insurance laws are changing soon and HDHPs will be affected).  Again, I have not researched this for myself, but lots of information on the web.  Bogleheads has an HSA wiki, and numerous posts.  Hopefully, not a problem to link to my search for "HSA" at that site:  https://www.google.com/search?q=HSA&sitesearch=bogleheads.org

Steve


Done by Forty

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Re: HSA plans for Health Care
« Reply #9 on: February 06, 2013, 06:05:28 PM »
Ask your HSA administrator what fees there are on the account when you sever your employment.  For early retirees, these fees will come into play.

sherr

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Re: HSA plans for Health Care
« Reply #10 on: February 07, 2013, 11:06:19 AM »
Thanks for the input guys.

Steve, can I open an account with Administrators and simply start staching money in that account without going through my employer? Open enrollment isn't until July and I felt like I had to go through my employer for this process.

No, by definition you can only have an HSA if you are on (only) an HDHP. You will have to wait until you change your health care plans before you can open an HSA. http://en.wikipedia.org/wiki/Health_savings_account

Other then that though, it sounds great and good luck! My wife and I are also on an HDHP with an HSA. We plan on switching temporarily in a couple of years when we want to start having kids because the other plan options would make that cheaper, but for now we're loving every dollar of that tax-deductible HSA contribution.

sherr

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Re: HSA plans for Health Care
« Reply #11 on: February 07, 2013, 11:09:14 AM »
"use it or lose it" plans typically are HRAs, not HSAs.  (I have HRA at work for me alone; wife's HSA is for rest of family).

Agreed, or it might be an FSA. HSAs are never "use it or loose it".

BlueMR2

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Re: HSA plans for Health Care
« Reply #12 on: February 07, 2013, 11:15:38 AM »
"use it or lose it" plans typically are HRAs, not HSAs.  (I have HRA at work for me alone; wife's HSA is for rest of family).

Agreed, or it might be an FSA. HSAs are never "use it or loose it".

Interesting.  The paperwork clearly calls it an HSA, but also very clearly states that any monies that I do not use will be taken away at the end of the year.  Closest thing to a rollover provision is bridging allowed if we're in the process of switching to a new provider.

Well, whatever it is, it seems a bit sketchy, so I'll stay out of it.  :-)

sherr

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Re: HSA plans for Health Care
« Reply #13 on: February 07, 2013, 02:45:25 PM »
"use it or lose it" plans typically are HRAs, not HSAs.  (I have HRA at work for me alone; wife's HSA is for rest of family).

Agreed, or it might be an FSA. HSAs are never "use it or loose it".

Interesting.  The paperwork clearly calls it an HSA, but also very clearly states that any monies that I do not use will be taken away at the end of the year.  Closest thing to a rollover provision is bridging allowed if we're in the process of switching to a new provider.

Well, whatever it is, it seems a bit sketchy, so I'll stay out of it.  :-)

True HSA accounts are owned by you the individual, so all the money in them stays in them year after year and the account stays with you if you change employers or they switch health care providers. They're just like a regular savings account with some additional tax benefits. In contrast HRA and FSA accounts are owned by the company, so you have no control which provider the company chooses or if the money rolls over after each year (and for some reason I think they're required to not allow the money to roll over, there's not an option for the company to let you keep it).

If you cared enough you could ask your benefits team to correct the name. I also would not put any money in an account that does not roll over unless I knew I had some medical expenses coming up.