Post: #1

For USA guys on here who are working at corporations and paying for health insurance provided by their employer - what is your take on high deductible HSA-plans (health savings accounts) insurance plans?

I was partial to the concept of the HSA plan because I'm healthy and the HSA lets you contribute to the account balance and have it roll-over to the following years, and not have the balance get wiped out at the end of the year like FSAs (I HATE that about FSAs). Also if you build the HSA balance up, you can invest it and it grows tax free. Once you hit retirement age, the restrictions come off and you can spend it on non-health expenses if you'd like (if I have my facts straight)

The downsides I've noticed are if you switch to a non-HSA plan or leave and become self employed or at a company that doesn't offer HSA plans, most banks will charge maintenance fees unless you have a balance of like $5K or greater. The other obvious issue is the deductibles are higher than plans without an HSA, so if you do need significant care, your balance is going to take a big hit. I had a neck injury in jiu-jitsu this year where I had to go to PT, and it bled the account pretty bad. So there's risk.

At my present novice understanding, it seems like to me if you have the ability to save, and don't need much health care, the best play with an HSA is to plow in tax-free contributions so that you get the balance to above 5K as quick as possible and then invest. Once you get there, it's an interesting tax avoidance vehicle because both the contributions and growth are tax free. You can switch back to a low deductible plans at that point if you prefer, leave your job, whatever. But up to 5K, it's a somewhat risky strategy, because if you switch to a different type of plan, you will get nailed by account maintenance fees. And it's certainly possible the banks could raise their threshold to waive fees.

So I'm weighing out the pros and cons, I'm by no means an expert and feel free to fact-check anything I've said. Appreciate any insight/experience you have.

Post: #2

I used an HSA for years, and I fully funded it each year.

I did the math for me, and for a healthy single individual with no dependents, almost any situation had me better off with the High Deductible Health Plan(HDHP)/HSA than if I had gone with the "traditional plans".

Every year when open enrollment came along, I think the average person spent at least 2 business days reading and talking about HDHP/HSAs, and then most went with the "traditional plan" because it was easier. The company's decision to bring in a rather poor presenter on the HDHP/HSA plans didn't help things.

One issue is that Congress has changed the law in this area more times than I can count (Wikipedia has a partial list). As long as you go by the rules in IRS Publication 969, that shouldn't be an issue.

http://www.irs.gov/pub/irs-pdf/p969.pdf

To the OP, you still have to pay income tax on any funds removed from the plan if they aren't used for qualified medical expenses (see Publication 969), only the 20 percent additional tax gets waived if you're over 65.

For those who aren't married, it's going to take some time to get to a $5,000 balance, the maximum (single) contribution in 2014 was $3,300 ($4,300 for contributors over 55).

There are some other issues buried in the fine print, particularly the treatment of over-the-counter medications and insurance premiums.

Post: #3

Thanks. You said you used it for years - do you still have the HSA account and are investing the funds / not using for medical expenses anymore? Or did you end up spending it?

Post: #4

Another benefit is some companies make a matching contribution, like in a 401k.

I've also heard of a strategy where people with an HSA will still pay for medical expenses out of pocket (after tax $), letting the HSA money continue to compound tax free. If you hold on to the medical bill receipts, you can expense it later.

Post: #5

^^ Yeah my company puts $500 into the HSA each year, which was definitely a factor in going that route. And I've definitely thought about paying medical bills out of pocket to try to get up to the 5K mark faster so interesting to hear people are actually doing that.

Post: #6

(09-06-2014 07:31 PM)poledaddy Wrote:  ^^ Yeah my company puts $500 into the HSA each year, which was definitely a factor in going that route. And I've definitely thought about paying medical bills out of pocket to try to get up to the 5K mark faster so interesting to hear people are actually doing that.

Can you control your monthly contributions or is it a set amount each month?

Post: #7

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Can you control your monthly contributions or is it a set amount each month?
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You control them. Technically if I wanted to, I could put zero in and just work off of the $500 my company puts in.