Do you have an HSA plan? Tell me about it.

[disneysteve]

We are considering switching to a high deductible plan with an HSA. The cost of the regular plans is getting outrageous and this seems to be the only way to stem the tide and control the costs.

I understand the basics but we've got a call in to our broker to answer a few specific questions.

If you have an HSA plan, tell me what you think of it. And how do you actually go about setting up the HSA? Did the insurance company do that or do you do it on your own? Where? Your bank? I don't know the details of how it all works.

[moneybags]

We have one. It was set up through DH's former employer. The money can be left in a money market account or invested in mutual funds. We use it as a retirement savings vehicle. We do not pay our current medical expenses out of it. We pay those with our after tax money and let the HSA build up.

You can withdraw money for prior year expenses as long as you keep your receipts. We will use our HSA account to withdraw tax free money in retirement or to pay medical expenses at that time.

[phantom]

I had HSA eligible insurance for about a year. I was nowhere near maxing out my tax advantaged retirement vehicles, so I decided to treat my HSA as the medical expense covering part of my emergency fund. Thus, I sought out an HSA with relatively high interest on savings and no investment options. I settled on setting my HSA up at Connexus Credit Union, and I've been pretty happy with it. Although, the fact they like to send me credit card offers almost monthly, drives me crazy.

From what I remember seeing, HSAs with good investment options charged pretty high fees for accounts with low balances. So, I had planned to switch to an HSA that allowed investing if I ever built up enough money in the HSA to offset those fees. But, since I can't contribute to an HSA anymore, that's unlikely to happen any time soon.

I found this web site to be incredibly useful for comparing HSAs.

Edit: I forgot to comment on the actual process of setting up the HSA. My employer had a recommended HSA that they would have opened for me, but they welcomed people to shop around. What they offered seemed pretty good, but I decided I could find a better fit for what I wanted by shopping around on my own. I opened an account myself, and once it was set up, I just had to give my employer the usual direct deposit information, and they made all the contributions for me. You can actually handle the contributions completely on your own, but when your employer does it, you get to skip the FICA taxes.

[LivingAlmostLarge]

I don't like our HDHP. You set up the hsa on your own.

[AJ444]

We have an HDHP through the feds where my wife works, the insurance is Aetna and they automatically set up an HSA with Payflex where we invest anything over 5k in the account. They have a Vanguard Balanced fund investment option which was sufficient enough for me that I didn't look into opening up a separate HSA on my own. We pay medical expenses with our credit card and then immediately reimburse ourselves from the HSA. The Feds also kick in $1500 a year in the HSA, it's a pretty sweet deal.

[Fishindude77]

We have one, it's nothing real special. There is some tax and insurance savings. We just contribute a few bucks weekly to cover any prescriptions or misc. medical expenses that we have.

I suppose I could, but I don't use it as any kind of investment tool.

[disneysteve]

I don't like our HDHP.

Can you elaborate on why?

From the breakdown on the one we're looking at, it really is far better than traditional plans. Once the deductible is met (which you can pay from the HSA), it covers everything but meds 100%.

[LivingAlmostLarge]

My fault I bought the cheapest HDHP for $650/month for family of four with $6500 deductible and $13k max. It covers nothing and many providers don't take it. I'm grateful we even have it but everything for us is OOP. It's just crappy and expensive.

Too spoiled with employer provided coverage. But realize my kids are young and we have a lot of stuff that comes up and it nickels and dimes us for everything. Plus we are covering the premium. I think I might view it differently if it were 100% premium covered by employer and they provided the deductible into an HSA as some friends do. Most people I know with HDHP don't have such a high deductible.

[sv2007]

I've never had it, but company offered it and I read up a bit. It's used to combine a high deductible plan ($5-8k) vs normal ($1-2k).

It strikes me as more or less self insurance. I've not used my auto policy in over 10 yrs, should I consider self insuring? No way, eventhough I've got an excellent dirving record. For us healthy people, there'll be accidents, and 1 is enough to cost you more than any savings. So, I passed on that a few years back.

[iliketosavemoney]

This is our first year on the HDHP/HSA plan for a family.
We get $800 seed money every year.
It costs us $70 less per month then the PPO offered.

Super simple calculation (not accounting for taxes saved and the PPO's $30 copay) means if we spend $1640 in medical bills a year, its around even with if we went with the PPO.

We pay out of pocket and keep receipts. Plan on using the HSA as a super Roth IRA for now.

One thing about having the HSA is that sometimes, I don't want to go to the doctor because I don't want to spend the money. This can be a good thing since it stops me from going for every minor little thing. But it could be bad if I really should see a doctor but I don't..

[disneysteve]

It strikes me as more or less self insurance.

For us healthy people, there'll be accidents, and 1 is enough to cost you more than any savings. So, I passed on that a few years back.

It is self insurance in a way for the every day stuff since there is a deductible. For the catastrophic stuff, though, it blows the traditional plans away because once the deductible is met, the insurance covers everything 100%. There's no copays, no coinsurance, nada. The only expense after the deductible is met is for prescriptions and there's a maximum out of pocket for that.

One thing about having the HSA is that sometimes, I don't want to go to the doctor because I don't want to spend the money. This can be a good thing since it stops me from going for every minor little thing. But it could be bad if I really should see a doctor but I don't..

This is something that has been a concern for a lot of folks. In general, though, the trend is toward shifting more and more costs to the patient. That isn't unique to HDHP/HSA plans.

I love the fact that we get to pay over $6,000/year in medical bills with pre-tax dollars. The current contribution limit is $6,750. In the 25% tax bracket, that will save us up to $1,687.50 each year. Currently, our predictable medical bills exceed that so essentially our costs will drop by over $140/month with the new plan. Plus the premium is lower which makes our savings even bigger.

It really seems like a no-brainer to me. I'm not sure what the potential downside would be.

[scfr]

We had a HDHP for a couple years (2007-?). During that time, we contributed the max to a HSA that we still have.

The US Treasury and IRS web sites both have good information about HDHP/HSAs. Might be worth a look.

When we had our HDHP (and things certainly may have changed since then), the process was to first get the HDHP and then get the HSA. Without a HDHP, you couldn't open a HSA. The first year we had our HDHP, the amount we could contribute to the HSA was pro-rated based on how long we had the HDHP. We had until Tax Day (April 15) of the following year to make our contribution.

Back when we got ours, they were relatively new and the options for HSAs were pretty limited. Nowadays there are many more options. Even places like Vanguard offer them. If you plan to use the funds as you go, consider a bank account HSA. If you plan to treat the HSA funds as retirement savings and pay for your deductible and other out-of-pocket expenses with other funds, then consider a mutual fund account such as Vanguard.

Watch out for the opening, closing, and annual fees. They can be hefty and are harder to avoid than they are for IRAs.

We were very happy that we decided to go with the HDHP/HSA. The amount we saved on our insurance premium was enough to fund the HSA, and we got a tax savings to boot. We no longer have the HDHP because I became eligible for insurance through my employer.

[disneysteve]

If you plan to use the funds as you go, consider a bank account HSA. If you plan to treat the HSA funds as retirement savings and pay for your deductible and other out-of-pocket expenses with other funds, then consider a mutual fund account such as Vanguard.

Watch out for the opening, closing, and annual fees. They can be hefty and are harder to avoid than they are for IRAs.

All very good advice. Thanks. We were already talking about using a bank but just because that's what our broker suggested. Your reasoning makes a lot of sense, though. At least for the next year or two, I definitely anticipate spending every penny of the HSA account.

[AJ444]

There are HSA providers that offer Vanguard mutual funds as an investment option but Vanguard itself does not offer an HSA account with them, I wish they did.