Health Savings Accounts

Discussion in 'Homesteading Questions' started by amelia, Dec 21, 2004.

  1. amelia

    amelia Well-Known Member

    Messages:
    403
    Joined:
    May 2, 2003
    Location:
    Washington State
    My firm has been given the option this year of switching from a traditional health insurance program to a "health savings account" program. Basically this consists of a catastrophic (high deductible) policy through a traditional insurer, coupled with special individual savings accounts earmarked for whatever health expenses are incurred prior to the deductible being met. The funds in the account "roll over" from year to year, they are portable from one employer to another, they are not lost upon death (a beneficiary is designated), and they can be pulled out at the discretion of the employee, albeit with a penalty. Contributions to the HSA are tax deductible so long as they are not touched for non-medical expenses.

    From an entirely personal standpoint, this seemed like a kind of neat way of dealing with the problem of health insurance that has frequently been discussed on this board. The premiums are very low. I'm wondering if others of the homesteading mindset have used HSAs and what they think of them.
     
  2. Cindy in PA

    Cindy in PA Well-Known Member

    Messages:
    740
    Joined:
    May 13, 2002
    Seems like they definitely have their place. I think they would be a good idea unless you end up in the hospital. Two people going into the hospital for a day during the year would cost the $10,000 out of pocket for a family. HSA's would be great if they lowered the healthcare costs in the meantime instead of you paying the insurance inflated rates.
     

  3. amelia

    amelia Well-Known Member

    Messages:
    403
    Joined:
    May 2, 2003
    Location:
    Washington State
    The deductibles on the plans I've been looking at are on the order of $1,500 to $2,500. That would mean that in the event of a serious injury or hospitalization, a person's account would be depleted in that amount, and the catastrphic policy would take over from there. Given that the premiums for a traditional (low deductible) plan are hovering around $500 per person, and that the premiums for the catastrophic policy are less than half that, it would take only 6-10 months for the account to be replenished without paying anything more into the account than what we already get socked for. Seems like a good deal for us self-sufficient types, but maybe I'm missing something.
     
  4. YuccaFlatsRanch

    YuccaFlatsRanch Well-Known Member Supporter

    Messages:
    4,649
    Joined:
    May 3, 2004
    Location:
    Hill Country, Texas
    If your firm is Home Depot, you better read the FINE PRINT.
     
  5. jack_c-ville

    jack_c-ville Well-Known Member

    Messages:
    144
    Joined:
    Feb 19, 2004
    Location:
    Virginia
    Health savings accounts work great if you don't actually get sick or hurt. Which sort of defeats the whole purpose. Of course if you use up your $10,000 or what ever you have in there and then you get hit by a car or have a heart attack they are not going to refuse you at the emergency room. You'll just be adding to the unpaid bills that drive up the cost of healthcare for everybody else who is paying for health insurance.

    If you are part of a company's group health insurance plan then you are benefiting from collective bargaining. The actual cost of health care to you is less. But once you start paying the bills yourself out of your special bank account, that combined bargaining power is lost to you. You are just one customer without any clout and the amount that you get charged is much higher compared to what the insurance company pays. Maybe you decide to use the money in your account to pay for health insurance yourself. A lot of people probably will. But again, the collective bargaining advantage is lost. When you are part of a group of employees you are given a lower rate of premium than what you will be charged when you approach the company representing only yourself. This is why large health insurance companies looooove health savings plans. They will provide the same coverage as before (or often less), but they get to charge you more for it.

    Health savings plans have been available for several years but almost nobody is using them. This says something. There is a huge national industry of financial advisors and whenever there is a tax loophole or a way to shave some costs it gets figured out pretty fast and is taken advantage of to the fullest extent. Financial professionals have had a long time to look at these things and the response has been to recommend against them.

    So few people have decided that these things are a good deal that the latest thing in Washington is to force everybody to have them whether they like it or not. The White House is pushing to make health insurance premiums for employees no longer tax deductible as employee benefits. This will effectively increase the cost of providing employees with health insurance by 10-30%. It's supposed to force everybody to switch to these savings plans.

    If you just like the idea of having a tax-sheltered savings account that can be inherited by family members after your death, look into the various forms of IRAs. They do much the same thing.

    -Jack
     
  6. devittjl

    devittjl Well-Known Member

    Messages:
    220
    Joined:
    Jun 24, 2004
    Location:
    Washington
    I asked about these at my company.

    One thing that was pointed out was that perscriptions would have to be paid at full price (meaning that there was not perscription coverage with the plan)!

    If you are on any maintaince perscriptions this could add up quickly.
     
  7. KAK

    KAK Well-Known Member

    Messages:
    123
    Joined:
    Jun 18, 2003
    Location:
    MO Ozarks
    Don't worry about perscriptions. We must now pay for all of our health insurance. Health savings accounts are a great idea if you are the one who is paying the entire bill. And even if you have perscription coverage (ours, depending on the prescription still had between $15 and $30 co-pays), start looking online. A medication we have to buy costs $14.22 for a 90-day supply (generic) online, whereas when we bought it at a pharmacy, it cost about $240 for a 90-day supply. Of course our total health insurance bill per month is about $800, and that is with a $5000 deductible, no preventive health care, for two adults and three dependents. We live in Colorado, are not quite old enough for medicare (in our mid-fifties), but old enough to have insurance rates sky-high.
     
  8. jillianjiggs

    jillianjiggs Well-Known Member

    Messages:
    550
    Joined:
    May 13, 2003
    I think they're great if you're paying for something you know about ahead of time, like elective surgery or braces. Otherwise, they're kind of a pain in the butt, especially come tax time.
     
  9. Mudwoman

    Mudwoman Well-Known Member

    Messages:
    528
    Joined:
    Dec 18, 2002
    Be sure that you understand what the insurance portion will pay for. This is for CATASTOPHIC illnesses and starts paying after your deductible of lets say $2500. Then it will pay 80% of COVERED expenses. This means that in addition to the $2500, you will have 20% of the bill and 100% of anything that they don't cover. When you consider that the typical 2 day stay in a hospital runs about $20,000, then you need to realize that you would be charged $6000. ($2500 plus 20% of $17,500) If there are additional charges that they don't cover, then add that. Imagine that you and your spouse are in a traffic accident and happen to spend a couple of days in the hospital. You could be looking at $12,000 plus for your part.

    Also, these policies don't cover any visits to a physician for things like colds, flu, etc. If you haven't been to a doctor lately without insurance and seen the costs, then you need to. The office visit runs $85 here, and if you need blood work that is $200+. They don't cover wellness care like pap smears, mamograms etc. They don't cover prescription drugs. They usually don't cover any emergency room visits unless you are then admitted to the hospital. A visit to the emergency room could cost you $3500. All of this does not get credited against your deductible either. Also, check to see if the deductible is for a person per year and not for each catastrophic illness. Makes a huge difference.

    These have their place and if it comes down to this or nothing, this is far and away better than nothing. You would have to accumulate quite a bit of money in your med savings acct.
     
  10. caballoviejo

    caballoviejo Well-Known Member

    Messages:
    442
    Joined:
    Sep 6, 2004
    I checked into the High Deductible savings accounts this year when they became available.

    I think there is some confusion on the board about this. These are not the Medical Savings Accounts which were fased out in Dec. 1993 and are no longer available. MSAs were like IRAs. You put money into them and they were truly savings accounts. You could pay health insurance premiums from the, co-pays, prescription, plus all deductible medical expenses. MSAs were between you and the IRS - your're employer wasn't involved.

    The new HDSas are tied to and available only through your employer (gag me). You are eligible for them ONLY if you select the high deductible option on your employer provided insurance. Further, if you choose this then you are no longer eligible for the pre-tax flexible spending account from which you may otherwise pay out-of-pocket health expenses.

    The HDsas are not handled by you but by an approved administrator entity to which you send your expenditures for approval. There are'nt many of the administrator entities around yet.

    Anyway, I did some calcultions. With health expenditures (including insurance) of approximately 10k for my family last year I would have lost money with the Hdsa as opposed to just using the regular deductible coupled with pre-tax expenditure of dollars I set aside in my Flexible spending account.

    In sum, I think that only a government of bureacrats destined to design some goofball systems answerable to every political faction imaninable would have come up with such another complex, paper-laden, piece of individual burden as is the Highdeduct account.

    Its just anothe time approval-getting time killer and accouting mess.
     
  11. mightybooboo

    mightybooboo Well-Known Member

    Messages:
    11,301
    Joined:
    Feb 10, 2004
    Location:
    So Cal Mtns
    Still have money in an MSA,it was a rip,what we spent for services was then taxed,company took a disbursement instead of a rollever when we left,taxes AND penalties from IRS,no one wants to fix any problem with them,constantly being sold to different management companies,yearly fees to manage it,just wasted money all the way.Just horrible.So it sits today,shrinking away.
    Anyhow ,that was our experience,bad advice from Clark Howard on that one,he really touted em on his financial show.
    Good luck,not for me at all.IMHO,YMMV.
    BooBoo
     
  12. melinda

    melinda Well-Known Member

    Messages:
    47
    Joined:
    Feb 12, 2004
    Location:
    se AZ
    There are some confusing replies here. I did a little research myself. I've quoted some of it below. Basically, your Health Savings Account is there, funded by you with your pre-tax dollars, to pay the deductible on your high-deductible policy and other health-related costs. For instance, say you have a $2000 deductible health policy. You have to spend $2000 out of pocket before your policy pays anything. If you had put $2000 in your Health Savings Account, you could pay from that. That $2000 would be deducted from your gross income before paying federal income tax the year you put it in there, whether you spend it or not.

    Whether or not you have a HSA, you still have to pay your deductible with any health insurance plan. And your co-pay. And any unapproved costs. Your HSA is not tied to your insurance policy. It's separate. The money you put it this account is not included in your gross income for the year, even if you spend it on health care. It's your money, you put there, for spending on health care. The benefit: income tax savings. Plus there's the incentive to switch to a high-deductible plan, which costs you a lot less. If you have the money to pay for a low-deductible plan, you could use part of that to fund the HSA instead and switch. Of course, if you don't have enough income to pay federal income taxes anyway, then the tax savings don't benefit you!

    I have a high-deductible plan and just recently got info from my insurance carrier about the HSA - haven't done it yet, but am seriously considering it. I won't benefit from convincing anyone here to open one, by the way - I just found some of the replies a little confusing.

    Quoted from http://www.nahu.org/consumer/HSAGuide.htm



    Health Savings Accounts (HSAs) are a new way for consumers to pay for medical expenses. As of January 1, 2004, almost anyone with a qualified high-deductible health plan can also have a Health Savings Account. HSAs can save you money on your medical care now as well as provide a good way to save for future medical expenses. HSA funds can pay for expenses before you meet your deductible as well as helps pay for services not covered by your health plan, COBRA coverage during periods of unemployment, medical expenses after retirement and long-term care expenses, to name just a few.

    Your high-deductible health plan can be one you get through your employer or a policy you buy on your own. Even if you get your high-deductible health plan or even your HSA account through your employer, you own your account. You decide how much to contribute, how much of the account to use for medical expenses, and which medical expenses to pay from your account. You also choose whether to pay for medical expenses from the account or save it for future use. Even if you change jobs, your Health Savings Account is still yours.

    You can keep the account even if you move to another state, and you can continue to keep it as you grow older. Regardless of where you get your health insurance plan, whether on your own or through your employer, your Health Savings Account funds are yours.

    Unlike some other types of accounts, you don't lose HSA funds at the end of the year. Unspent balances remain in your account earning interest until you spend them on medical care. This will be a strong incentive for you to spend wisely on your medical care, just like you do on other items you purchase. You'll want to shop around for the best value for your health care dollars.


    hope that helps someone figure out what it's all about!
     
  13. DAVID In Wisconsin

    DAVID In Wisconsin Well-Known Member

    Messages:
    2,359
    Joined:
    Dec 3, 2002
    Location:
    Wisconsin & Mississippi
    I have done my research on HSA's and love the idea! I only wish that policies with larger deductables were eligible. My current policy has a $10,000 deductable so it wouldn't qualify. I might actually get a policy with a HSA. With the tax benefits and all, I may come out about the same.
     
  14. Cindy in PA

    Cindy in PA Well-Known Member

    Messages:
    740
    Joined:
    May 13, 2002
    Unlike some other types of accounts, you don't lose HSA funds at the end of the year. Unspent balances remain in your account earning interest until you spend them on medical care. This will be a strong incentive for you to spend wisely on your medical care, just like you do on other items you purchase. You'll want to shop around for the best value for your health care dollars.


    I don't need a strong incentive to choose healthcare wisely. We have had an HMO for several years and never go to the doctor except for kids immunization and my annual if I make it there!! Right now there is no interest on anything, so the build up will be slow in your account. They should take care of the obscene costs of healthcare, before setting these up and letting people make their wise decisions. Keep in mind you can only deduct your deductible for the year from your income, not the entire amount you save (It is whichever amount is smaller). You cannot save an unlimited amount pretax either.
     
  15. amelia

    amelia Well-Known Member

    Messages:
    403
    Joined:
    May 2, 2003
    Location:
    Washington State
    I did a little reserarch on HSAs yesterday and talked at length with the company's benefits consultant, and here is what I learned:

    - The annual deductibles are NOT sky high. Plans with deductibles of $1,250 and $3,500 are available for a premium that is about one-half of what we now pay for our $250 deductible plan.

    - The account is generally funded at the inception (in our case, by the employer) in the amount of the annual deductible. If the insured person incurs no medical expenses during the year, the entire amount "rolls over" to the next calendar year.

    - Contributions to the plan can be made by the employee or the employer at any time. There is no minimum contribution required, but the maximum amount that can be contributed to an account in a single year is the amount of the annual deductible.

    -Amounts contributed to the plan are tax-deductible (even if you don't itemize), so long as the funds either remain in the account or are used to pay for medical expenses.

    - The account can be used for any "qualifying" medical expense. What "qualifies" is determined by a list put out by the IRS, but it is much broader than what is currently included in standard health insurance policies. For example, a HSA can be used for dental, vision, over-the-counter medicines, even the purchase of long-term care insurance.

    - The account can even be used to cover the medical expenses of a non-covered dependent.

    - Just like an IRA, the account is owned by the insured person and remains in his or her own name. A beneficiary is designated, so that if the insured person dies, the funds go to the person designated.

    - The funds in the account can be pulled out at any time for any reason--i.e., for reasons other than medical expenses--but there is a 10 percent penalty (plus ordinary income tax). The penalty does not apply in the event of disability, or if the person has reached age 65.

    - The insured person is entitled to the same preferential service rates negotiated between providers and the issuer of the high-deductible policy.

    Maybe I'm missing something here, but so far this looks like a very good alternative to traditional health insurance.
     
  16. ship1of2

    ship1of2 farmer11

    Messages:
    37
    Joined:
    Jun 27, 2003
    I have heard that the placae where you keep the money for the deductable will charge you a service fee. Any truth to that?