How do I insurance better?
December 17, 2012 5:38 PM   Subscribe

How do I get the most out of my new Health Services Account (HSA)?

I recently started a new position and signed up for an HSA plan. Really, I don't know too much about it, but the way it was laid out for me (and from looking in to the program), it seemed to be a better deal than the PPO offered.

I was told that my HSA account could be used like an IRA -- put money in and then claim the medical expenses on my taxes. I was told I would have to set up an external account with a bank. This is what's confusing me. Which bank should I use with my HSA?

If anybody wants to get really specific, the plan I have is BlueCross BlueShield HSA with an Embedded Deductible.

posted by apip to Work & Money (8 answers total) 1 user marked this as a favorite
Every work-based HSA I've joined has come with the account. Wells Fargo with BCBS, some other bank another time. The account paperwork showed up a few days after the enrollment was set up.

But if you do have to set it up yourself, it doesn't matter. Call the bank you already use.
posted by Lyn Never at 5:52 PM on December 17, 2012

Something I recently found out about the HSA my husband and I have is that you can't use it for over the counter medicine UNLESS you get a prescription for it and order it from the mail. This includes bandaids and Nyquil and headache stuff, all of that. You should see if that is the same for yours.
posted by Saminal at 6:59 PM on December 17, 2012

You can move an HSA to the bank of your choice, or in my case, to the credit union of my choice. For no fees, my credit union gave me a debit card that makes paying for prescription meds especially easy.
posted by Napoleonic Terrier at 8:17 PM on December 17, 2012

I use US Bank, my regular bank, and they charge $3.25 a month.
posted by waving at 6:33 AM on December 18, 2012

Okay, you have a High Deductible health plan with an HSA.

There are usually two components to this:

1. Major Medical insurance.

2. An non-taxed HSA account/debit card used to cover co-pays, deductible and covered medical expenses.

The Major Medical is usually a plan that is like any other medical plan, except that you have a high deductible on it. Mine is $1,600 annually, then it covers 90% of expenses from an in-network provider. It's not terrible. Mine is administered by United Healthcare.

With your Major Medical you usually get a free Annual Checkup with your Primary Care Physician, a Well Woman Check up with your Gyno (if you're a woman) and the labs that go with these things. I get an annual Mamogram as well. You don't come out of pocket on these things at all.

The HSA Account is simply a bank account where you stash your pre-tax contribution and it can only ever be used for COVERED medical expenses. These are pretty comprehensive.

I used First American Bank for my HSA account because it's free. My deposits are done directly every paycheck.

Now the money you contribute to the HSA is PRE-TAX and usually taken from your pay like your 401(k). You don't have to mention it when you do your taxes, it's pretty easy in that respect.

With an HSA you can roll over your contributions from year to year. Some employers give you an annual deposit to get you started. My employer deposits $250 into my HSA.

A prudent plan is to do a standard deposit every pay period. You'll want to have enough to cover your entire deductible, plus your regular medical expenses.

For example, I should have $1,600 in my account to cover my annual deductible, plus I spend about $40 per month on prescriptions, which contribute to my deductible (when I use the Rx plan). Plus some extra for the 10% co-pay I might need to make, so let's round it up to $100 per pay period. I should have about $2400 in my account. Now, once I've built it up, I can scale back the contribution, since I don't expect to exceed the spending more than that.

If I use up all my deductible money (as I did this year due to some surgery I had) then I up my contribution until my account is full again.

Grill your HR person like a cheeseburger, because this is pretty important. You should understand all of the ins and outs of your plan. ESPECIALLY what contributes to your annual deductible.
posted by Ruthless Bunny at 6:56 AM on December 18, 2012 [1 favorite]

Ruthless Bunny has pretty much nailed it (I think, he answered my HSA question as well)

Here is what I learned over the period of time, cross check this information though.

HSA account is pretty much like your checking account where you earn almost no interest. This money is tax-free. You can deposit $6450 for a family for the year of 2013 and you can use this money as Ruthless Bunny mentioned. If you do not use this money, it rolls over. If your insurance changes next year, you will still have this money to use for allowed purposes only.

So you have 2 options, either use it just as a checking account or accumulate money in it and invest in stocks/mutual funds. I am going to use this money so I am not interested in stock options but if you do, you need to dig deeper in which bank offers what and you will pay money for these services. AFAIK, money earned on this is also interest free.

In my case, my deductible is $4000 for family (but I don't know if it is embedded or what does 'embedded deductible' mean for that matter. My small employer is not well-versed either.) I am going to put all the permissible amount in it to get tax break and use it for medical expenses.

In case if you use prescription drugs, you will notice your Rx meds cost is shot up by ~25% (mine did, in 2 drugs out of 3). You can buy drugs cheaper using coupons from local pharmacy but it will not contribute to the deductible. If you and family are healthy and need drugs once in a while, check and local pharmacy with your insurance/prescription card. Go with whatever is cheaper.
And yes, get all 'pending tests' done with this tax-free money, like eye, dental exams etc.

Do GRILL HR and don't trust what bank tells you. They have very little idea, talk to your tax consultant. (I don't have one, neither I am willing to pay so taking a chance with IRS. If I am not allowed, I believe, I pay 20% penalty, willing to pay..)

One more thing, if your insurance coverage has already started, you can score $1000 for this year if you open before holidays. One bank told me it is not possible as first day of the last month of the year is already passed but when I opened the account at my local credit union 2 days ago, he said you can put $1000 bucks. I agreed right away.
posted by zaxour at 11:27 AM on December 18, 2012

Ruthless Bunny's explanation is good, except one thing that might be confusing:

The HSA Account is simply a bank account where you stash your pre-tax contribution and it can only ever be used for COVERED medical expenses. These are pretty comprehensive.

Keep in mind that you can use your FSA for qualified expenses - and that might include things that are not covered by your HDHP (e.g. an abortion or some other common exclusion that is also a true qualified medical expense).
posted by Pax at 11:50 AM on December 18, 2012

Also, you actually can take the money out and use it for anything you want - but there's a 20% penalty for nonqualified distributions (which applies if you use it to pay for, for example 1) a nonqualified health-related expense 2) what would otherwise be a qualified health expense for someone you can't use it for - e.g. non-tax dependent child or same sex spouse or 3) something unrelated like credit card debt or a vacation.
posted by Pax at 2:10 PM on December 18, 2012

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