Should I go with an HSA?
June 2, 2007 2:34 PM   Subscribe

What is your experience with your Health Savings Account?

My spouse and I are self-employed. We're looking into an HSA. We're both in good health, and the $5650 deductible is in our reach.
-Does it make good financial sense?
-Any problems with qualified expenses? One advisor told us everything from the gym membership to tampons was eligible.
-Is there any way to game the system? For example, when does it make sense to spend your entire deductible?
-Any hidden tax consequences?
-Does it matter which insurance carrier I go with, or are some better than others in general?
-What is the No. 1 thing I should know before getting into an HSA?
I'm looking for any tips/advice from those with HSAs.
posted by sixpack to Health & Fitness (7 answers total) 4 users marked this as a favorite
This is the first year I've used my HSA and so far so good. My employer actually offers two things I'm taking advantage of: 1) health savings account and 2) flex spending account.

The HSA account has money deposited into it by my employer when I complete certain health-related tasks (completing a survey: $75, completing a health-improvement program: $300, etc). I can then draw on this "tax free" money to be reimbursed for just about anything health related except vitamins. Co-pay, sports massage, acupuncture, etc. There are some restrictions but I'm not sure what they are; I know that vitamins aren't covered. Whatever is unused from this plan will roll over to next year's account.

The flex spending account is a separate account that works in nearly the same way. At the beginning of the fiscal year I choose an amount for my flex spending account (for example, $1,200). Every month $100 is withdrawn from my paycheck (before taxes), and the plan works the same as the HSA. I know that if I quit my job today I'll still have the $1,200 to use even though no more money is being deducted from my check. The downside is that if I fail to use the $1,200 this year it's gone. Use it or lose it.

As a practical example, it works like this: I go to the doctor in May and pay a $20 co-pay. He gives me a prescription and I fill it with a $10 co-pay. While I'm at the drug store I buy bandages for $10. I submit this (actually the doctor's office submits it for me) to the HSA/FS folks and at the end of the month I get a $40 check in the mail. This also extends to my wife, who is not covered under my health insurance plan.

I'm planning on getting some major dental work done that'll eat up most, if not all, of my combined HSA and FSA balance.

I don't know if it's any different for you since you're self-employed, and if my version of an HSA is different than what you're talking about.
posted by spikeleemajortomdickandharryconnickjrmints at 3:28 PM on June 2, 2007

I opened an HSA online at Wells Fargo. I like the fact that they provide a debit card and for the most part transactions are paperless. The drug stores flag items as HSA OK in their database, and I've never had to submit any receipts or deal with much of the hassle that others complain about. This year I took advantage of the new rules allowing for a larger tax-free IRA rollover. In my case (a healthy young man) it made sense switch to individual catastrophic coverage with an HSA, rather than to just continue piping that same cash into high premiums.
posted by laptop_lizard at 5:20 PM on June 2, 2007 [1 favorite]

I think you'll find some answers here.
posted by laptop_lizard at 5:29 PM on June 2, 2007

Money in the flex plan has to be spent every year or you lose it. If we are talking about the same thing, that was the big downside for me. It all depends on how good a planner you are.
posted by selfmedicating at 7:27 PM on June 2, 2007

I am almost positive that you should not have both an HSA and an FSA.

If you are talking about an HSA that comes with a high-deductible insurance plan -- I've had one. It was fine for me. It's just another way to tax shelter money. Whether it makes sense for you depends on things like whehter you have another option, whehter you can afford to pay large expenses up front if necessary, how much you think you'll use, etc.

I can tell you that our first HSA was with Chase bank, and their system was a pain -- no paper statements, clunky online set up. There is a new carrier, but I'm no longer with this insurance.

It also depends on what sort of options your account will give you for investing the left over funds, and how much time you want to put in.

So, it worked for me becuase I have low expenses, high income, and liked the tax shelter.
posted by dpx.mfx at 8:42 PM on June 2, 2007

Response by poster: Thanks all. S-medicating, HSAs are different from flex spending.
Dpx.mfx - I think that's the bottom line here, does an HSA make sense tax-wise.
posted by sixpack at 11:49 AM on June 3, 2007

Best answer: If you have a HSA, you can only have a Limited FSA for Preventative, Dental and Vision charges. Trust me, if you have a HSA there is little to no reason at all to have an FSA, especially since it's going to be limited anyways. HSA and FSA are NOT the same thing. A HSA is not a flex account; the money carries over from year to year in an HSA, which is its major benefit.

Be careful about what you buy with your HSA, most people who sell plans incorrectly assume that you can use them for everything, they don't know what they're talking about. That said, the only time you're going to need to justify purchases is if you get audited, so keep receipts. You can find the guidelines for HSA qualified purchases by making a Google search for it.

With a $5000 deductible, I sure hope you're going to be contributing close to that amount into your HSA. You may want to find out if a slightly higher premium with a lower deductible may be an option, especially as you fund the account in the first year. If either of you were to get sick or need an MRI, Sleep Study or ER visit, you could easily be out for $2000. A rule of thumb is that you should try to decide if you could reasonably pay your deductible and still be able to pay all the other bills you may have, if not, you may need a lower deductible.

Urgent care, be familiar and know when to use one, with these plans, don’t default to going to the ER unless it really is an emergency. Generally speaking, depending on the situation, you’ll be perfectly fine going to an urgent care over an emergency room, and the difference in price is usually in the hundreds of dollars. Since you’re keeping the money if you don’t use it, be knowledgeable about that kind of thing.

Don’t let a doctor send you to a hospital for a blood test, they are incredibly expensive versus an independent lab, get to know which are in your plan and use them.

Find out if physicals without sick diagnosis are included without needing to meet the deductible. Some High Deductible plans have this option. Keep in mind that with High Deductible plans, you no longer have a copay for doctor's office visits. It all comes out of the HSA and goes to the deductible.

As far as gaming the system, depending on your age absolutely. If you are young and fit, you can conceivably contribute your maximum allowance into your HSA from 25 - 70 (assuming Medicare age being raise) and then withdraw the balance of the account, or use it for any medical purchases you may need.

It's also useful if you need to pay for COBRA benefits, if you were to leave your employer (assuming it's a group plan) you can use your HSA funds to pay for your COBRA premiums and keep your insurance in effect while you're looking for another job.

Most HSA also have an option to dump any money over a certain amount into a mutual fund so it can gain interest while it sits in the account. If you have a fair amount of money in your account you may want to look into this, since you can make reasonable interest this way rather painlessly.

I have an HSA and it works pretty good for me, I made the mistake and took the limited FSA the first year along with the HSA and I wish I had just dumped that extra money into my HSA. Now I need to find a way to spend $250 on prescription sunglasses before the end of the month.
posted by gregschoen at 9:23 AM on June 6, 2007 [5 favorites]

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