Health Care? (Pittsburgh: health insurance, credit card, loan)

[hnsq]

Hey everyone,

I just moved to Pittsburgh and will start the new job in less than a week. I really want to save some money with my health insurance, and was wondering if the health care network in Pittsburgh is good enough for me to go with an HMO. I have other options, but I am a 22 year old guy who is pretty healthy, and I really don't want to give up money every month for health care I will never use. Any suggestions?

[BrianTH]

Personally, if I was young, healthy, and single, I would look into a High Deductible Health Plan with a Health Savings Account. That gives you protection against something catastrophic, while also giving you another way to save money in a tax-sheltered account. In fact, the HDHP-HSA combination is controversial in part because people are worried that young and healthy people will opt for them, making traditional health insurance more expensive for other people. But that is a public policy issue, and as an individual you might as well do what makes sense for you.

[jfer]

I agree, if a HSA compatible HDHP is available, it is a great option for the young and healthy. If your employer does not offer one, the HMO's in the area are very good IMO.

[guylocke]

Health Savings Account

Is that like a flexible spending account? I know working at Walgreens many people come in with special credit cards that can be used on health and beauty items (and prescriptions!). I guess every paycheck a bit of money goes into this "flexible spending account" which is linked to this card. Is that what you mean? How is it tax-sheltered? As a healthy young man who will soon need his own health insurance, I am interested in your advice!

[BrianTH]

Originally Posted by guylocke

Is that like a flexible spending account? I know working at Walgreens many people come in with special credit cards that can be used on health and beauty items (and prescriptions!). I guess every paycheck a bit of money goes into this "flexible spending account" which is linked to this card. Is that what you mean? How is it tax-sheltered? As a healthy young man who will soon need his own health insurance, I am interested in your advice!

So an HSA basically works like a 401K or IRA: the money you (and sometimes your employer) put into the account isn't subject to federal income tax, and you can take the funds out after you reach retirement age without penalty. And you can also take funds out before retirement age without penalty for qualified medical expenses.

You can only do an HSA if you first sign up for a qualified High Deductible Health Plan. As the name implies, these plans have high deductibles, but you can use funds from the HSA to pay those expenses. A lot of people opt not to do that, however, because the funds in the HSA are serving as part of their retirement plan.

A medical expense FSA is a bit different. It is also untaxed, but you don't need to sign up for an HDHP to have one. The major downside is that FSAs are "use or lose it" during the plan year, meaning if you don't use the set aside amount during the year it reverts back to your employer (again, with an HSA you can keep the funds as long term savings).

[guylocke]

Interesting. Do people often have both a 401K and an HSA at the same time from the same employer?

[Katiana]

Originally Posted by BrianTH

Personally, if I was young, healthy, and single, I would look into a High Deductible Health Plan with a Health Savings Account. That gives you protection against something catastrophic, while also giving you another way to save money in a tax-sheltered account. In fact, the HDHP-HSA combination is controversial in part because people are worried that young and healthy people will opt for them, making traditional health insurance more expensive for other people. But that is a public policy issue, and as an individual you might as well do what makes sense for you.

You are still making a big gamble. I have known healthy young people who have had health problems. If you have a huge deductible, you may have to take out a loan if you land in the hospital. An auto accident is one example that could wipe out your HSA.

[BrianTH]

Originally Posted by guylocke

Interesting. Do people often have both a 401K and an HSA at the same time from the same employer?

Yes indeed. Basically, the HSA can serve the function of expanding the contribution limits on 401Ks, and/or increase the total contribution amount from your employer.

[BrianTH]

Originally Posted by Katiana

You are still making a big gamble. I have known healthy young people who have had health problems. If you have a huge deductible, you may have to take out a loan if you land in the hospital. An auto accident is one example that could wipe out your HSA.

I agree a person with this sort of plan should make sure they can cover the deductible if necessary. Of course in theory that is part of the purpose of the HSA, but as I noted above you get the maximum benefit from this approach if you don't have to make withdrawals from the HSA.

FYI, the minimum deductible this year for a single person is $1100. So, I would recommend trying to set aside at least that amount (probably as part of a larger emergency fund). Note, by the way, that the premiums for HDHPs are lower, so usually it doesn't take too long for the premium savings to cover the cost of putting aside this amount.

[Mugatu]

I don't know why anyone would chose a high deductible plan. Like Katiana said, you are taking a huge gamble that nothing will happen to you. Most companies around here offer good healthcare options at reasonable premiums. I now work for a division of UPMC, and get the UPMC Advantage HMO plan, including vision coverage, for $30 per bi-weekly paycheck. As long as I take a yearly health screening, there is no deductible, and it covers at 100%. The job I had before UPMC offered Highmark's HMO plan, $50 per paycheck, 100% coverage with no deductible. Don't risk your finances on a high deductible plan.