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1. No one has a clue how much they will pay for medical expenses in a given year. You may be completely healthy or you may need a heart transplant to survive. How do you calculate a reasonable savings amount given that information?
I just estimate. Last year (which was the first year I had an HSA), I contributed $960 for the year, which is how much I would have paid for my premiums if I'd done the PPO plan. My company chipped in an additional $600, so total contributions were $1560. This year I upped my contribution, and my company's contribution stayed the same. My deductible is $1250. For everything in excess of $1250, I just pay 10%. My total out of pocket maximum for the year is $3,200. So even if I WERE to have a heart transplant, it wouldn't cost me any more than $3,200.
Another nice feature about the HSA is that if you have (for instance) medical expenses in 2012 while you have an HSA, you can use your HSA dollars from 2013 to pay for those 2012 expenses, if you need to.
I also like that the money continues to build and rolls over to the next year, and that it stays MY money. Even if I were to leave the HSA/HDHP in 2014, I could still pay for 2014 (PPO) medical expenses with money in my HSA.
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Originally Posted by markg91359
2. Why should medical care which is the most inefficient and bloated sector of the economy be subsidized by the tax system? I'd feel better giving people a break on retail purchases at stores like Walmart or Costco. At least, I know the prices paid for those items are competitive and involve little profit for the seller.
I am maybe misunderstanding this comment, but I do appreciate that I get an above-the-line tax deduction for my HSA contributions. I'm one of those taxpayers who gets no breaks whatsoever: I don't own a house, don't have kids, don't have business expenses, make too much money to qualify for credits, don't have student loans. I pay my full tax burden. So the above-the-line deduction for the HSA contributions is a nice thing for me! (It cut a good $600 or so off my final federal tax bill last year.)
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Originally Posted by markg91359
4. It puts pressure on the wrong place. The consumer should not be penalized for things like going to the doctor when he thinks he may need to go. You don't want people forgoing needed primary and diagnostic care which may prevent ailments from getting worse and resulting in long, expensive, and complex medical procedures later.
The preventative care visits are covered 100%. As for the other visits, that's what the HSA is for: you have money in your HSA account, you go to the doctor for whatever reason, you swipe your HSA debit card, and that's it. I don't see the penalty.
I'll admit that the big worry for me when I first signed up for the HSA was "What if I get sick early in the year, before I have money in the account?" Well, you can either gamble that you'll stay healthy and just contribute per pay period as you would normally do. Or you can seed your HSA account up-front. You just can't exceed a certain total maximum contribution for each year. (Although there's no maximum on the total amount you can accumulate in your HSA. There's only a limitation on how much you can contribute annually.)
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Originally Posted by markg91359
I hope for their elimination and the creation of what we really need in this country: A single payer health insurance system like the one in Canada.
I'm not necessarily opposed to a single-payer system. But that's not an option available to Americans at the moment. My company offers a choice between a PPO and the HSA/HDHP. I've had both, and right now I like the HSA/HDHP. I wish I'd signed up for it a few years ago when I was younger!
... velly interesting - I hadn't thought about that. What happens if you have a major expense/deductible? (Is the $6K vs $15K policy deductible completely covered by a $3/$6K deductible?). Also, would this approach be a good alternative to a Medicare supplement? (Does the HSA account carry-over or have to be spent each year?)
Plans are different, so you have to look into specifics. Mine will still have co-pays once deductibles are met, but there is a cap on out of pocket expenses each year. Basically, the maximum I will pay for all family members in a year is $6,000 (between deductibles and co-insurance) for in-network services. Once this is met, my claims are covered 100%. Since this is approximately how much I can contribute to HSA a year, and normally we don't spend all $6,000, I feel we are ahead. Alternative for me would be to have a plan with a $750 family deductible but unlimited out of pocket with a premium that is ~$200 a month higher.
Not sure about Medicare supplement, since you have to shop around for a commercial insurance plan. Mine is employer-sponsored.
HSA carries over. You can only spend it on medical/dental/vision related expenses until you are 65. After the age of 65 it can be spent for whatever and taxed at your tax rate, very similar to how you would access your 401K money, since contributions to HSA are also tax deductible.
I just estimate. Last year (which was the first year I had an HSA), I contributed $960 for the year, which is how much I would have paid for my premiums if I'd done the PPO plan. My company chipped in an additional $600, so total contributions were $1560. This year I upped my contribution, and my company's contribution stayed the same.
... or, you could contribute up to a IRS allowed maximum. This is your money, if you will not use them for medical expenses, they will be a nice addition to your retirement once you hit 65.
You can also use money there to pay for your health insurance premium should you become unemployed or if you are paying for COBRA.
I treat my HSA as a health-related possibly retirement-supplementing rainy day fund with tax dedcutible contributions. It doesn't get much better than that!
... velly interesting - I hadn't thought about that. What happens if you have a major expense/deductible? (Is the $6K vs $15K policy deductible completely covered by a $3/$6K deductible?). Also, would this approach be a good alternative to a Medicare supplement? (Does the HSA account carry-over or have to be spent each year?)
HSA dollars carry over forever. If you die with funds in your account those dollars transfer to your heirs much like your 401K or IRA dollars would.
In an ideal world you would contribute the max to your HSA every year and never touch the dollars until you retire. At that time you would have a nice fund to pay your Medicare/MA, etc. premiums (which you can't do before age 65), you can use those funds to pay rent at assisted living and other qualified expenses. You can use those funds to pay Long Term Care Insurance premiums at any time too. The money goes into the account tax free, grows tax free and is used tax free on qualified expenses. If, after age 65, you want to use the funds to buy a boat, they would just be subject to regular income tax, before 65 there is a 20% penalty plus the tax. It's the best retirement savings vehicle around.
The goal is to grow your account over a few years to cover your possible out of pocket max so you always have the funds there. If you can cover your medical costs through the year without touching those dollars, great, if not, the funds are there, year after year. Once your account reaches $2000, you can move those dollars into other savings vehicles, money market, mutual funds, etc. The funds are there for your use, you just have an opportunity to make them work a little harder for you then.
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Originally Posted by OhioToCO
Plans are different, so you have to look into specifics. Mine will still have co-pays once deductibles are met, but there is a cap on out of pocket expenses each year. Basically, the maximum I will pay for all family members in a year is $6,000 (between deductibles and co-insurance) for in-network services. Once this is met, my claims are covered 100%. Since this is approximately how much I can contribute to HSA a year, and normally we don't spend all $6,000, I feel we are ahead. Alternative for me would be to have a plan with a $750 family deductible but unlimited out of pocket with a premium that is ~$200 a month higher.
Not sure about Medicare supplement, since you have to shop around for a commercial insurance plan. Mine is employer-sponsored.
HSA carries over. You can only spend it on medical/dental/vision related expenses until you are 65. After the age of 65 it can be spent for whatever and taxed at your tax rate, very similar to how you would access your 401K money, since contributions to HSA are also tax deductible.
You can use it for whatever you want, when ever you want, you would just pay a 20% penalty and income tax on those funds--not a wise thing to do but it's an option. After 65 if you use the funds for qualified medical expenses you do not pay tax on those dollars and that list grows after age 65. They were designed to cover premiums and expenses during retirement years along with long term care, either in your home, in assisted living or in a nursing home...mainly because of the Boomer generation and the the high costs that are hitting because of the number of people over age 65.
The only people I know that don't like HSA's are those that don't understand them. The first year people have them they grumble a bit about the bills from the dr, etc., the second year, once they have some funds built up, the HSA's aren't so bad. After the 3rd year or so, once they have enough in there to cover out of pocket costs, people think they are the best thing in the world .
HSAs are the best things that have come along in years. In our current plan, I know that the MAXIMUM that I will spend in a given year is $4,500. Three years ago, I had two surgical procedures and I hit my cap quickly. It was great. I did not have to worry about paying any more. And prescription drugs count toward the maximum.
Also, the HSA is a "back door" IRA. For those who max out their IRAs and 401(k)s, it provides another means of saving for retirement.
What is awesome is even though you pay out of pocket until the deductable is met the agreed upon prices are greatly reduced through agreements.
I had a cyst on my foot removed. Bill was 1k. The agreed price i would pay was 300.00 out of pocket even though the insurance company paid zero at this point.
They're great if you are not a big consumer of health care services.
And the ability to use the money for other things after age 65 is awesome, especially if you are maxing out your other tax-advantages retirement savings options.
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