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HDHP / HSA experiment 2011 - Nothing to See Here

Feb. 15th, 2011

01:27 am - HDHP / HSA experiment 2011

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This year, for various reasons, I opted for the HDHP (High Deductible Health Plan) health insurance, which is to say a plan which pays nothing until you've satisfied a hefty deductible but (1) I pay no employee contribution for, (2) makes me eligible to have and make contributions to an HSA (Health Savings Account) and (3) in addition to my being able to make pre-tax contributions to my HSA, gives me an additional monthly contribution from my employer. What this means is that I trade the expense of premiums and benefit of low costs (copays, etc.) for care ... for no (employee-funding of) premiums and an account which allows me up to a certain point to pay for medical expenses tax-free (Federal, anyhow). If you end up spending the rather large deductible, the plan then cuts in and pays even better than a regular PPO, but if you hit just the wrong spot (enough bills to hit around the deductible amount but not enough to start saving you money due to the better pay-out rate) it could work out worse, financially. An additional down-side is that there's more stuff to keep track of and manage for tax purposes.

My experiment in which I am both scientist and subject (uhoh) has got off to a somewhat rocky start.

I elected an additional employee contribution, and both employer and employee contributions show up on my twice-monthly pay slips, but until today (yes, 45 days into the year) not a single dollar of that actually arrived in my HSA bank account, so no funds were yet available from which to pay expenses. So, now, finally there's funds in there and I could start to pay bills.

Now I have additional stuff to figure out -- which is to say: What can I pay from my HSA? I know what kind of expenses, but what about when they are incurred? The IRS publication I read makes it sound like I can have a qualifying distribution from the account for expenses incurred since the date the HSA was established, which I read as meaning the funds didn't have to be in the HSA when I went to the doctor in order for me to be allowed to use them to pay the doctor's bill. There's a catch, however. Due to frustrating delays related to ... I'm not sure what ... I wasn't able to open my HSA until late January, and it sure reads to me like the date the account was established is what matters, not the date I was eligible to contribute to an HSA (i.e. January 1st, the first day of coverage under the HDHP). This would be unfortunate, since we did have some expenses in early January. :/ I'm not much looking forward to trying to get straight answers from either our finance people at my company (this is more specialized detail than I honestly think they can be expected to know), the benefits people my company uses, or the HSA bank.

So far this experiment has not been a terrible failure, but it's not been by any stretch of the imagination a resounding success.

Current Location: Fremont, CA
Current Mood: disappointeddisappointed
Current Music: Hazy Shade of Winter - Simon & Garfunkel

Comments:

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From:anemone
Date:February 15th, 2011 08:40 pm (UTC)
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Wait--you can immediately withdraw money from a health care spending account (I've done it), but you can't immediately withdraw it from a health care savings account? That kinda sucks.
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[User Picture]
From:mavjop
Date:February 15th, 2011 09:23 pm (UTC)
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They are *completely* different animals.

I assume by health care spending account you mean flexible spending account aka cafeteria plan aka section 125 plan aka .....?

An HSA (Health Savings Account) is literally what it says. It is a tax-advantaged account. It is a *savings* account. You can keep it year-to-year. It is *your* money. You *can* take money out for non-medical reasons, but then you have to pay income taxes and an additional 10% penalty tax on it. It can earn interest, be invested in the stock market, etc., etc. much like a 401(k) but for healthcare expenses rather than for retirement.

The limiting factor is you can only *contribute* to one while on a HDHP. I'm not sure how this benefits the government, but the idea is seemingly not to make it too easy, or something.

You can *use* funds from an HSA if you go back to regular (non-HDHP) health insurance. You just can't contribute any more while you're covered by a plan that is not an HDHP.

So, if I do the HDHP thing for a year, I can still use stuff next year, if I have funds left in my account. There's an annual contribution limit, but that's it. The problem seems to be when you first sign up for an HDHP the earliest date of service for which you can use funds in a qualifying (read: not taxed/penalised) way may, by my reading, be out of your control (i.e. subject to delays by your employer/the bank).

It *looks* to me like if I have a big unexpected bill I could quickly (after the date of service) contribute extra to my HSA (subject to the annual limit) and then pay off the bill using those tax-advantaged funds, so it has that going for it.
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From:anemone
Date:February 16th, 2011 03:19 am (UTC)
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I assume by health care spending account you mean flexible spending account aka cafeteria plan aka section 125 plan aka .....?

Yeah. IBM calls it a "Health Care Spending Account." I always figured the HSA was strictly better, but apparently not so.

I thought about trying the high deductible plan too. so I'm interested in how it turns out.
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From:mavjop
Date:February 16th, 2011 03:27 am (UTC)
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It's strictly different, for certain, but is a a dog better than a motorcycle? :)

Ok, so they're more similar than that, in that one can use both to pay for medical expenses using tax-advantaged funds, but that's more or less where the similarity ends.
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From:targaff
Date:February 16th, 2011 06:33 am (UTC)
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My experiences of healthcare in the time I've been here have largely just reaffirmed my conviction that the NHS is a Good Thing. Also that medical admin staff are useless regardless of whether it's private or public.
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From:mavjop
Date:February 16th, 2011 09:41 pm (UTC)
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Generally speaking, yes, in spite of how effectively the right wing manages to spread FUD about socialised medicine, almost every country with socialised medicine has it better than the US. I've experienced both good and bad on the admin staff side.
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