# Health Savings Account



## gatormac2112 (Sep 14, 2017)

I was going to PM dfw_pilot about this, but thought maybe somebody else might get some knowledge if I shared the question here.

My employer just started offering a HDHP (High Deductible Health Plan) with an HSA (Health Savings Account). I am currently enrolled in the lower deductible PPO offering and was wondering would it be wise to change over to the HSA? Of course having a higher deductible would blow, but being able to put money into a tax advantaged account would be nice. Not sure what the right play is here.


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## dfw_pilot (Jan 28, 2017)

Awesome thread! Maybe someone has done the math, but I think it depends on what your out of pocket increases will be.

I would initially be excited about the HSA. Tax deductible going in. Grows tax free, and comes out tax free at the other end if used for medical expenses. The trick is to pay for your medical expenses out of pocket for the next 20 years while putting the max into your HSA. Then, keeping the receipts, pay for them all in 20 years. That way, you'll come out ahead from the growth of your funds.

I've heard good things about HSA bank. You might get some good advice, and let us know what you decide.

dfw


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## Ware (Jan 28, 2017)

gatormac2112 said:


> I was going to PM dfw_pilot about this, but thought maybe somebody else might get some knowledge if I shared the question here.
> 
> My employer just started offering a HDHP (High Deductible Health Plan) with an HSA (Health Savings Account). I am currently enrolled in the lower deductible PPO offering and was wondering would it be wise to change over to the HSA? Of course having a higher deductible would blow, but being able to put money into a tax advantaged account would be nice. Not sure what the right play is here.


My employer is doing the same thing. They're actually contributing $2,500 or $3,500 into an HSA if we choose one of the HDHP options over the PPO.

Everyone's situation is different with regard to health care costs, but I do know where the HSA really shines is when you don't use it to cover current medical expenses. If you are able to cash flow your current medical expenses, an HSA has a triple tax advantage - meaning your contributions go in before taxes, your investments within the HSA grow tax free, and you pay no income tax on the money that comes out if it is for medical expenses. At age 65 you can actually take it out for any reason, and simply pay income taxes on it (presumably in a lower tax bracket during retirement), but like dfw mentioned, as long as you keep receipts, I don't think there is a time limit to "pay yourself back" for the medical expenses you are incurring now. Also, it's worth noting that your contributions come out before FICA (~7.65%), which not even a 401k does. So in that sense, you could actually say it is more desirable than a 401k. A good strategy is to contribute to the 401k to maximize employer match, then max the HSA, then go back to the 401k or IRA.

The 2018 HSA contribution limit for a family will be $6,900, and that includes any employer contribution (if applicable). The individual limit is $3,450.


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## gatormac2112 (Sep 14, 2017)

Well my employer is doing it through Fidelity. Under the current PPO each covered individual has an annual deductible of $400. The HSA plan has a family deductible of $2700, but the premiums would be down $1885 for the year and there is an employer contribution to the HSA of $1000 per year. The out of pocket maximum under the PPO is $8100 for medical and $5000 for pharmacy for a total of $13100, while the HSA plan has a total out of pocket maximum of $10,000 medical and Pharmacy combined. Office copays under PPO are $40, under HSA is 20% after calendar year deductible (this is the first thing that sounds crappy). Medical emergency & accident injury is a $75 copay under PPO, under HSA is 10% after calendar year deductible. Basically you have to pay everything until you pass $2700 for the year. But again, getting $1000 from employer and $1885 premium savings kind of makes that a wash, all the while getting to put up to $6900 into a tax advantaged account might be worth it.

EDIT: Just saw your post Ware, $3500 is way better than the $1000 my employer is offering.


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## scarlso2 (May 8, 2017)

This is an area I spend a lot of time with as a Pension Actuary. My office used to be really close to a group of Health Actuaries and they designed the choices for a lot of corporations in the U.S., and this subject came up a lot. Ware and DFW hit all the key points of using an HSA as a stealth IRA, and undoubtedly it is the optimal savings vehicle allowed in the tax code. I've analyzed this same question for a variety of family members/friends this year and in a large number of cases, employers are subsidizing the HDHP so much that there is a very high probability that the HDHP would end up saving money even excluding the tax benefits of an HSA. It's a function of the premiums you would pay, the deductibles, the cost sharing after the deductibles, the out of pocket max, and any other details of the plan options (co-pays for certain things, Rx costs, etc.). It was surprising that in half the plans that I've looked at this year, no matter what sort of medical situation a family experienced, the HDHP ended up saving them money, add in the huge tax advantages and was a no-brainer. This definitely isn't always the case, but I'd be happy to modify my plan analyzer for your options if you want to PM me.


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## Ware (Jan 28, 2017)

All of our personal/non-employer sponsored stuff is at Fidelity - Roth's, brokerage accounts, etc. I have no complaints.

There are a lot of variables that make it almost impossible to compare healthcare plans between employers. For instance, the $2,500 employer HSA contribution I mentioned is on a HDHP with a family deductible of $5,000. The $3,500 contribution is on a HDHP with a family deductible of $8,000 :shock: . Our PPO option has a family deductible of $2,000. My premium savings are only about $400 to go to the $5,000 family deductible HDHP. Yours actually sounds like a much better deal on those fronts; however, my out of pocket max for a family is only $6,000 for the PPO and $6,550 for the HDHP.

I still haven't decided which route I'm going to take this year. To complicate things, we are expecting a change to the size of our family next year.


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## dfw_pilot (Jan 28, 2017)

scarlso2 said:


> but I'd be happy to modify my plan analyzer for your options if you want to PM me.


Wow, that sounds like a great deal - TLF'ers coming together for a solution. I don't have access to an HSA, but if I was on the fence, I'd send a PM.

Great conversation so far!


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## gatormac2112 (Sep 14, 2017)

Ware said:


> All of our personal/non-employer sponsored stuff is at Fidelity - Roth's, brokerage accounts, etc. I have no complaints.
> 
> There are a lot of variables that make it almost impossible to compare healthcare plans between employers. For instance, the $2,500 employer HSA contribution I mentioned is on a HDHP with a family deductible of $5,000. The $3,500 contribution is on a HDHP with a family deductible of $8,000 :shock: . Our PPO option has a family deductible of $2,000. My premium savings are only about $400 to go to the $5,000 family deductible HDHP. Yours actually sounds like a much better deal on those fronts; however, my out of pocket max for a family is only $6,000 for the PPO and $6,550 for the HDHP.
> 
> I still haven't decided which route I'm going to take this year. To complicate things, we are expecting a change to the size of our family next year.


Good points, mine doesn't sound that bad when you consider all the variables. I still like the idea of getting $3500 instead of $1000 though, especially if you're healthy and never visit the doctor.

One question: How can you have a deductible of $8000 and a max out of pocket of $6550?


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## gatormac2112 (Sep 14, 2017)

scarlso2 said:


> I'd be happy to modify my plan analyzer for your options if you want to PM me.


That is very generous of you, I more than likely will be doing that!


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## Ware (Jan 28, 2017)

gatormac2112 said:


> Good points, mine doesn't sound that bad when you consider all the variables. I still like the idea of getting $3500 instead of $1000 though, especially if you're healthy and never visit the doctor.
> 
> One question: How can you have a deductible of $8000 and a max out of pocket of $6550?


Sorry, I should have been more clear... we have 3 options - a PPO and 2 HDHP's.


The PPO has a $2k family deductible and a $6k out-of-pocket max.
HDHP 1 has a $5k family deductible and a $6.5k out-of-pocket max. This one gets a $2,500 employer contribution to the HSA.
HDHP 2 has a $8k family deductible and a $12.7k out-of-pocket max. This one gets a $3,500 employer contribution to the HSA.


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## gatormac2112 (Sep 14, 2017)

Ware said:


> gatormac2112 said:
> 
> 
> > Good points, mine doesn't sound that bad when you consider all the variables. I still like the idea of getting $3500 instead of $1000 though, especially if you're healthy and never visit the doctor.
> ...


 :thumbup:


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## MasterMech (Sep 24, 2017)

Ware,

It sounds like your family addition is timed just right to wipe out any savings from switching your health plan now. The little bundle of joy will more than max your deductibles and OOP in that first year of life so figure you WILL certainly spend that OoP max.


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## g-man (Jun 15, 2017)

Reviving an old thread, but enrollment closes on Friday. Max the HSA is still a good strategy?


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## Ware (Jan 28, 2017)

g-man said:


> Reviving an old thread, but enrollment closes on Friday. Max the HSA is still a good strategy?


I max mine and cash flow our medical expenses - the plan is to let the HSA balance marinate until retirement.


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## dfw_pilot (Jan 28, 2017)

I also think it's a great way to go. HDHP + HSA being optimal. Hopefully your employer contributes money as well.


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## marshtj (Apr 9, 2018)

This is actually a fairly simple question to answer. First, you have to really understand your previous couple/several years of medical expenses. Once you have a firm grasp of this number then compare the premium difference. This is the amount that you will absolutely contribute. Based on your numbers above you are ahead on this calculation. Then you are only looking at the difference to catch up to the annual family maximum.

Don't forget that you can still use an FSA (limited purpose) for child care, dental, vision, etc.


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## TroyScherer (Jul 17, 2018)

My employer has done a HDHP + HSA plan for a number of years (6-8 I think). For some of the guys I work with it was really rough at first and I think still as they had families and pre-existing conditions where their medications and families stuff pushed them to pay everything up front. One of my co-workers meets this in the first 4-6 months every year.

For my wife and I it has worked out as we are fairly health and never really need to go tot the doctor or have any incidents. So I am paying a good amount into my HSA every pay and simply building up a nice saving that I can keep and use later as needed. We now have plenty in it to cover a few years of the deductibles so we now view it as an extra retirement fund possibly.


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## Ware (Jan 28, 2017)

TroyScherer said:


> ...so we now view it as an extra retirement fund possibly.


That's the real beauty of a HSA. :thumbsup:


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## dfw_pilot (Jan 28, 2017)

marshtj said:


> Don't forget that you can still use an FSA (limited purpose) for child care, dental, vision, etc.


Additionally, you can use your LPFSA once you've met your deductible, too.

Cheers!


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## g-man (Jun 15, 2017)

Bumping this since enrollment started for me.


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## FlowRider (Apr 7, 2019)

My wife and I opted in for Health Savings Accounts to get the employer contribution each year.

It really works well if you are healthy and don't go to the doctor very often.

I am retired now, and I still have the money I put in and my employer paid in, all in my HSA.

I had arthroscopic knee surgery that cost the insurer $30,000; I only paid the $3,000 deductible.

Otherwise, I just put money in and got the "free money" employer contribution every year I could.

My wife still contributes to hers, since she is still working, and gets her employer contribution too.

I would say if you are healthy, it is a great way to set aside money for future medical expenses.

I like the fact that the HSA is portable; it goes with you. I still have mine intact in case I need it....

I opted in for a Flexible Spending Account one year, and had to scramble to spend my $1000.

I went to the eye doctor and bought some really nice glasses, but very few appointments available.

The eye doctor told me everyone waits until year end, and they get slammed by appointments.

After that, I did not use the FSA option. The "use it or lose it" aspect just did not work for me.

Personally, I think the HSA is a great way to save for medical bills for the future; max out if you can!


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## soupy01833 (Aug 10, 2020)

I switched to an HSA and so far it has been good. This is my third year. I choose not to use the money in the account for expenses and am trying to grow it to the max out of pocket should that ever come to being needed. My employer covers all preventative procedures 100% and are not subject to deductible( physicals and colonoscopy are 2 of them) all frequently used prescriptions are very cheap. The 2 I take daily are about $2 for 90 day supply. All other dr's visits you pay for 100% until the yearly deductible is reached. In each of the first 3 years I have not come close to shelling out more than the cost savings in the reduced rate for the HSA healthcare plan. It is good if you are healthy.


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## g-man (Jun 15, 2017)

^ check in your hsa account. You can let them invest the money in your hsa account in the market (like a 401k). While there are some fees and risks (market going down), overall it is a win since the gains are not taxed. I think most it is not on by default, you have to opt in.


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## dfw_pilot (Jan 28, 2017)

g-man said:


> Bumping this since enrollment started for me.


Good call. And the limits have increased as well.


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## 440mag (Jan 29, 2018)

Juice!

*The Top HSA Providers of 2020*

_Fidelity continues to stand out as the best HSA for investing and for spending_.

https://www.morningstar.com/articles/1003852/article


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## Thick n Dense (May 7, 2019)

I was pondering this today... an HSA is a pretty sweet deal but having a high deductible plan is terrible if compared 1 to 1 value.

My payments are roughly 80 % of the bill until I hit the deductible... compare to the old days of a 20$ co-pay for almost everything...

Is the HSA really better do to the tax free and benefit perks? It's possible... anyone run a spread sheet on it or does it not matter anymore LOL


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## dfw_pilot (Jan 28, 2017)

@Thick n Dense, check out this comparison.


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