Questions About Health Insurance vs. HSA's

Calling all health insurance and math whizzes: As long as I'm on economics today and I don't know much about health insurance, taxes or math, I'm looking for opinions.

Every year my insurance premium rises even though I'm healthy, have no medical conditions and barely use it. This month I was told my premiums are going up $75 a month to almost $600 a month even though my age bracket is the same and I'm healthy. My choices are to downgrade my plan and pay even more of a copay for doctors and prescriptions or go with an HSA (health savings account) with a "catastrophic" insurance plan. [More...]

Under it (a small group plan and I'm the employer and an employee) I put $2-3k in a savings account. I don't have to pay income tax on the money so long as I use it to pay for medical or dental expenses, including vision, dental and prescription drugs, things that aren't covered under my current policy. The bank gives me a debit card and I pay the full amount of the services with it at the time they are rendered.

Here's where I get confused. There is a $2k deductible on the catastrophic insurance plan. When I've met the $2k deductible, the health insurance company picks up 100% of everything after that, from doctors, to hospitals to prescriptions. And the premium is $20 a month less instead of $75 a month more.

So, if I get sick, once the deductible is met, I don't have to pay anything for hospital stay expenses, doctor bills or prescription drugs.

But if I don't get sick, since I don't spend $2k a year on covered expenses (most of my money goes to things like vision, preventive care and dental which again are not covered under the policy) wouldn't I be paying $2k on top of my premiums? Since my current deductible is $500, wouldn't I be paying $1500 a year or $125 a month more to save $95 a month in premiums ($75 increase vs. $20 less)?

So, anyone know if these HSA's are good things? Or how you figure out if the math makes sense?

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    all I can give you is sympathy (5.00 / 1) (#1)
    by Capt Howdy on Fri Jun 13, 2008 at 02:24:47 PM EST
    I am terrible at both but I recently had similar problems.  my solution was to quit freelancing and take a full time job for the benefits.

    But even a job with health care is no (none / 0) (#77)
    by hairspray on Fri Jun 13, 2008 at 06:59:12 PM EST
    longer a solution.  My son and his wife, both healthy and relatively young are spending $500/mo and this is he cheapest plan. They need to pay down to $2000 in order to take advantage of their coverage.  It is crazy.  Plenty of younger people like them have dropped their insurance and are self insuring and hoping a catastophe doesn't occur.

    or move to Canada (none / 0) (#91)
    by BestinShow on Sat Jun 14, 2008 at 01:58:25 AM EST
    As I was reaching my fifties this is one of the main reasons I moved back to Canada ( I'm a duel)

    Full coverage ( office visits and Hosp) Cost: $54.00 a month. This is the price for a single age 18 to 64  who makes $30,000 a year or more. Under $30,000 its pro-rated less, down to 20,000 Earn under 20,000 a year then it's free. Age 65 or older it's free. Family cost is $109.00 a month
    (if your an employee most companies pay this as part of your benefits)

    I also have extended care @ 22.00 a month..this covers Chiro, podiatrist,osteopaths, naturopaths, physiotherapists, psychologist, speech therapist, acupuncturist, and massage therapist..as well as
    Ambulance, wheelchairs, hearing aids, etc.  

    My father had open heart surgery last year. Lives in small town in north-central Ont. Went to local hospital, they discovered his arteries where 99% blocked..helicopter him to Toronto General..open heart surgery that afternoon. Today he is as active and fit as Bill Clinton or Larry King. Cost to him ...ZERO

     True Universal Health Care is a right ....not a privilege.  Hillary understood this. BTW our provincial health plans are mandatory


    With my HSA... (5.00 / 1) (#5)
    by citizen53 on Fri Jun 13, 2008 at 02:37:33 PM EST
    I pay premiums, but only fund it when I actually incur bills and then pay out of it up to the deductible.

    Either way, it sucks.  If you don't have the money to go to the doctor, it provides nothing except the catastrophic care, but at least premiums and out of pocket are deductible for tax purposes.

    HSA's are not for everyone (none / 0) (#38)
    by JavaCityPal on Fri Jun 13, 2008 at 02:57:06 PM EST
    you really need to be very healthy and know you will stay that way.

    I watched one staff member sign up and end up with a series of broken bones and illnesses hit not just her but her dependent kids, as well. She swore she would never go HSA again.


    Or use it if that is the only thing... (5.00 / 1) (#46)
    by citizen53 on Fri Jun 13, 2008 at 03:01:52 PM EST
    you can afford, in terms of premiums.

    It does cover catatstophic care after the stop loss.


    I think you are correct (5.00 / 1) (#22)
    by waldenpond on Fri Jun 13, 2008 at 02:47:32 PM EST
    without looking at the contract....but I think you are correct.  So you get to pay $75 a month more or $55 a month more for the HSA with catastrophic?

    If your current is $500, you pay 500*12+500 deductible or $6500. Plus co-pays

    $75 increase, 575*12+500deductible = $7400 plus co-pays

    HSA (75-20?) or $55 increase $555*12+2000 HSA =
    $8660 no co-pays.

    I think your decision will depend on what your co-pays look like under your contract with the $75 option.

    ok, more numbers (none / 0) (#80)
    by Jeralyn on Fri Jun 13, 2008 at 07:07:05 PM EST
    co-pay under current policy is $30 and for hospital and expenses without copay, like hospital and surgery, they pay 80% after $500 deductible. They also pay most prescription coverage.

    Catastophic plan is $2,000 deductible with maximum out of pocket also $2,000.  "The deductible is included in the out of pocket maximum." I don't know what that means, it's like reading Greek.

    It pays 100% of everything after I've satisfied the $2k deductible -- no copays or 20%. This includes doctors, hospitals, prescriptions, preventive (but not vision or dental.)

    Lifetime benefit is $6 million.


    Not too many (none / 0) (#86)
    by waldenpond on Fri Jun 13, 2008 at 07:43:58 PM EST
    visits per year means few co-pays.. dentist 2x, eyes 1x, physical 1x, annual 1, sick 2 xs.  Maybe 7x so additional 210.

    Current: 6500+210 = 6710
    $75 option: 7400+210 = 7610
    $55 + HSA: 8660

    Check your policy for the terms of the HSA.  I see some state that their HSA carries over or can be used as an investment tool.  Mine does not allow for either.  Mine is simply banked money I spend down or lose.

    The 2000 out of pocket 'included in out of pocket' is simply a clarification of terms.  It is irrelevant if 100% is covered.  (if it was 2000 deductible + 80% then a cap on out of pocket would be relevant.

    Personally, I find 2000 deductible acceptable for catastrophic if you have money set aside.  It's more of an issue when someone lives paycheck to paycheck.  Catastrophic costs can be huge and a 6 million cap would cover long term care.  Question?  Does it cover ambulance?  I know when I had to be flown out, my Blue Cross did not cover that portion.


    One more item (none / 0) (#87)
    by waldenpond on Fri Jun 13, 2008 at 07:55:22 PM EST
    If you are looking at the catastrophic portion versus your current 80% coverage.....  I can check some old data I have, but heart by-pass etc can easily cost 300k.   20% of that cost is 60,000.  Cancer and other major illnesses are also very expensive.  Check your cap on your current policy.  Some are as little as 500k, most typically 1-2 million.

    See if you can lock in your catastrophic rate now.  As you age, it typically increases exponentially.


    Re health insurance (5.00 / 0) (#32)
    by scribe on Fri Jun 13, 2008 at 02:52:46 PM EST
    I have no idea - I haven't had any in over 15 years.

    Thankfully I have not needed it and, when I have had to go get treatment, I make clear to the doctor that (a) (s)he's getting paid from my pocket by my check, so do it quickly and (b) I'm a lawyer who does plaintiff's cases, so do it right the first time.

    No problems so far - everything up front.

    I can think of a couple of points (5.00 / 1) (#33)
    by standingup on Fri Jun 13, 2008 at 02:53:03 PM EST
    for consideration that you did not include.  

    First, if you are self employed and can itemize, you might also be able to deduct the premiums you pay.  

    Second, the HSA accounts can be invested in interest bearing and I believe some are allowing stock investments too.  This income should also be considered when trying to evaluate choices.  


    Also (none / 0) (#72)
    by BackFromOhio on Fri Jun 13, 2008 at 06:26:02 PM EST
    I think you can use the HSA to pay the deductible -- the $500 you pay in medical expenses before the insurance kicks in.
    Query whether you can use the HSA to pay insurance premiums?  I thought this was allowed -- so you would be paying the same insurance premiums, but on pre-tax dollars.

    Health insurance premiums (none / 0) (#84)
    by standingup on Fri Jun 13, 2008 at 07:17:37 PM EST
    as an authorized HSA distribution are only allowed under special circumstances.  From the IRS:

    You cannot deduct qualified medical expenses as an itemized deduction on Schedule A (Form 1040) that are equal to the tax-free distribution from your HSA.

    Special rules for insurance premiums.   Generally, you cannot treat insurance premiums as qualified medical expenses for HSAs. You can, however, treat premiums for long-term care coverage, health care coverage while you receive unemployment benefits, or health care continuation coverage required under any federal law as qualified medical expenses for HSAs. If you are age 65 or older, you can treat insurance premiums (other than premiums for a Medicare supplemental policy, such as Medigap) as qualified medical expenses for HSAs.

    yes I already deduct (none / 0) (#81)
    by Jeralyn on Fri Jun 13, 2008 at 07:08:06 PM EST
    my premiums and would these as well. But I wouldn't be paying for them with the HSA money but pre-tax dollars.

    My own experience with health care (5.00 / 0) (#47)
    by jerry on Fri Jun 13, 2008 at 03:02:29 PM EST

    I can't help you but just note that this is one reason we should all have universal health care.

    In contrast to your $600 per month, I have a 100% employer paid for plan.  I have no idea what that does to my salary.  I know that I, a non union engineer, can thank 50,000 fellow union employees (mostly mechanics and aerospace workers) for a health care plan that in a few weeks will pay for about $150,000 of services for me, for no deductible.

    About ten years ago, my health care plan paid for about $50,000 for a week of ICU treatment for me.

    We need universal health care....  And more unions.

    Real universal health care is needed (none / 0) (#54)
    by befuddledvoter on Fri Jun 13, 2008 at 03:07:48 PM EST
    Otherwise people like Jeraly and I and all the appointed attorneys who make a pittance for income would be left out.  Not poor enough but not rich enough.  Hillary's plan was the best.

    I'm in the same place as you (none / 0) (#55)
    by nycstray on Fri Jun 13, 2008 at 03:14:15 PM EST
    as are many creative professionals. We fall through the cracks.

    I didn't mean to imply (none / 0) (#76)
    by Jeralyn on Fri Jun 13, 2008 at 06:54:14 PM EST
    I make a pittance for a living. I only do a small number of court appointed cases (and take them for pro bono reasons)and have never been a public defender. But, yes, not poor enough or rich enough.

    catastrophic (none / 0) (#2)
    by ChuckieTomato on Fri Jun 13, 2008 at 02:33:51 PM EST
    typically is for major accidents and illnesses like cancer, a disabling car wreck and the list goes on. They won't cover mundane doctor visits, prescriptions, and usually lab work, at least mine won't. Mine won't even cover an ER visit unless there is a diagnosis associated with it.

    I don't have a HSA, but I think you are basically on your own in paying for the mundane visits, lab work, and prescriptions while having some protection against a catastrophic transplant surgery or cancer treatment. That is, if they don't go back and conclude that you had a tumor growing in your body from 5-10 years ago, which in that case they can cut you off.

    You are correct (none / 0) (#63)
    by PlayInPeoria on Fri Jun 13, 2008 at 04:00:23 PM EST
    Catastrophic protects you from major illness and injury.

    Even if you are healthy now, there are no guarantees about tomorrow... that is why you get this type of insurance.

    A HSA is used for other health expenses. Even if you are healthy... there are certain tests that should be performed at certain ages. The HSA can be used for this purpose .... and having test performed at the proper time can help keep you healthy. Having the money in a HSA will encourage you to have those test taken.

    FYI.. Tim Russert was healthy... and suddenly gone! It happens.


    Way over my head.... (none / 0) (#4)
    by kdog on Fri Jun 13, 2008 at 02:37:02 PM EST
    all I know is not to get sick...you'll get screwed one way or the other no matter what you do.

    I recently worked for one of the Blue's (none / 0) (#34)
    by JavaCityPal on Fri Jun 13, 2008 at 02:54:31 PM EST
    Health insurance industry is truly pathetic. They see it as their job to turn down anything they can and make the members fight for their coverage, then they hand out huge bonuses to everyone who is exempt pay status.

    I've said for years that my family will have to find out how I died through the autopsy. I am so opposed to the medical system, I see a doctor every 12 years whether I need to or not.


    I need to be really really hurting.... (none / 0) (#56)
    by kdog on Fri Jun 13, 2008 at 03:19:15 PM EST
    to see a doctor.  I self-diagnose and self-medicate whenever possible.

    Healthcare is like the DMV to me...a hassle to be avoided at all costs.


    I have worked for and been a member of (none / 0) (#85)
    by hairspray on Fri Jun 13, 2008 at 07:18:21 PM EST
    Kaiser on and off for years.  In the beginning they were very, very cheap.  Their rates have gone up but it is still possible for an individual to pay about $150/mo and not have outlandish co-pays. They are not perfect but  their secret in keeping costs down is to eliminate the insurance bureaurocracy.  The physician is educated in "best practices" and makes the decision about whether you need an MRI or not.  Outside bean counters don't exist.  Over the years my care has been more than adequate.

    Wikipedia says (none / 0) (#6)
    by TeresaInSnow2 on Fri Jun 13, 2008 at 02:38:06 PM EST
    you can carry over your money in your HSA from one year to the next, so the $2K you pay in isn't lost at the end of the year.  And I'm not sure, but I don't think you have to put the full $2K into the HSA, only the amount you think you'll need for expenses and want to have tax deferred.

    Wikipedia has some nice references for further information


    I don't know anything else.

    HSAs (none / 0) (#71)
    by brad12345 on Fri Jun 13, 2008 at 06:04:19 PM EST
    do roll over year after year, so in theory, if your healthy, you can save whatever you don't spend.  You don't need to deposit anything into an HSA if you don't want to (but it's roughly equivalent to a 401k, in terms of its tax advantages, so it makes sense to use.) In general, for people who are paying for their own coverage, they're a good idea--you can save money on premiums (i.e. pay less to an insurance company) and as long as you're healthy, no problem.  That's a huge qualification, though, of course, and HSA plans are almost always terrible for employers because they are excuses for employers to essentially give paycuts to employees.

    All that said, we should really just have single payer coverage.


    This... (none / 0) (#8)
    by MileHi Hawkeye on Fri Jun 13, 2008 at 02:40:28 PM EST
    ...might be of some help.


    thanks, that was (none / 0) (#75)
    by Jeralyn on Fri Jun 13, 2008 at 06:48:55 PM EST
    very helpful.

    My pleasure. (none / 0) (#79)
    by MileHi Hawkeye on Fri Jun 13, 2008 at 07:06:49 PM EST
    You can also get to all of the Small Group Health regulations from the DOI website.  In case you want some dry reading to lull you to sleep.  :>)

    We really, really, s/have "universal (none / 0) (#9)
    by zfran on Fri Jun 13, 2008 at 02:40:50 PM EST
    health care" We will not get it, I don't think even if it were introduced to a dem. congress by a dem. president, they would not approve it and spend the money. This article appeared recently. I think it describes the ludicrus coverage we have available today.

    Denial of Coverage and Why

    look closer at the plan (none / 0) (#11)
    by nowar99 on Fri Jun 13, 2008 at 02:41:50 PM EST
    I would look a little closer at the terms or evidence of insurance.  Often there are two numbers...the deductible, and the out of pocket maximum, which are often not the same.  You may also want to verify what the insurance company considers payable once it starts paying 100%...you may be surprised (hopefully you will not, but the most important thing is to verify).

    I had a decent insurance plan based upon co-payments and no deductibles (except on prescriptions...an annual deductible that I easily met), and the our employer eliminated the plan.  My choices were high deductible plans or Kaiser (closed HMO).  I have a pre-existing condition so I knew that I could easily spend the deductible, and would make a run at the out of pocket max each and every year.  So, I went with the closed HMO.  I hate to give up my specialist and primary care doctor, but I just can't afford the high deductible plan.

    To me, a huge factor in choosing a plan is your anticipated medical costs for a year...something easier for me to calculate than it might be for a "healthy" or "no pre-existing conditions" person.  I know what I will spend in a good year, so my starting point isn't just the cost of an annual physical, but quite a bit more expensive.

    HSA (none / 0) (#19)
    by jmacWA on Fri Jun 13, 2008 at 02:45:45 PM EST

    The HSA that I have also gets me a discount off the normal provider charge.  I have a BC/BS plan that up until March of 2007 was a regular PPO, and then was changed to an HSA.  Now instead of paying a co-pay I pay nothing at the time of service, and then get billed by the provider for the "allowable charge" which is generally less then the full amount.

    ! ! ! ! ! FEEES!!!!! (none / 0) (#20)
    by TeresaInSnow2 on Fri Jun 13, 2008 at 02:46:03 PM EST
    My Alan says he rejected the HSA's out of hand because the fees were similar to what he'd pay in taxes on the same money.

    You might want to find other tax shelters....

    I am self-employed also (none / 0) (#24)
    by befuddledvoter on Fri Jun 13, 2008 at 02:48:45 PM EST
    I have medical coverage through the state of Mass. which subsidizes and provides a clearing house for medical insurance.  There is Commonwealth Care and the Commonwealth Connector.  All medical insurance carriers have to go through one or the other. I have an attorney friend who uses the HSA.  She has only had it this year.  So far, she is very satisfied.  She feels it is her money and if she never uses it, it is hers to keep.  I suspect at some point it will be taxable income if not used for medical/dental expenses.  I will have her update me and post.

    There is an organization called freelancers union.  They are interested solely in self-employed people and have medical and dental insurance at group rates.  They do not have it available in Mass., unfortunately.  I will see if I can find the contact info for you.  

    This is a huge problem, especially for court appointed attorneys who are not "state employees."  I know this issue first hand.  In Mass, we were trying to buy into the state employee plan and pay the full group rate.  We were not allowed to do so.  Now that Mass has mandated health insurance, it is a different playing field.  

    My health insurance went up 25% this year-- (none / 0) (#30)
    by jawbone on Fri Jun 13, 2008 at 02:51:08 PM EST
    I was in shock. There was an alternative: $6000/year (may have been higher, I was kind of in shock), #2000 upfront deductible before anything kicked in, 50% of any hospitalization, doctor's fees, prescriptions, lab work, tests. There were some more co-pays, but I stopped taking notes. BTW, insurance companies usually figure the deductible at what they've negotiated to pay, so the deductible ends up being more than $2K. Then, when charging the insuree their 50%, it is usual and customary (which is usually higher).

    Gotcha coming and going.

    Clerk took one look at records, saw I have cancer which requires continual monitoring, and told me I was better off paying an arm and a leg.

    I don't know what happens if someone with an HSA does get a chronic condition--would that prevent getting coverage for more traditional insurance in the future for that condition?

    Gee, maybe we need someone in the WH who will actually fight for national health insurance!

    A few years ago, end of the Clinton years in the WH, I was terrified to learn a woman acquaintance in her early 50's was paying $1,500/month for health insurance. She'd had a heart attack and couldn't go without insurance, she felt. I cannot imagine what she's being charged now! And, now, I'm almost there.

    Yes, that's right: $18,000 a year.

    Well, (none / 0) (#82)
    by reslez on Fri Jun 13, 2008 at 07:08:42 PM EST
    HSAs don't work for people with chronic conditions like diabetes. They blow through the deductible and have to pay for all their tests and medications. HSAs also don't work well for people who don't have enough income to fund their account. However, for other people HSAs have some advantages.

    My personal feeling is that "normal" health insurance is so awful now you wouldn't notice much of a difference. If I had the choice I would get the HSA. I'd certainly enjoy not giving a big insurer a large chunk of my paycheck every week. At any rate, I don't currently face such choices because I'm unemployed and uninsured.


    Jeralyn, (none / 0) (#36)
    by Makarov on Fri Jun 13, 2008 at 02:56:01 PM EST
    I would check with different insurers, particularly Blue Cross / Blue Shield, if you have options in your state. BCBS may have a bad rep with Michael Moore, but they are, at least, a non-profit which is why they are usually cheaper.

    I don't know how old you are, but if you're 40+, I would strongly recommend avoiding catastrophic insurance. As someone noted above, the plans vary widely in what they will / will not pay for. Once you hit 40, the chance of needing a simply diagnostic procedure like a colonoscopy or endoscopy is a lot higher than when you're 25.

    Also, check into small business associations in your state, to see if you get into a group plan. As a last resort, compare insurance offerings in nearby states and consider "relocating" (a rented P.O. Box might be enough). Insurance regulation differs tremendously state to state, and one state over you might find an individual plan at a group rate (perhaps as low as 2/3 of the $600/mo you are paying now).

    SBA vs. Bar Association (none / 0) (#48)
    by befuddledvoter on Fri Jun 13, 2008 at 03:03:15 PM EST
    Same exact plans and same exact rates in Massachusetts.  I have tried NLADA and NACDL.  Neither offer medical insurance.  I assume many members are state employees or get the insurance through their non-profit.    

    it is bcbs (none / 0) (#59)
    by Jeralyn on Fri Jun 13, 2008 at 03:31:34 PM EST
    which is Anthem in Colorado. It's a group plan or small employers.

    Cheaper? (none / 0) (#60)
    by MileHi Hawkeye on Fri Jun 13, 2008 at 03:32:14 PM EST
    Not in Colorado.  Anthem may be not for profit, but they certainly are out to make money.  Those salaries don't pay themselves.  Excess earnings gets funneled into the "charitable" foundation.

    It appears that Jeralyn is already qualified for small group coverage under State law as a business group of one ("I'm the employer and an employee.").  As such, if you don't already have it J, you might want to look at the state Basic and Standard plans.    


    Freelancers Union (none / 0) (#37)
    by befuddledvoter on Fri Jun 13, 2008 at 02:56:31 PM EST

    there is a box to put in your zip code and check if they are allowed to offer medical insurance there.  This freelancers union has great potential, IMHO.  

    Heh, posted it also ;) (none / 0) (#50)
    by nycstray on Fri Jun 13, 2008 at 03:04:02 PM EST
    I'm glad to see they've been doing membership drives. I think they'll be an option when I move to CA also. Their rates are the same or a bit better than at the last job I quit. My insurance there had just gone up to a rate that made me think twice about staying at the job/keeping the insurance. Decided the job wasn't worth it, lol!~

    Do you know if the Freelancers Union (none / 0) (#44)
    by nycstray on Fri Jun 13, 2008 at 03:01:26 PM EST
    is in your state? I was going to check the site for you, but I don't know the zips there.

    I would make sure on HSA the money really does roll over. I was offered it one year but didn't take it because if you didn't use it, you lost it.

    I have a HSA and it has worked (none / 0) (#49)
    by IndiDemGirl on Fri Jun 13, 2008 at 03:03:55 PM EST
    better for me than the other dreadful "insurance" I had. Of course that isn't saying much.=-

    My husband is an attorney here in Indiana.  He is partners with an elderly attorney.  I had great insurance when I was a teacher, before I had my daughter 5 years ago.  I didn't realize my teacher insurance was great at the time, but I sure know now!  For a few years we got "insurance"  through a Small Business Association network.  That was just a disaster.  I don't want to go into the details, as it would take hours to list all the ways in which we were screwed by our "coverage."

    Almost a year ago I changed insurance and went with an HSA.  We have a family plan so the deductible is 5800.  We do use a PPO network. Under our plan we each have a small amount for preventative care.   Our old plan had nothing.  

    In the few times we have seen a doc, I have been happy with the PPO discount we have received.  Our old plan would sometimes give us just a $1.00 discount on in-network services.  I'd write letters and spend hours on the phone in order to get the correct amount discounted.

    Now regarding the money you put into your HSA account - $2,000 in your case.  In our plan if we fund our $5800 a year we can deduct that amount on our tax return. We don't have to touch that money and we don't lose it if we don't use it.  It builds up year after year.  And at age 65  whatever money we have in that account can be withdrawn without penalty, if we so chose.  It would be taxed at that time.  

    We also DON'T HAVE to put the money into our HSA account. There is no penalty for not doing so.  

    In short, the HSA works out well for our lives.  IT certainly isn't ideal and I won't recommend it for everyone.  It is much better than the non-insurance we were paying so much for which also had a high deductible but covered nothing.  

    I spent a long time researching the pros and cons of the HSA and am glad I changed when I did.  Actually I wish I'd changed sooner.

    I know nothing about HSA's (none / 0) (#65)
    by ding7777 on Fri Jun 13, 2008 at 04:13:11 PM EST
    but from what you described, wouldn't putting that same amount of money into a Roth IRA be better?

    For a young person, losing the current tax deduction might be a better way to go once an HSA has been reasonably built up


    For some that would be a good idea - and (none / 0) (#68)
    by IndiDemGirl on Fri Jun 13, 2008 at 04:42:19 PM EST
    we do have IRAs, too.  

    But the HSA does let you take out money, with no penalty, for health and dental expenses.  So, if our income is good one year we make our deposits and leave it there.  We get the tax deductions for that amount.  

    Another year perhaps, our income isn't as good.  Our daughter needs some medical care or perhaps braces.  We can then take money out with no penalty or taxes.

    It's sort of like stashing money away, pre-tax, to use for medical expenses if needed.  No taxes ever paid on the money if used for medical expenses.  You get a tax write-off for the money you put in the account for that year.  

    We wouldn't have chosen the option if we had good health insurance, but with our situation it worked out better than the other way.  We wanted lower monthly payments so we were in a higher deduct. plan anyway.


    Devil in the details (none / 0) (#51)
    by wintermute on Fri Jun 13, 2008 at 03:05:51 PM EST

    I was in the same boat as you a couple of years ago, and I went the HSA route.  I crunched the math every which way I could, and found it to be a better deal in every single scenario.  

    The ideal scenario is where you have no expenses, i.e. the ideally healthy person.  Everything you put into the HSA account just stays there, tax free, year to year, until you spend it or withdraw it.  

    Think of it this way - each month, take the $95 savings and put it into your HSA.  That way, you feel the same "pinch" as if you'd stayed on your current plan (which I'll guess is some form of PPO).  Now that's $1,140 a year in pre-tax dollars you have towards your health care expenditures.  Take that number and play with some scenarios.  I can't work through them with you without knowing more about your current plan, in particular what you pay for co-pay on your doctor's visits, if you're paying some 80/20 ratio after hitting your deductible, etc.

    Are you sure your HSA plan doesn't cover vision / dental?  Under my plan, well-checks are FREE.  I'd be surprised if yours weren't.  The range of "qualified medical expenses" under the HSA regs is simply vast - you can even use HSA dollars towards over-the-counter items.  And the "penalty" for using HSA dollars on non-qualified expenses is not particularly draconian.

    yes they are covered (none / 0) (#58)
    by Jeralyn on Fri Jun 13, 2008 at 03:28:37 PM EST
    under the HSA meaning I can spend its money on them, but I didn't think they went towards the $2k deductible on the catastrophic plan. I'll check on that. thanks.

    $30 copay, 80/20 (none / 0) (#83)
    by Jeralyn on Fri Jun 13, 2008 at 07:09:07 PM EST
    after $500 deductible

    thanks new thread up on Russert (none / 0) (#52)
    by Jeralyn on Fri Jun 13, 2008 at 03:06:07 PM EST
    please put your comments there.

    Thanks, Jeralyn n/t (none / 0) (#57)
    by Blue Jean on Fri Jun 13, 2008 at 03:20:13 PM EST
    Are you getting group insurance rates thru (none / 0) (#53)
    by JavaCityPal on Fri Jun 13, 2008 at 03:06:46 PM EST
    The Colorado bar association?

    You can almost always find good insurance plans through a large Chamber of Commerce if the bar association doesn't offer it.

    I'm very anti-HSA. You might as well set up a solid investment fund of your own that you can use for medical and not have to deal with the insurance companies rules and restrictions.

    HSA/large deductible (none / 0) (#61)
    by diogenes on Fri Jun 13, 2008 at 03:41:15 PM EST
    With this plan, there are no insurance companies writing checks/overhead costs/profits etc unless you hit the catastrophic level.  Every other kind of insurance (car, homeowners, etc) is universally accepted to save money if you take the largest deductible possible.  You can do the same while using a HSA (with tax advantages, even) for health.  

    Raise your deductible over time (none / 0) (#62)
    by atlanta lawyer on Fri Jun 13, 2008 at 03:52:32 PM EST
    If you put $ into the HSA overtime, you can raise your deductible.  If you can put in $2K up front, and then add to it monthly, when you get to $4K, you might want to raise your deductible to $4K, which will drop your premiums further.  Of course, if you need to use your whole deductible one year, your account will be empty for the next year, so you might want to get say, $6K in their before you raise it to $4k.

    HSA's are a much better deal now (none / 0) (#64)
    by Molly Pitcher on Fri Jun 13, 2008 at 04:02:43 PM EST
    than when they started.  We had one the first year--and lost around $200 because then you could not keep money that had not been used.  OTH, my daughter got sick on vacation and was not allowed to fly home--so doctor, meds, hotel, and extra airline bills piled up.  Feds say the HSA should cover those costs; the company says 'no way.'

    I'm lucky--medicare plus state health plan 'supplemental' policy.  Cost of the latter is about $25 a month more than the regular insurance--but no deductibles and it pays medicare premiums and deductibles.  I feel sorry for the people who try to save the $25 per month--they are losing money.  I pay only insurance and medicine co-pays.  Years my doctor visits are few, I don't 'get my money's worth.'  Years there are health problems, I have a safe harbor.

    You keep the money. (none / 0) (#66)
    by QuakerInABasement on Fri Jun 13, 2008 at 04:23:26 PM EST
    Jeralyn, the most important feature of the HSA is that you keep any money you put in that isn't spent--you don't lose it.

    So let's say you build up a $5,000 balance in your HSA. It's yours until you spend it.

    If you don't spend it--it's still your money. You may not ever deposit another nickel. Or you may keep building it. The bonus is, once you have enough on hand to cover your deductable, you're fully covered.

    What about fee discounts? (none / 0) (#67)
    by songster on Fri Jun 13, 2008 at 04:38:46 PM EST
    Someone touched on this, I think, but I didn't get a clear picture: my insurance company pays only a small fraction of the "billed" amount for a service.  The service provide accepts that, I suppose because they've negotiated with the insurance company.

    If I have a HSA plan, and I'm paying for a service from the account, which fee am I paying?  If it's the full fee, that sounds pretty bad.

    insurance (none / 0) (#69)
    by sociallybanned on Fri Jun 13, 2008 at 05:35:51 PM EST
    If you are single with no children and typically are healthy, meaning no borderline Type 2 diabetes and such, that would be a good option for you.  I consider myself pretty savvy with this too.  I volunteer in my state to assist seniors, veterans, ppls with disabilities with their options with Medicaid and Medicare (Med C which is similar to what choices ppl have).

    Not only do I spend a week contemplating, what option I should choose for my family by weighing costs and premiums out with a choice I want (doctor) when it comes to switching plans but I look ahead.  I do put money into a MFSA account which is separate from a HSA account where most companies pay into at least 1000 or more.

    When we lived in Florida, my husbands' premiums for the family, including myself were 1000 a month.  That wasn't including copays and deductibles.  We dropped all insurance on me because it saved us almost 400 bucks a month. Mind you he was a programmer working for a "benefits" company.  It was a joke!  At one time, we needed the extra money on his check and canceled all insurance (did not reenroll) for the family (it was required for him to carry it, regardless).  The month we stop carrying insurance, my daughter broke her wrist.

    Later, I decided because we have kids and you never know how many bones they will break, we forced ourselves to only spend 225 a month on groceries (family of 6).  MMMM< mac and cheese makes you FAT!

    My other daughter was a competitive gymnast and it was required for her to carry insurance.  Thank god, we did at that time because she broke a vertebrae and MRIs would accept us unless we could fork out some big bucks .

    So, you really have to consider this.  Could you cut back even further to carry insurance, since they have increased your premiums.  (That's a big jump).  Are you willing to take a chance on massive bills, just in case you catch some virus or e coli.  :)  

    IMO, I don't like taking chances with the insurance.  Since, I'm in between jobs, the kids and I do not have insurance and my husband's current company (state benefits) aren't that good either.  HMO sucks but the copay is cheap.  PPO is so expensive just so you can have the freedom to pick and choose your doctor.  HSA , IMO, is for the single and unmarried that are beyond healthy.  You can always enroll the following year.  
    Here is another story.
    My husband is really healthy and thankfully had insurance.  When our son was sled riding down the hill near the frozen creek (Jan 08), the hubby reached out to grab him from falling in it.  He ruptured his tendon , in his arm. You can see his bicep curling up near his shoulder.  It snapped in other words.  The same thing happened to the "Dancing with the stars" guy.  The surgeon said if he was older, then he could have just left it be and not be able to use that arm period for lifting because obviously the bicep isn't attached but the forearms works.  LOL.  In other words, if he didn't have insurance his arm would have been disabled to do anything, including yard work.  The surgery cost 10K!  Too much crap happens for me to take a chance with not having insurance.  You just have to think about it yourself. It's gambling, IMO.  Sometimes, it doesn't affect you but sometimes it does.  

    no (none / 0) (#70)
    by manish on Fri Jun 13, 2008 at 05:54:04 PM EST
    But if I don't get sick, since I don't spend $2k a year on covered expenses (most of my money goes to things like vision, preventive care and dental which again are not covered under the policy) wouldn't I be paying $2k on top of my premiums? Since my current deductible is $500, wouldn't I be paying $1500 a year or $125 a month more to save $95 a month in premiums ($75 increase vs. $20 less)?

    NO..you have the option of putting $2000 into an account that you will earn interest on.  That interest is not taxable.  The $2000 sits in your account until you spend it.  You can only spend it on medical expenses (if you spend it on other stuff there are tax implications).

    This is a pretty good deal for you under your current health needs.  You are paying about $1200 less per year in premium.  The downside is that you have to pay the first $2000 of expenses per year.  Your current plan has a $500 deductible and presumably some other co-pays and what not.  This is how it plays out:

    If you incur exactly $2000 in medical expenses (the worst scenario if you buy the HSA), you will pay:

    Current Plan - $600 X 12 (premiums) + $500 (deductible) = $7700.

    HSA - $505 X 12 (premiums) + $2000 (deductible) = $8060.

    This assumes that your current plan has no co-pays.

    But most likely you will save money since it sounds like you have less than $1640 of expenses since thats the amount where both plans cost the same.

    HSA (none / 0) (#73)
    by BackFromOhio on Fri Jun 13, 2008 at 06:35:02 PM EST
    I think there's some confusion here. If what you call a "health savings account" is what I've heard termed a "flexible spending account", there should be no "cost" to this.  It is a provision in the tax code that allows an employer to set up a plan and for employees to opt to set aside a certain amount out of their salaries (with an IRS cap) into the plan of pre-tax dollars, to be used to pay for medical costs not covered by your medical insurance plan.  So, the suggestion made is if you want to bring down the monthly cost of medical insurance, make sure to put aside in your HSA, to the extent allowed by the IRC, an amount that covers a larger deductible and other expenses you typically pay with the HSA funds.  So you'd figure your annual savings on lower premiums, the amount of pre-tax dollars you need/can put in the HSA, less any additional amount of out-of-pocket medical costs not covered by the less expensive medical plan or the HSA funds and any greater amount you put into the HSA account .  

    no, flex spending accounts (none / 0) (#78)
    by Jeralyn on Fri Jun 13, 2008 at 06:59:35 PM EST
    are different than HSA's.

    I just went through this too (none / 0) (#74)
    by DandyTIger on Fri Jun 13, 2008 at 06:45:55 PM EST
    I looked at insuring under my company (employee and employer like you) vs. just getting individual insurance. The benefit of through the company is it's group insurance meaning you can't be tossed out. But it means it's a lot more expensive. For me it was around a monthly of 600-700 through a company, and around 250 for individual (for family of 2). So one thing to look at immediately is compare your small group with individual accounts.

    As for HSA or no, I went without it. Not because I thought through it, but because even with math degress, it made my head hurt. :-) Well, I looked at it a bit, but I ended up with an individual policy with a medium deductible. It has a limit of 5M, so I added catastrophic on top of that for more.

    I told all this to my brother who lives in europe, and he reminded me again how stupid I am to live in this country. Sigh.

    The theory of insurance (none / 0) (#88)
    by lgm on Fri Jun 13, 2008 at 08:10:21 PM EST
    I'm not an expert on health care, but I know something about insurance in general.

    You should distinguish between routine and catastrophic medical care.  The theory of insurance says that you should pay out of pocket for routine care and insure only against expenses that are unlikely to happen or that you could not afford should they happen.  For medical insurance, that means opting for high deductibles and copays in return for lower premiums.  

    Then you try to pay routine expenses from pre-tax rather than post tax dollars.  If you're in the 25% bracket, paying pre-tax amounts to a 25% discount.  Employer provided health care is pre-tax, which is one of the reasons it's cheaper for your employer to provide health care directly than to pay you more to buy your own (another reason is that large employers get a group rate).    The HSA is a way to do this -- but be careful if the fees (as someone said).  About tax bracket: you should use your marginal tax bracket, which  is higher than your total bracket, because the first part of your income is taxed at a lower rate.  If you have a 25% marginal rate and 10% overall rate, that means that you send 10% of your income to Uncle Sam, but if you had one more dollar, 25 cents of that would go to him.  

    You also need to worry about the long term.  If you later decide to get standard insurance, you may be denied if you come down with a "pre-existing condition".  For example, if you develop a long term need for $10,000/year in drugs (not that unlikely these days, with new drugs and all), no insurance company will take you as a new customer at their normal rate.  

    I am pretty happy with my HSA (none / 0) (#92)
    by lillyrose on Sat Jun 14, 2008 at 05:45:20 AM EST
    Check the catastrophic plan. It probably has an annual and/or lifetam cap on benefits.  If you get really ill, you will wil meet the cap quickly. I had a catastrophic plan for several yeas as  it was cheaper.  then i switched to an HSA , as I did not want to gamble any more.

    I think dollarwise, I do save money. The last time I checked, it was about $100 a month more to get more extensive coverage. By using the HSA, it is about even dollarwise, but I get the added benefits of: can use the tax deductible HSA money for my dentist, eye exams, eyeglasses, prescription sunglasses. The other benefit (that I have not used yet), is after deductible is met, hospital admissions are covered 100%. ALL the other plans have a co-pay of $500-$1,000 per hospital admission.

    Under the US treasury guidelines, for my age, I can deposit any amount up to $3,650 a year.  Deposits into the HSA account come right off the top of your gross income as do the schedule C business expenses. My HSA deductible is $1500.  So, for me, I will probably end up depositing around $2,000 (enough to meet deductible, plus money for dentist and eyeglasses-want it tax deductible).

    I have a Harvard Pilgrim plan. There are a number of basic health things that are covered EVEN BEFORE a deductible. These include an annual physical, a few basic lab tests, and a mammogram. Other than those few basic things, anything else is paid by me until I reach $1500. For example, the colonoscopy, the anesthetist for the colonoscopy were both paid by me from the HSA savings account.

    However, an additional benefit to having health insurance is just because I use Harvard Pilgrim, all doctors and other medical providers REDUCE the amount from the initial amount billed. I don't remember the exact numbers, but the colonoscopy may have been initially billed at $1,000, but was reduced to $600.  

    Once I pay the $1,500 deductible, EVERYTHING is covered by Harvard Pilgrim, FULL COVERAGE.

    The HSA mechanism is very good.  The doctor submits a bill to Harvard pilgrim.  It is rejected and I get a letter showing the amount I owe based on the reduced amount doctor will accept. Harvard pilgrim keeps track of bills submitted and sent to me for payment. When they send me bills totaling $1500, HP will then pay for everything.  Thus, the $1500 means I have ACCUMULATED $1500 in bills. It is not necessary that I have paid out what I owe.

    When I was deciding what plan to get, I added the annual cost of the monthly premiums plus the $1500 deductible and it was less expensive than the all inclusive plan. All the more inclusive plans had a co-pay per hospitalization of $500-$1,000 which is not tax deductible right off the top of your gross, but instead goes into that line item where you add it up and it must be some percentage.  So for both a combination of cost and tax benefits I chose it.

    It has to be an individual decision:  how many hospitalizations anticipate; use of monthly prescription, how many doctor visits, etc.

    Not Whiz but know what I'm talking about... (none / 0) (#93)
    by notime4lies on Sat Jun 14, 2008 at 07:44:07 AM EST
    Insurance companies "game" the system so that healthy insureds have to switch plans every four years.  The older the group you belong to is, the higher the premium.

    This is based on adverse selection.  Here's an example of how it works:  Blue Cross & Blue Shield come up with a new group called "Healthy Virginians."  They may market it or they may not but...any new enrollee gets dumped into this group. The premiums are great, everyone who is eligible to join is ecstatic and remarks how they can't understand why people say there's a health insurance crisis.

    Until...four or five years later when the group gets older, more enrollees have pre-existing conditions and voila, Blue Cross markets a new program (same coverage, just different name) called Choice Virginia.  New enrollees are placed in this newer group, the healthy enrollees at Healthy Virginia start to shop and move to the newer group and the old Heathy Virginia keeps more and more of the insureds who can't move because of preexisting conditions.  The group's rate, of course, keep rising and rising and any healthy person who remains helps to underwrite the higher cost of the poor saps who can't move.


    Why we need National Health Care (none / 0) (#94)
    by jimakaPPJ on Sat Jun 14, 2008 at 08:30:45 AM EST
    is shown all through the previous threads.

    And just so you don't think it will get better when you hit age 65 and start Medicare.....

    The following is joint figures for myself and my wife...

    Medicare Doctor + Hospital - $2400.

    Medicare Drugs             - $1120.

    Supplemental               - $3800.

    Base Total                 - $7320.

    In addition, the Medicare Drug plan only pays $2500, and then you pay until your out of pocket hits about $4000. You then pay about 5%...

    So it is easy for most of us ROF's to hit $12000.
    a year..

    BTW - The supplemental pays what Medicare doesn't, which is substantial, so get it. But it is NOT secondary insurance. If Medicare doesn't cover it, the supplemental doesn't either.

    Medicare pays only the first 21 days of a skilled nursing facility for long term care. After that it takes additional insurance coverage. I don't have the details, but it is sky high. Typically the patient is forced in to Medicaid and the state takes whatever savings the person has left, and then their home and whatever retirement income they have coming in.

    To those who think they are getting "free" insurance through their employer I can only say it is truly, "Pay me now or pay me later."

    Good luck on your decision.

    HSAs (none / 0) (#95)
    by mkwlbert on Sat Jun 14, 2008 at 06:52:04 PM EST
    It really depends on whether or not your HSA allows you to rollover your unused balance to the next year.  Some HSAs allow you to keep rolling over the unused balance until you leave the company then you can take it as a lump sum or defer it.  You need to assess your usage for each year.  How much do you use your healthcare Plan?  It's a fact that only 15% of Plan participants account for over 85% of the claim costs.  Don't blame your employer for trying to get healthcare costs under control.  Here are some reasons why Americans pay more than other countries.  We pay for the R&D of prescription drugs and we pay the high cost of the patents.  Since we have great technological advances, we pay the high cost of purchasing the equipment. More importantly, every employer and person that pays a premium for healthcare also pays for someone who doesn't have  insurance and there are millions.  Review your usage my friend, if you are relatively well, and the Plan allows for you to rollover the unused part of your account, it won't take long to stock pile the $2k deductible.  When you think about it, $2k is nothing compared to even one day in ICU!