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Health Spending Accounts

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Health Spending Accounts

Old 11-07-04, 09:44 AM
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Health Spending Accounts

I keep reading about the HSA accounts. It seems like a good way to save a ton of money if you're relatively healthy. From what I understand, you (or your employer) buys a high deductible premium and then you would contribute up to that deductible amount (or is it $5k annually, I forget). Unlike Flexible Spending Accounts (FSA) you can roll the money year after year for major emergencies.


This works perfectly for me since I am male and therefore I visit a doctor only when something breaks or falls off. I think it would be quite hellish for older workers that require regular medical exams or treatments.

So when is my employer going to offer this account to me? I see it as an economic windfall.
Old 11-07-04, 09:54 AM
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Sounds too good to be true. And probably is.

Generally, insurers charge you through most of your life so that they can pay the immense cost of healthcare during the last several years of your life. The difference is hugely disproportional, and unless your insurer is fully on the hook, you're going to find yourself deciding between foregoing some important healthcare options and selling your house.

So you invest some money in this account, right? And if you don't spend it, it continues to accumulate, right? My question is: Once you have to spend it, what happens if it runs out? Is the insurer no longer obligated to pay, or do you have to pay 50% of the costs?

- David Stein
Old 11-07-04, 10:51 AM
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Originally posted by sfsdfd
Sounds too good to be true. And probably is.
There's nothing mysterious about this type of plan. I know several people that do nearly the same thing but without the medical savings plan.

If you're paying several hundred dollars a month for health insurance and only go in for basic office visits or perscriptions when you catch a serious bug once in a while that sure sounds like a waste of money to me. I already opt for our most basic level of insurance and I would immediately drop down to a high deductable major medical plan if it was available I if I could also fund a medical savings plan.

I was always under the impression that for Medical savings plan to be non-taxable they needed to be spent every year, is that correct??
Old 11-07-04, 11:48 AM
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Originally posted by Creek Rat
I was always under the impression that for Medical savings plan to be non-taxable they needed to be spent every year, is that correct??
From what I've read, you can bank the unused portion every year. I suppose that you're saving for the later years of your life.
Old 11-07-04, 01:06 PM
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Ah... then it sounds like an even better plan but I suggest you check with you tax preparer if you are going to fund the savings part "Pre-tax" so you don't get any nasty surprises down the line.
Old 11-07-04, 03:12 PM
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Every plan I have ever heard of up til now has absolutely no rollover whatsoever. Spend it or lose it. I have only heard it recommended that people use such a thing if they know they will easily exceed their savings every year.
Old 11-07-04, 03:32 PM
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there are two different things yall are talking about here...if i understand right.


there is a health savings account or something that the govt lets you do. you put money in pre-tax and spend it on approved stuff throughout the year. there is a max you can put in ($2500 i think). You can spend it on copays and contact lens fluid and lasik surgery and stuff...


then there are insurance plans that are kind of similar. my company offers one through lumenous. its cheaper than the other "regular" plans (but i dont recall the actual cost). You basically put in money and the company puts in money and it ends up something like $2,500. Everything you need done comes out of there. AFter it is expired, there is a bridge. In our case its something like $1,000. This comes out of pocket. After that, the plan reverts to something similar to a standard insurance plan where they pay 80% and you pay 20% or something (although i couldnt find actual details for this part). the money rolls over every year.

This seems like a good option for me. I havent been to the doc in like 10 years. but i guess once i get a family and have a kid, i would want a regular plan since i'll be using it more. in that case, all the money that i've rolled over will disappear since i switch to a regular plan...i think.


btw, any reason this is in the election forum? I'm moving it
Old 11-08-04, 02:55 PM
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Two types of plans, like Venusian says.

The FSA's are really cool, there's one for both health care and dependent care, that allows you to bank Pre-tax money to be used for health care or dependent care during that year, and get the money back tax free. Disadvantage: max for dependent care iis only 5k, max for healthcare is 2.5k i think. Also, if you don't claim that money [you can claim up until March of the following year] you lose it. Losing a little might not hurt, but losing a lot would. It lowers your taxable income, but you probably lose the taxtime write off.

There are also new insurance plans, my company offers one from Definity, that act similar to that:

I think in my company's case, it paid all of the first 2500 or so out of the employer funded account; you paid for the next 1500; then they pay 80% of everything. That first block of 2500, you can carry over to the next year [as long as you stay with them]. Preventive care was always cover 100%. It's another form of 'insurance', so that does kinda make use of a 'healthcare account', but if my company's any example, if you change insurance providers, you lose the money in the Personal Care Account [PCA]. So if you have a good year healthwise, you're invested in that company and have financial motivation to stick with them.

Something like that would be good for a single person with relatively good health, and it is very consumer driven [the goal is that the consumer learns to spend his healthcare dollar more wisely, thus saving everyone money.] In my family's case, it was absolute not the best option.
Old 11-08-04, 04:15 PM
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Working in the employee benefits field, there are several terms you need to know; HSA, HRA, and FSA.
You all have pretty well described FSAs - set aside your own money to pay for services throughout the year on a pre-tax basis with a use or lose it provision.
HSAs are new (started 1/1/04) and in order for the plan to qualify as what the IRS defines as a HSA compatible plan; the plan must meet certain criteria. These are listed below:

1. Minimum Calendar Year Deductible must be $1,000 for single member, $2,000 for a family
2. Maximum Out of Pocket in a Calendar Year must be $5,000 for a single member, $10,000 for a family
3. Contributions to a HSA are allowed up to 100% of the planís deductible to a maximum of $2,600 per individual and to $5,150 per family

There are some advantages to this type of plan:
1. Contributions to the HSA by an employer are not included in the individualís taxable income.
2. Contributions by an individual are tax deductible.
3. Contributions can be put into HSA monthly or in lump sums prior to employee filing annual tax return.
4. Employees have incentive to NOT utilize the plan. They want to save their money.
5. The interest and investment earnings generated by the account are also not taxable while in the HSA or when it is used to for qualified medical expenses.
6. HSAs are portable, so an individual can take it with him/her if he/she leaves the company.

The disadvantages:
1. Plan must be a high deductible health plan with a minimum of $1,000 for an individual or $2,000 for a family with no front dollar benefits other than for preventive care.
2. The individual, not the employer, owns the HSA. If the individual changes jobs, the HSA follows him/her.

That #2 is a big reason why employers will not offer HSA plans. If an employee leaves, they take the money the employer has funded with them. Also, companies are not liking the idea that an employee can take the money out for non-health related reasons. Much like a 401k plan, an employee can take the money out and pay tax & penalties on it. When a major health issue comes up and there is no money, the employer may feel pressured to give the employee additional money.

What you will see, are HRA (Health reimbursement accounts). An HRA is an arrangement. The Employer funds an account for each employee and covered dependent. This money is to be used to compensate them on a Tax-Free basis for unreimbursed eligible medical expenses. The Employer can implement a HRA plan using any plan through any carrier.

Advantages:
1. Contributions to the HRA by an employer are not included in the individualís taxable income.
2. Contributions can be put into HRA monthly ore 100% funded at the beginning of each plan year.
3. Employer can utilize any plan design they wish for an HRA arrangement.
4. Employees have incentive to NOT utilize the plan.

Disadvantages:
1. Un-used amounts rollover to future years requiring the employer to establish an accounting liability to fund up to 100% of the liability.
2. Depending on how the arrangement is administered, employees may have to pay for expenses first and then get reimbursed.
3. No interest earnings allowed on un-used rollover funds.

Employers can keep control over their portion and don't have to give the employees anything if they are terminated or leave.

Hope this helps!
Old 11-08-04, 10:06 PM
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Wow, thanks guywall! I can see how #2 could deter employers from offering it.
Old 11-08-04, 10:15 PM
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We've had HCSA up here in Canada for a few years now. Greatest things ever. It's a win-win situation for everybody.
Old 11-09-04, 12:32 PM
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Originally posted by dtcarson
Two types of plans, like Venusian says.

The FSA's are really cool, there's one for both health care and dependent care, that allows you to bank Pre-tax money to be used for health care or dependent care during that year, and get the money back tax free. Disadvantage: max for dependent care iis only 5k, max for healthcare is 2.5k i think. Also, if you don't claim that money [you can claim up until March of the following year] you lose it. Losing a little might not hurt, but losing a lot would. It lowers your taxable income, but you probably lose the taxtime write off.
5k on healthcare..
Old 10-14-19, 11:03 PM
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Re: Health Spending Accounts

So it's open enrollment time at my company, and I am debating between keeping my existing insurance plan with a Health Reimbursement Account (some money provided by the company for use on eligible expenses; it's theirs, and it can roll over to the next year if I stay in the plan), and switching to the HDHP with an HSA.
My HRA rolled over the last two years, but now is at 0 because I spent it all, so now might be the time.
I'm seeing articles about the high cost of health expenses in retirement and while I'm not near there yet, I'd like to start banking and investing that money.
But the HDHP has some really high numbers - the difference in MOOP versus the other plan is more than the savings in premiums and the HSA seed money the company provides. And scrips are OOP till deductible is hit.
But I've never hit OOP - but as my wife says, we're older now and the warranty's starting to go. And of course it can be tough to predict healthcare expenses.
My two biggest concerns/questions are:
a) is the savings, tax benefit, and investment still worth the higher cost IF I have healthcare expenses that approach MOOP? (I know this is pretty subjective and YMMV for every scenario, but, thoughts?)
b) Not sure if you've heard, but there's an election coming up. And not to get too political - but what are the odds that HSAs retain their triple tax advantage for at least the next 20 years so it's actually worthwhile for me to bank in HSA and invest it till then? I guess worst case scenario, if HSAs totally go away for whatever reason, I'm sure there would be announcements and publicity, so hopefully I could at least submit health care expenses incurred and get reimbursed. I know companies are pushing HDHP/HSA plans much more than they used to (you know, to "empower the health consumer", it's not "to save costs"); what are the chances that private insurance goes fully away and all benefits are negated?

Again, not trying to go political - the ultimate question is, "is now a good time, or a bad time, to move to an HDHP with HSA and start building that up"? Is it like frequent flyer miles, where I should use them as soon as possible (ie, HRA) before they change the rules?
What do you all have, and what was your reasoning?
Old 10-14-19, 11:19 PM
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Re: Health Spending Accounts

I have a $2000 deductible with 20% coinsurance. Once I hit my deductible, I have to pay 20% until I pay another $2000 out of pocket. My yearly out of pocket maximum is $4000. My company deposits $700 per year into my HSA. We can also earn another $500 in HSA dollars by participating in the company's wellness program. I also put in about $200 year via payroll deductions. I currently have enough to pay my deductible. I hope to save enough to pay my out of pocket maximums in a year or two. Luckily, I'm in good health and only go to the Dr. once a year for a yearly free physical. I think I used my HSA one time for some prescription skin cream. A HDHP can be good if you don't have medical problems, but you're taking a risk if you get sick and you have to pay the high deductible.
Old 10-15-19, 01:25 PM
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Re: Health Spending Accounts

holy thread bump, Batman!

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