Help with HSA

[Deleted]

I've never had an HSA before. I'm getting divorced so will need to get my own health insurance some time next year. I won't know the amount per paycheck until open enrollment next week, but I've been looking at my options. If I select the PPO there is no HSA, but if I do either the 1500/3000 or 2000/4000 Plan I'm eligible to open an HSA. My company will deposit up to $1K per year. Both plans have a 20% Co-Insurance after the deductible is met. How do I decide how much money to put in my HSA? DS and I are fairly healthy, but DD is in long term treatment for an ED. She see's the doctor 5-6 times a year and looking at old EOB's, they charge about $600 per visit before insurance. Obviously, I don't know right now how much of a discount the practice will have with my new insurance, but figuring that DD will probably meet her individual deductible within the first 6 months of the year. I was thinking of in addition to the $1K my company puts in doing another $2K on my own? I'm leaning towards the 1500/3000 plan. Thoughts? If you need more info to offer insight my Open Enrollment starts Monday so I'll have some more concrete numbers by then. 

[MrsE]

If you decide on the HSA I would recommend maxing out the contribution if you can. Unlike FSAs, unused funds are not forfeited at the end of the plan year and they can become a tax advantaged savings strategy for retirement.

[AdaraMarie]

When I first started my monthly contribution I estimated my monthly therapy expenses because I couldn't really afford to save extra. I have always contributed directly, after taxes, so that if my budget needed to have adjustments I could skip contributing. I generally use it for tax benefits at the end of the year and take out most/all of what I put in. I am just starting to get to a position where I am looking at putting in more next year. My account has to get up to $2k before it can be invested and I haven't ever had a high enough balance for long enough to invest, but I do get $1k employer contribution every year which is great.
I have prioritized my savings into maxing out my Roth ira first because there are not as many restrictions on how to use the money and it isn't tied to my job.

I have a 1500/3000 deductible and this is the first year in the 8 or so years I have had a high deductible that my family won't hit it. I put $350/month in my hsa and so between that and the employer contribution it has typically covered our annual expenses and grows a tiny bit.

[plutosmoon]

My HSA is similar, it has a $3000 family deductible and $6000 OOP max. I think my HSA is listed as $1500/$3000, but there is no individual deductible. The $1500 is the deductible on a single plan, family plans have to hit $3000 total before we get to coinsurance. I discovered this after DD's ER visit, when I thought I hit her deductible. I don't know if that's an HSA thing, or a my employer thing. I pay the first $3000 (bills are the negotiated insurance rate) and then there is coinsurance until we hit $6000, after that I pay nothing. My employer also funds $1000 per year into my HSA.

In 2021 and 2022, I put $2000 and $2500 respectively into my HSA, it's been fine. I didn't have enough money to put any more than that into it. We have pretty low expenses usually, but this year has been a bit high with phase one orthodontics, xrays and an ER visit, even with all that I still have plenty in the account. Next year I'm bumping my portion to $4800, and my employer putting in their $1000, I was able to increase it because my employer did a premium re-balance and my premiums are dropping $130 a month, I'm using that savings to increase my HSA. I'm saving for DD's phase 2 orthodontics and I'm working towards maxing (I think like $7500 total including the employer is the annual max).

I don't really think you can overfund the HSA, since it can be used for the rest of your life for medical.

[mccallister84]

I will say the first few years with an HSA were hard for us. We don’t have an employer contribution and with hitting the deductible each year it was hard to get ahead. Plus at least for H’s employer we can only contribute the max/26 so even though the first year we used it we knew I was having a baby in June and we would meet the deductible then we literally couldn’t funnel enough money in through deductions before then. Luckily we could put in post tax dollars and get the tax break at the end of the year.

The money does roll over so there is no fear in over funding but I would prioritize 401k/403b and Roth IRA assuming eligibility before maxing out the HSA.

[AdaraMarie]

I guess as far as some more direct advice, if you are interested in running data I'd look at the medical bills for the last 2-3 years and assume that you have to pay full price until you hit the deductible and see what it comes out to. That would give you a theoretical high. Then you could try to determine potential insurance discounts and any potential contribution from your X.
Your current insurance probably has a discount between the charge and what they cover so you could assume that.

I usually have to pay about $80-$125 for a "regular" doctor visit or therapy (mental or physical), and anywhere from about $180-$300 for a specialist.

[definitelyO]

Oct 26, 2022 14:27:57 GMT -5 plutosmoon said:

My HSA is similar, it has a $3000 family deductible and $6000 OOP max. I think my HSA is listed as $1500/$3000, but there is no individual deductible. The $1500 is the deductible on a single plan, family plans have to hit $3000 total before we get to coinsurance. I discovered this after DD's ER visit, when I thought I hit her deductible. I don't know if that's an HSA thing, or a my employer thing. I pay the first $3000 (bills are the negotiated insurance rate) and then there is coinsurance until we hit $6000, after that I pay nothing. My employer also funds $1000 per year into my HSA.

In 2021 and 2022, I put $2000 and $2500 respectively into my HSA, it's been fine. I didn't have enough money to put any more than that into it. We have pretty low expenses usually, but this year has been a bit high with phase one orthodontics, xrays and an ER visit, even with all that I still have plenty in the account. Next year I'm bumping my portion to $4800, and my employer putting in their $1000, I was able to increase it because my employer did a premium re-balance and my premiums are dropping $130 a month, I'm using that savings to increase my HSA. I'm saving for DD's phase 2 orthodontics and I'm working towards maxing (I think like $7500 total including the employer is the annual max).

I don't really think you can overfund the HSA, since it can be used for the rest of your life for medical.

This is not a HSA thing - it's a high deductible health plan (HDHP) thing.  Where you pay 100% of the negotiated medical bills until you hit the deductible.  Once you reach the deductible (the family one if you're in family coverage) then you pay your % of the negotiated medical bills - typical co-insurance is 20%.  Until you reach your out of pocket maximum. Then you pay $0 for the rest of the year.

The HSA is a savings account and the mechanism you can use to save pre-tax dollars and use those funds plus the funds your employer contributes put toward eligible medical, dental and vision expenses.  

[definitelyO]

Oct 26, 2022 12:01:39 GMT -5 @sameoldstory said:

I've never had an HSA before. I'm getting divorced so will need to get my own health insurance some time next year. I won't know the amount per paycheck until open enrollment next week, but I've been looking at my options. If I select the PPO there is no HSA, but if I do either the 1500/3000 or 2000/4000 Plan I'm eligible to open an HSA. My company will deposit up to $1K per year. Both plans have a 20% Co-Insurance after the deductible is met. How do I decide how much money to put in my HSA? DS and I are fairly healthy, but DD is in long term treatment for an ED. She see's the doctor 5-6 times a year and looking at old EOB's, they charge about $600 per visit before insurance. Obviously, I don't know right now how much of a discount the practice will have with my new insurance, but figuring that DD will probably meet her individual deductible within the first 6 months of the year. I was thinking of in addition to the $1K my company puts in doing another $2K on my own? I'm leaning towards the 1500/3000 plan. Thoughts? If you need more info to offer insight my Open Enrollment starts Monday so I'll have some more concrete numbers by then. 

The IRS does not allow a HSA without an associated High Deductible Health Plan (HDHP).   

I would do the math under both plans -  you should be able to calculate your premiums once OE starts and then add in your prior expenses.  Under the HDHP I would assume you'd pay the deductible based on your DD's treatment costs (confirm her MD is in network).  Is the difference in premium in the 2 plans enough to offset the $500 deductible savings?  

I'd also ask your HR/benefits team about changes to the HSA contribution - the IRS allows for mid-year changes to the amount you are saving- not tied to a qualifying event but it's up to the employer to determine if they will allow or not.  In that case you could start small and then ramp up your savings in the HSA if allowed.

[sadlebred]

If your daughter has $600 appointments 6 times/year, would a PPO not be cheaper?

[RockNVoll]

I'm just here to offer that there's an argument to be made for prioritizing an HSA over an IRA (Roth or traditional) or 401(k). HSAs are completely tax free if you use the money for medical expenses, and the definition of medical expense is pretty broad as far as I've seen.  You're never not going to have medical expenses so if you're planning to save and invest for the long term anyway, the math almost definitely works out better with an HSA in the long term.  The down side relative to a Roth is that the Roth allows you to take out contributions for any reason without penalty so there's more flexibility in that sense, but if you're looking for the best long-term investment vehicle, the HSA is a fantastic tool even with its fees.

[Deleted]

Oct 26, 2022 21:00:53 GMT -5 sadlebred said:

If your daughter has $600 appointments 6 times/year, would a PPO not be cheaper?

That's what I need to figure out. I looked and over the last two years, between my two kids the insurance company was billed $26K and my OOP was $3300. Of course, that is before any discounts or agreed upon rate reductions. I'm getting divorced so need to get off of my H's plan. I'm going to look at my options once open enrollment starts next week and also look at my kids Dad's plan to see if that makes more financial sense.

[mccallister84]

Oct 27, 2022 7:25:50 GMT -5 @sameoldstory said:

Oct 26, 2022 21:00:53 GMT -5 sadlebred said:

If your daughter has $600 appointments 6 times/year, would a PPO not be cheaper?

That's what I need to figure out. I looked and over the last two years, between my two kids the insurance company was billed $26K and my OOP was $3300. Of course, that is before any discounts or agreed upon rate reductions. I'm getting divorced so need to get off of my H's plan. I'm going to look at my options once open enrollment starts next week and also look at my kids Dad's plan to see if that makes more financial sense.

Definitely do the math but with H’s insurance we do it every single year and the PPO never makes sense - even if we hit the OOP max. At his company your health care contribution changes based on salary so maybe it would make sense for a lower earning employer. Again, now that we are a few years in and have a bit of a cushion built up it’s fine but it was very annoying at the beginning.

[midwestmama]

We have an HSA (with HDHP) and have for quite a few years now. We have been fortunate to be generally healthy and haven't needed to spend much during the year so we have a decent balance now. For me, I would not do an HSA if I expected to exceed the OOP max year after year as that generally costs more OOP than a PPO or POS plan. However, it would be good to do the math to look at both options. Larger employers tend to have automated tools to help with decision making between an HSA and other plan(s).

If you go with the HSA, as others have said, plan to max it out for the first few years to build up your account balance. Check with your HR department (or it should be in the open enrollment materials) when/how often you can change contributions throughout the year. If it's financially feasible, you could front-load contributions to the first half of the year to max it out, and then not have contributions the remainder of the year. That way you know you have enough to cover OOP expenses.

Keep in mind that any employer contributions count toward the IRS maximum, so subtract the employer contribution when determining your contribution if you plan to max out.

[definitelyO]

Oct 27, 2022 8:05:59 GMT -5 midwestmama said:

We have an HSA (with HDHP) and have for quite a few years now. We have been fortunate to be generally healthy and haven't needed to spend much during the year so we have a decent balance now. For me, I would not do an HSA if I expected to exceed the OOP max year after year as that generally costs more OOP than a PPO or POS plan. However, it would be good to do the math to look at both options. Larger employers tend to have automated tools to help with decision making between an HSA and other plan(s).

100% agree that you have to do the math to compare out of pocket (copay/co-insurance) vs. out of paycheck (premiums).  We used to have an annual cost calculator as well.   

We used to run a PPO and a HDHP alongside each other and the premiums alone on the PPO for a family were $5,000 more a year than the HDHP.  So depending on your anticipated medical spend the HDHP was less expensive. More paperwork for sure.  

[sent]

I agree with everything RockNVoll said. I've read that the HSA is one of the best tax-free mechanisms to save for retirement especially if you are eligible for a good one through an employer.

My husband always picked the best PPO plan at open enrollment when it came to medical. It was probably a good decision through the year DS was born. After DS was born and I had a minute to breathe, I looked at our options and did the math. The HSA plan was about $250/mo cheaper than the PPO plan. The coverage of the 2 plans were exactly the same, it just took longer to hit the deductible for the HSA version. I switched us to the HSA plan and put the extra $250/mo out of his paycheck into the HSA. I then contributed additional money to reach the max contribution allowed per year. The max something like $7000. We have now done it for almost 3 full years and have a chunk of money in the account. Not only have we come out ahead, I also like that I can just use the money whenever for whatever health expense. Like I will pay OOP for DD's optometry exam and for 2 pairs of eyeglasses for myself next month. I don't have to think for even one second how that expense will affect my monthly budget for the month because it will come out of the HSA funds, and those funds are getting added to each year this plan is available to us.

I thought I would have to pay the full price for everything until we hit the deductible but I haven't had to do that. Even with this plan, there are small amounts or discounts or something that CIGNA kicks in for all the bills we have received so that the OOP for various visits don't feel outrageous at all.