Talk me into using an HSA vs a regular health plan.

[Robotic Wis-Hipple]

Ok, so I've read a few things on HSA's including the old post here on sdn, but something just makes me feel uneasy about this thing.

I love the idea of pre-tax contribution, employer contribution, and tax free growth of an HSA, but I guess it still feels like a bet more than an insurance to me.

I'm single, young, healthy, haven't gone to a PCP in years and typically see one specialist one time per year for primarily cosmetic reasons so I don't NEED insurance for office visits and prescriptions etc.

With that said, if I get a normal health plan I'd pay $x per month, for a low deductible and the ability to pay a single $50 copay for my specialist visit and be covered if disaster struck. With an HSA I'd contribute $3400 a year pre-tax (I'd get $1000 from employer) and pay cash at my specialist and let the HSA money be a retirement account. But I keep thinking what if I'm in a car accident or I get diagnosed with cancer etc? I'd pay $2600 maximum deductible and have an out of pocket max of $5350 (10% of the bill after deductible is met).

Am I misreading something? If single this is saying the absolute maximum amount I'd have to pay cash for all health expenses including a disaster scenario would be $5350? And if that happened $3400 of that is pretax dollars one thousand of which was from my employer? If all that is correct I think I have to do the HSA, at least until I have kids, but there's got to be a catch right?

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[aneftp]

If you are single and healthy. 100% take the hsa route and max out what you can.

That hsa deduction money is pretax (including exempt from social security and Medicare taxes ....which 401k money is not exempt). 401k is only exempt from federal and state income taxes.

Many young people like to invest that hsa money. But one warning is that the hsa account that you use. The funds and investments are often more limited than what you can have in a regular 401k. Meaning many of them can have higher fees and there ain't no vanguard index funds available in many of those hsa plans.

Now once you have a family than all bets are off. My wife just loves to use the doctor for everything. Urgent care visit for kids sprain ankle. Kids doctors visits. Ur wife psych visit cause she's depressed or moody. Or kids therapist etc. those things can add up. But hsa likely still comes out on top regardless. But psychologically people feel like they are spending a lot more money on each visit each everything comes out of pocket up to $1500/3000 than 10% after to max of $6850

 

[aneftp]

I will give you an example of the federal health plans since they are all available online at govt website.

For simplicity sakes. I will compare two plans

Blue cross ppo $550/month (employee cost) with low co pays $25/50. Max out of pocket is $10k though. And each hospital stay can cost you up to about $800/stay

Now Aetna high deductible hsa plan is only $300/month with $3000 deductible (feds give you $1500 towards your hsa). Once you reach the $3000 it's 10% up to $6850 max in network.

So running the math before any expenses

$6600 for low co pay plan (blue cross)

$3600 for HSA plan.

So it cost you $3000 more in premiums for the low co pay. Automatically the hsa plan is $3000 cheaper.

 

[aneftp]

Now this is where it gets super complicated.

Because it doesn't really cost you $3000 more for the low co pay plan. Remember employer health plans are cafeteria plans and tax adjusted. So those premiums you pay are tax deducted from paycheck.

So tax adjusted you are really paying 33% less tax adjusted on the $3000. So the hsa plan is really $2000 cheaper than the non hsa plan

 

[aneftp]

Now. I look at max cost. Suppose I get in accident. Hospital bill is $50k.

So my hsa plan would likely cost me the full $6850

And my low co pay plan will only cost me $800 for hospital stay.

So the hsa plan $6850
Low co pay is $800 out of pocket.

Hsa plan originally was $2000 tax adjusted cheaper. Now my out of pocket is $6850. Vs $800 for low co pay plan with hospital stay.

So holy crap. The one auto accident. The low co pay ends up costing me $6850-2000 savings ($4850) minus $800 (low co pay).

So real time the hsa plan after a major accident costs me roughly $4000 more than the low co pay. (Assuming worst case)

$4000! More.

But we aren't done yet.

Remember the feds gave me $1500 towards hsa. So that takes it down to $2500 difference. So hsa still ends up costing me $2500 more than standard low co pay after major accident.

But we are still not done. Remember you as a family can contribute up to $6750 (but feds gave you $1500 already). So you can contribute $5250 more. So that's a tax savings of around $1700.

So $2500 more minus $1700 means worst case situation. You end up paying $800 more for the hsa vs the low co pay

 

[Robotic Wis-Hipple]

Awesome! Thanks.

Next step is figuring out my regular 401k contributions.

 

[sigrhoillusion]

Wait... you don't pay $12/year for the BEST health insurance like the rest of us?!

 

[anesthesiadoc]

The selling point they made for us with the HSA is we could apply it to the cost of the nursing home we'll end up in after 30 years of this job.


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[GA8314]

I do both. A high deductible Plan plus HSA (over $6k/year PRETAX). The more pretax the better, and that money will keep adding up each year. So, even if I (or a family member) were to have a substantial event, then still ample money left in the balance.

 

[aneftp]

I do both. A high deductible Plan plus HSA (over $6k/year PRETAX). The more pretax the better, and that money will keep adding up each year. So, even if I (or a family member) were to have a substantial event, then still ample money left in the balance.

It really depends. Since we had a family. It's been harder to save in the hsa.

Baby 2010 (used $6000) hsa use
2011- $2000 dental expenses hsa use
2012- baby $6000 hsa used
2013 baby needs echo workup $3000 plus misc $2000 so like $5000 hsa
2014: wife surgery $5000 hsa
2015: braces and other stuff hsa $5000
2016 wife surgery $6000

So I haven't saved a lot in the past 7 years with the hsa.