Health Savings Accounts

Joe Baker · Post by **Joe Baker** » Mon May 09, 2005 5:42 pm

I'd encourage people to look into Health Savings Accounts (HSAs), if your company offers a choice -- and just be happy if they give you one without asking (provided they also fund it...). For most companies they have just become a possibility, and apparently the response has been overwhelming. I have one at work, and it's a really great deal. It works like this: my company gets me a plain old-fashioned indemnity insurance policy with a $5000 deductible (yes, you read that right, but hear me out). The policy's a LOT cheaper -- about $3500 a year cheaper, in fact -- than my old policy with the $35 copay for doctor visits. Boiling down some of the details to the net effect, they give me the $3500 they save in a "Health Savings Account", 1/12th of the money being deposited each month. That $3500 is MY MONEY! If I get the sniffles, I can go to the doctor if I want to but I'm spending MY MONEY! If I spend less than $3500 on health care, I can roll the money forward to next year, because it's MY MONEY! If my family stays healthy, and we don't spend it all, I can keep rolling it forward 'til I retire, when I can take it out just like I can from an IRA or a 401K, because it's MY MONEY! If I move to another company, I can keep my HSA, because it's MY MONEY! In the absolute worst case, I lose a net $1500 per year -- a LOT less than I spent last year on doctors and prescriptions! Because I'm in charge of spending decisions, I decide how it's spent. I look for less expensive drugs, question the importance of tests, and generally look to be sure I'm not overcharged, because its MY MONEY! Of course it is JUST for health care. If you spend it on "non-healthcare costs" -- a tuba, for instance

-- you pay tax on the money plus a 10% penalty, just like an early distribution from an IRA or a 401K.
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Joe Baker, whose wife and daughter have chronic health problems, and who will spend about $3000 LESS on healthcare this year with his HSA.

ThomasDodd · Post by **ThomasDodd** » Mon May 09, 2005 7:52 pm

They are great. I'm waiting for one to be an option for me.

I need to check my wife's prescription cost, without the current Rx plan. I think it's about $500/month, so I need to check on alternatives and cheaper prices.

I really don't know the cost of them. Sure the pharmacy prints a "price" on the info sheet, but I don't know if that what the price would be out-of-pocket or not.* It's hard to get drug prices though. The pharacy doesn't like to tell you the cost, unless you have the Rx and want it filled. Makes comparison shopping difficult. There might be other, less expensive drugs that would work, but the doctors currently aren't interested in trying to find them. If cost became an issue, they might. Perhaps a Rx card of some sort might help too. Again, I haven't looked into them much yet.

* I know in the automotive business the price changes depending on insurnce or not. I got a quote on a window once for insurance. ove $1200. I got a quote later, saying I wasn't using insurance (I have a high deductable) and it was half the "with insurance" quote. I wouldn't be surprised if medicine was similar. Probably varies by pharmacy too.

ThomasDodd · Post by **ThomasDodd** » Mon May 09, 2005 8:04 pm

bruce hamilton wrote:We take advantage of something similar called Flexible Spending Plan. (It could be the same thing) .

Flex Spending is very different.

HSA's require a high deductible insurance plan, like Joe mentioned. I don't remember the exact amout, but a lot.

HSA's funds acrue, and you never loose them.

Flex you use with more traditional insurance, to cove the smaller out-of-pocket expenses, co-pays and OTC stuff.

Flex, you forfit any amount you don't use each year. Say you put $1000 in, but your expense are only $600. You loose the other $400. If something changes mid year you cannot adjust for it either.

I lost $500 last year when my wife quit seeing one doctor, and scaled back visits to another. I if I'd got the entire $1500 and paid taxes on it, I doubt it would have been $500 in taxes.

It's good for know expenses. Like long term meds, that you can calculate the cost in advance. So you don't pay taxes on money spent for that. But you need to be careful about the amounts. Of couse if anything unexpected happens, you are off in the calculation too.

There's also the hassle of filing the claims, but that depends on who does the claims work. Mine's not too bad, since I can fax the claims, and the tend to pay quickly. YMMV.

Tubaryan12 · Post by **Tubaryan12** » Mon May 09, 2005 8:50 pm

I have a FSA and I set the amount to be the difference between what I would pay for the traditional insurance and what I pay for the new plan. That way even If I don't use it all I'm no worse off than if I stayed with the traditional plan.

Joe Baker · Post by **Joe Baker** » Mon May 09, 2005 9:29 pm

ThomasDodd wrote:They are great. I'm waiting for one to be an option for me.

I need to check my wife's prescription cost, without the current Rx plan. I think it's about $500/month, so I need to check on alternatives and cheaper prices.

I really don't know the cost of them. Sure the pharmacy prints a "price" on the info sheet, but I don't know if that what the price would be out-of-pocket or not.* It's hard to get drug prices though. The pharacy doesn't like to tell you the cost, unless you have the Rx and want it filled. Makes comparison shopping difficult. There might be other, less expensive drugs that would work, but the doctors currently aren't interested in trying to find them. If cost became an issue, they might. Perhaps a Rx card of some sort might help too. Again, I haven't looked into them much yet.

* I know in the automotive business the price changes depending on insurnce or not. I got a quote on a window once for insurance. ove $1200. I got a quote later, saying I wasn't using insurance (I have a high deductable) and it was half the "with insurance" quote. I wouldn't be surprised if medicine was similar. Probably varies by pharmacy too.

We get the BC/BS negotiated price on prescriptions. It runs about 10% below list, though the discount is very inconsistent.

I'm surprised that you're having a hard time finding prices on Rx drugs, though. Walgreens and CVS both list their prices online. Competition saves the day again! Also, with a little internet research you can find alternative drugs. An unexpected road-block that we hit: my wife usually sees a rather young PA who is apparently unusually susceptible to the drug reps. When we requested a switch to a less expensive alternative (not a life-threatening condition) the PA resisted. We gave her the choice to either try the less expensive prescription or lose our business, and she came around.

And you're right about this being entirely different than an FSA. A couple of things I forgot to mention about HSAs that accentuate the differences: if your HSA isn't funded 100% by the employer, and an unexpected medical expense comes up, you can contribute pre-tax money ANY TIME up to the annual deductible of your policy. WAY different than an FSA! Also, if you're maxed out on tax-deferred savings (IRA, 401K, whatever) you can, if you like, pay your medical expenses with taxed income and leave the HSA money alone, just like a 401K.
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Joe Baker, who meant to say, "because it's your money!"