I had an interesting conversation with a friend yesterday about one of the ways to save money that has been in the back of my mind for a while but I never acted on it. He was now eligible for a Health Savings Account because of the high deductible and this reminded me that I am also on a high deductible plan and had been thinking of getting a Health Savings Account as well.
I currently have a Flexible Spending Account where money is taken out of my paycheck pre-tax and I can then use that money for qualified medical expenses. The bad thing about the Flexible Spending Account is that you only get to use the money for one year and once that time period runs out then you lose the balance.
The good thing about the Health Savings Account is that there is no expiration date on the money and you can even withdraw it after retirement by paying the ordinary income taxes on it.
I need to do some more research to see what I will need in order to get my new account started because it will soon be time to change the contributions and other things on insurance now that we are about to start work again next week.
Is this something anyone can apply for? Or does your employer provide it?
This is Melissa from MyMochaMoney.com. My husband and I have an HSA. We go through the deductible pretty quickly due to a couple of medications our family has. However, we are in the position to be able to pay out of pocket and NOT withdraw any of the HSA money that is put aside. We know it’s there if we need it. I believe the deductible is usually $3,000. My husband is with a new company that actually funds the $3,000 if you can believe it (what a great company!). His past company didn’t and it was $3,000 as well.
He is lucky to work at that company then if they fund the deductible. I am waiting to actually speak to the insurance person at my workplace so they can explain better. I have been with this company three years and never had to deal with this insurance stuff in the past.
When I first started working I missed out on the Flexible Spending Account the first year because it was not explained to us, she simply said ‘Oh don’t worry about that. Most people don’t get it.” I could have used that account to pay for my LASIK if it had been explained and I am sure I would have had a better deal that way.
The HSA also has not been explained but now that I read more about it I think it makes sense for me, especially since I am now on the HD plan that qualifies.
Well I am glad I do not have to deal with these extra accounts. I live in Canada and the closest thing we have is a tax-free savings account. That Flexible Spending Account does not sound very flexible if the balance just expires like that.
The whole idea of this savings account is, they will be the ones who will benefit with your money. The next thing you’ll know is that upon getting the insurance it will never be enough for your payment because the money value is too low many years from now.
If you can switch to an HSA you should do it. Your FSA is really owned by your employer (although it’s funded by you) so in addition to losing any unspent money at the end of the year it’s not transferable if you leave your job, doesn’t earn interest and you can’t use the money to pay COBRA premiums. All these things are permissible with an HSA.
I have a $3k deductible policy with an HSA. I rarely come close to meeting my deductible but it’s nice to know the money’s there if I ever need it.
I went over the details with a trusted friend and I am going to go ahead with the HSA after all. He worked the math for me it makes more sense to do it that way.
I had an HSA at my last job and it worked well for me because I do not go to the doctor very much, since I am pretty healthy. My deductible was $3000. For those times that I did need to go to the doctor, I was charged a reasonable flat rate that I normally just paid out of pocket.
Well I am hoping that it works out for me this way as well. However if I do have to get sick and need to go to the hospital I have the amount of my deductible in my Emergency Fund so I can pay those costs up front and not worry about not having enough in my HSA.
HSA have to be planned really well. The best use of it as a retirement fund (you can withdraw at 65 for any reason).
Immediate benefit (HSA savings acct) is 2%-3% interest tax deduction going in, tax free coming out. So it is like earning 6%+.
So if you can avoid touching the money for a number of years, then it is worth it. Otherwise there is no point for savings account. You can invest in the stock/bond markets with some accounts — but that depends on your skill and tolerance for risk.
BUT BUT BUT
Read the fine print on the deductible. The number they quote is for in network only. If you go to the ER, you will hit in and out of network doctors. Two separate deductibles. Also co-payment is not the same as deductible.
All in all for a family deductible be ready to fork out around $11K in the worst case scenario for a year. Your monthly premiums are around $500 or so. So all in all $17K for the year. This is about what COBRA would cost with a good plan. But this is worst case.