Just a plug for high deductible health plans with an HSA:
People are scared of high deductible health plans because, well, you know – that high deductible. However, often the employer contributes a chunk of that deductible to your HSA, so your real out-of-pocket cost is the difference between the employer’s contribution and the deductible. And sometimes that number is a lot less scary.
Also, the monthly contributions you have to pay for for a high deductible health plan are often lower than a regular plan.
Also, and this is the big hairy deal, the HSA accumulates funds over time. You never ever ever forfeit the money in your HSA. You can use it for health care expenses – in which case it’s completely tax free – and, when you’re 65 or older, you can use it for any expenses and only pay regular income tax on the withdrawals. In other words, once you turn 65, it’s treated just like the money in your 401(k). It’s a fabulous way to accumulate lots and lots of money that will either never, ever be taxed at all (if used for healthcare) or just taxed at the regular rate.
Many highly paid people are thrilled to have the opportunity to contribute to an HSA because they are limited in the amount they can contribute to their 401(k). (The HSA has limits too, but that’s a story for another day.)
COBRA rights can be exercised retroactively during the election period – which I think is 60 days from the time your previous insurance ends or the company sends the COBRA notice. So basically if you have no ongoing medical needs, you can afford a gap in coverage knowing that if you get injured or sick within the 60 day window, you can elect and activate your COBRA coverage. (You would then be billed for the premiums, but that’s simple math – whether the medical bills is more or less than the premium). When my D. changed jobs a number of years ago that is the route she followed – for her there was only a few weeks gap between the time the insurance for job #1 ended, and insurance for job #2 kicked in. - so the plan was simply, “don’t get sick”. And she didn’t.
But then again, what is the deductible on that HSA plan? (That can be as low as $1300 on an individual plan) And is it a pure deductible (you have to run up $X before insurance kicks in) - or is it in combination with co-pays?
Thank you all very much for all the input and advice.
I know that high-deductible plans and HSAs are a good idea for people starting out young. But they aren’t as desirable for someone like me, who has never been on one before and is now starting a new job at 62. Because of preexisting conditions, I would have enough medical expenses to exceed the deductible every year, and I don’t have enough years remaining in my career to accumulate a significant amount in the HSA. So going the high-deductible route doesn’t seem like the best idea if I have an alternative.
I apologize for the whiny, frustrated posts about the difficulty of the paperwork. I’m leaving a job with only one week’s notice instead of two (for good reasons), and that has made it difficult to get things done in time. It’s really not the HR departments’ fault. They mostly deal with people who leave jobs with more notice.
In any case, I have the answer I wanted. If the paperwork can’t be done in time to get my onto my husband’s insurance, all I have to do is go on my new employer’s high-deductible plan for the rest of the year, without an HSA, and then my husband can add me to his PPO for 2018 during open enrollment. At worst, I would be on the high-deductible plan for three months, and from what everyone tells me, I don’t have to put money into the HSA and lose it. So thank you all very much for the information.
We had an HSA plan one year. But after that, they jacked up the premiums so much that the HSA wasn’t worth it, even considering the tax benefits! I guess I should check it out again to see if anything has changed.
first, if you were to put money into the HSA, you wouldn’t lose it, even if you don’t stay in a high deductible plan. The restrictions regarding participating in a HD plan are only for when money is going in, not out.
second, you don’t have to be young to benefit from an HSA plan. We are approaching retirement age, have one daughter who just graduated college, on in college, and one in high school. When we ran the number for the plans we had available, we found the HD plan with HSA most affordable for us. Our middle child has enough medical expenses that we not only meet her deductible each year, but reach our maximum out of pocket expenses. Knowing she will have such expenses, we are able to chart the cost of our share of premiums plus her out of pocket expenses for each plan. We assume that no other family members will hit the deductible, but if they do, the HD plans is actually even more beneficial. We make the maximum allowable contribution to the HSA, and turn around and use it to pay the medical bills - resulting in an automatic above the line tax deduction (note for FAFSA purposes, the above the line deduction is helpful too, as it reduces AGI).
Could someone clarify how HSAs work for me? If I have a chronic disease that requires ongoing care, and I have a high deductible plan with an HSA, can I just pass my money through my HSA to launder its taxes away? That is, can I put money in my HSA, immediately take it out again to pay the health bill, and now that money is not taxable?
I don't think this thread knows comparative costs, from OP. If you can "exceed the deductible" annually, why pay that billed amount with after tax dollars? Say the ded is 6k and you do have at least that in costs, for 12 months. You could put 1.5k (3 months) into an HSA and use those pre tax out-of-pocket dollars for expenses over the next 3 months.
If you don’t spend them, they’re yours use otherwise. No loss.
But why go on for three months? Many of us have changed jobs and it doesn't take that long to shift plans. No matter where HR is.
You could wing it, have 2 months to enroll in Cobra back to the date your present coverage ends. And any deductible met so far still counts, since it's the same insur plan as since January.
Is the new job plan cost less than $700/month (what you said Cobra would cost ?) Would the new high ded mean that all med bills are out of pocket until that's met? I.e., $xx for the plan/mo and 100% of any med costs until ded is met. Does that math really work?
Tomorrow’s Monday. Call DH’s insurer and ask how long this switch usually takes and confirm that, even if, say, it takes to Oct 15 or so, you wd be covered back to the date your present plan ends.
Cardinal Fang - there’s an annual limit to how much you can deposit into your HSA, but, yes, you can deposit $ into it and use it immediately to pay your medical bill. Most HSAs provide you with a debit card and/or checks to make your medical bill payments. The $ in your HSA is there to pay your bills, altho DH and I use the HSA as a savings account and pay our medical bills with our regular savings.
I am a huge fan of the HSA. We are in a financial position that allows us to pay the deductible for our HDHP out of pocket, so the money we put in our HSA stays in our HSA. The money is invested and grows. We plan to use it to pay our health care costs in retirement. It’s a great savings tool - the money we put in is pretax, it grows taxfree, and we can use it without being taxed on the income (as long as it’s used for qualified health care costs).
HDHP is tough for people who live paycheck to paycheck, though.
I WISH my kids could get HSA plans. Neither of them has that option where they live. One buys off exchange…and the other buys Direct,y from the company.
NO HSA options…and they still have high deductibles…and copays.
@thumper, I thought the HSA did not have to be sponsored by an employer - the only requirement is that in order to make deductible contributions they have to be in HDHPs, An individual can open an account at their local bank if they want, and if they make deposits with after-tax dollars, they can in fact deduct those deposits when they file their taxes to make them tax deductible.
Your kids would want to check with their coverage to be sure it meets the HDHP requirements before setting up an HSA. Additionally, they cannot mix other funds with the HSA account, and they would have to monitor the number of months they were covered by a HDHP, as the annual HSA max contributions are prorated over 12 months
For my kids…anything really is high deductible…one has subsidized coverage…so income isn’t that high. Thenother is in school…and has no income (we re paying the costs).
Both have deductibles in the $5000 a year range. When your income is under $45,000 a year…or is $0…those are high deductibles.
The closest we got to a HSA was a FSA, flexible spending account that we funded with pretax $$ deducted from H’s paycheck and could use for co-pays, contacts and out of pocket expenses, including medical travel. It had to be used up every year and you had to submit paperwork to get reimbursed. It was capped st $5k/year, I believe. We used it for several years until H retired and we could no longer participate. The paperwork wasn’t terribly onerous.
We’ve never qualified for a HSA, so never had one.
For 2018, the minimum deductible for an HDHP is $1350 ($2700 for family), maximum annual contribution of $3450 ($6650 for family), prorated by month if you don’t have HDHP for the full year. Yes, if you have HDHP through your employer, through the marketplace, or privately, you can purchase hour HSA from your bank or elsewhere. It doesn’t have to be affiliated with your heath plan. The advantage of affiliation is when you’re turning around and using it to pay expenses immediately.
If you use a private HSA, you will deduct the contributions directly on your tax return - the same way you would deduct any extra contributions you make to your employee sponsored plan (if you have $200 taken per month from your pay, but decide to top it off to the maximum at the end of the year, for instance) that don’t show on your W2. These are “above the line” deductions. You don’t need to itemize to take them.
For the person who asked about funneling medical expenses through the HSA, absolutely. That’s what we do each year. No sense in not taking advantage of the tax deduction. We no longer itemize, and even if we did, the 10% threshold before we could claim medical expenses means the HSA is a far better tax strategy.
Marian, if you have already hit your deductible or your out-of-pocket max, it might make sense to hang on to the COBRA option (and delay taking it until near the deadline) so that you don’t have to meet new deductibles this late in the year.
We had that happen. Kid had a medical issue in April…and met the high deductible. Then she moved to a different state in August…and guess what? She got to meet the deductible again. Oh but wait. Then January came…and guess what? A new year so the deductible reset…again.
Issue required physical therapy. And meeting that deductible three times…yikes. When January came…and the third time was hooening…we suggested she ask how much it would cost if she paid herself. It ended up making more sense to do,that!
Thumper, it still has to be a HDHP qualified plan – simply the fact that it has a high deductible does not mean that the plan qualifies. So your son still needs to ask his insurance company or employee benefits administrator to determine whether the plan qualifies. (I honestly don’t know what the technical requirements are that is why one plan with ahigh deductible might qualify and another doesn’t.).