Another HSA question

[Ava]

It's enrollment season, as you can tell from all the threads here in YMAM.

My workplace is going for a new insurance company. I am looking into this very carefully because I now have a chronic condition to manage.

With my condition, no complications, I have spent approximately $1,400 out of pocket for this year and haven't hit the deductible. We have high deductibles. That money is quite a chunk of change for me.

So I considered the two options offered for next year. One is more of a "regular" plan. The other is high-deductible. I studied both carefully and I talked to my manager about them. The regular plan charges more in biweekly payments, and doesn't really save you that much in out-of-pocket expense. The kicker is prescriptions. If you take a lot of them, then yes, the regular plan is worth it. Otherwise, the high-deductible plan is better. I'll be enrolling on the high-deductible option since I only take one medication that doesn't cost a lot. So my out of pocket would remain more or less the same for next year.

Which brings me to my question.

We have to decide now during enrollment period how much we want taken from our check for the HSA that comes with the high deductible plan. I was going for the maximum, which is $118 a paycheck. Before I hit "submit", though, I sort of froze. Having that kind of money taken from my net is a lot to process and a big change in my financial picture. I am doing ok but I have student loan payments coming due in January. I should be able to cut it even with the loan payments, but it's starting to get tight.

My application is now "in process" and I have until next Friday to submit it. I was thinking that I know I'll probably spend $1,400 so I should at least shoot for that. I have also decided I will get braces in January, I need them and I don't want to keep postponing. Then I  also thought it would be great to have the money there. It's a good way to invest, save, and reduce my taxable income. I just don't want to be eating cat food during 2016.

I have a tiny bit of savings that could tidy me up if I go for it and this proves to be too much. And then I'll recalibrate for 2017. But I'm afraid of the unexpected, like needing a new car, getting sick and missing work, etc.

I have an application with my manager for a higher paying role in my department, but it's very uncertain whether I'll get it. An increase in income would solve my dilemma.

Please talk me into hitting "submit". I really want to save and invest and I think this is the best option available to me at this moment.

[Tiny]

Remind us (well, me) do you have access to a 401(k) or some other pre tax saving account?      Do you have access to a FSA (for vision and dental) that goes along with the HSA/HDHP?  Can you use that FSA money for braces?   Or will you be using taxed money to pay for them?  (Not talking you out of braces - I had them when I was 22 and it was worth every penny and every bit of inconvenience and annoying short term "pain" over two years.)   I'm 51 and my bottom teeth have shifted back (it's hereditary, in a scary way when looking at old photos from 60 plus years ago) - but I'm still reaping the  benefit from having it done. 

If you do have access to a 401K - since money potentially could become really tight a few months from now - I'd set up the HSA for $65 (maybe $70) a paycheck to cover your expected expenses (and then alittle bit more). I'd then bump up your retirement savings to account for the $50 or so.

the Reason being you are committed for the full 12 months with the HSA contribution - generally you can modify how much you contribute to your retirement on the fly. Just make sure you CAN modify your 401(k) contribution (to reclaim the approx. $50 if you need it) Both are 'pretax'.   You are young enough  that if it takes a few years to get the steady stream that builds a balance in your HSA it's OK.  It's one of those financial goals that takes awhile to achieve. 

I'm not suggesting that you save less - I think you should give saving the $118 a month a shot (even if you have to split it between accounts and even if you have to tap some of it later in next year). I think it's great that you are thinking ahead and seriously considering the path/goal that might be a bit challenging but that gets you what you want/where you want to go. You've come up with a Challenging Plan/Goal not an outright "heading for a Trainwreck" Plan/Goal. That's one of the qualities of "wealthy people" that doesn't always get much airplay. OK, maybe it is when they talk about people managing 'risk'.

[raeoflyte]

I'm in a similar boat and we're going with the HSA.  For the family plan we put $5000 a year in the HSA and my employer kicks in another $1250.  The prescription info is interesting and I'll have to check into if that is the case for us.  But ds rx's aren't $331 a month which is the increased premium amount if I went with the PPO.  

We've done the HSA every year its available, and we've never been able to end the year with money in it, but I don't feel like we're worse off using that then the PPO.  And there is always the chance that we'll have a low medical bill year...

[Ava]

Nov 7, 2015 10:50:00 GMT -5 Tiny said:

Remind us (well, me) do you have access to a 401(k) or some other pre tax saving account?      Do you have access to a FSA (for vision and dental) that goes along with the HSA/HDHP?  Can you use that FSA money for braces?   Or will you be using taxed money to pay for them?  (Not talking you out of braces - I had them when I was 22 and it was worth every penny and every bit of inconvenience and annoying short term "pain" over two years.)   I'm 51 and my bottom teeth have shifted back (it's hereditary, in a scary way when looking at old photos from 60 plus years ago) - but I'm still reaping the  benefit from having it done. 

If you do have access to a 401K - since money potentially could become really tight a few months from now - I'd set up the HSA for $65 (maybe $70) a paycheck to cover your expected expenses (and then alittle bit more). I'd then bump up your retirement savings to account for the $50 or so.

the Reason being you are committed for the full 12 months with the HSA contribution - generally you can modify how much you contribute to your retirement on the fly. Just make sure you CAN modify your 401(k) contribution (to reclaim the approx. $50 if you need it) Both are 'pretax'.   You are young enough  that if it takes a few years to get the steady stream that builds a balance in your HSA it's OK.  It's one of those financial goals that takes awhile to achieve. 

I'm not suggesting that you save less - I think you should give saving the $118 a month a shot (even if you have to split it between accounts and even if you have to tap some of it later in next year). I think it's great that you are thinking ahead and seriously considering the path/goal that might be a bit challenging but that gets you what you want/where you want to go. You've come up with a Challenging Plan/Goal not an outright "heading for a Trainwreck" Plan/Goal. That's one of the qualities of "wealthy people" that doesn't always get much airplay. OK, maybe it is when they talk about people managing 'risk'.

I have access to a 401k and I can change my contributions any time online. It takes me a minute to do it.

The company matches the first 4 percent. I am currently contributing 6. My idea was to go back to 4, direct the other 2 to the HSA, and then cut my landline (I don't use it anyway) and that would be another $50 a month to soften the blow of the $118.

I almost believe is doable, I'm just scared about having to commit right now to that much, and seeing my take home pay reduced.

[Ava]

Nov 7, 2015 10:50:00 GMT -5 Tiny said:

Remind us (well, me) do you have access to a 401(k) or some other pre tax saving account?      Do you have access to a FSA (for vision and dental) that goes along with the HSA/HDHP?  Can you use that FSA money for braces?   Or will you be using taxed money to pay for them?  (Not talking you out of braces - I had them when I was 22 and it was worth every penny and every bit of inconvenience and annoying short term "pain" over two years.)   I'm 51 and my bottom teeth have shifted back (it's hereditary, in a scary way when looking at old photos from 60 plus years ago) - but I'm still reaping the  benefit from having it done. 

If you do have access to a 401K - since money potentially could become really tight a few months from now - I'd set up the HSA for $65 (maybe $70) a paycheck to cover your expected expenses (and then alittle bit more). I'd then bump up your retirement savings to account for the $50 or so.

the Reason being you are committed for the full 12 months with the HSA contribution - generally you can modify how much you contribute to your retirement on the fly. Just make sure you CAN modify your 401(k) contribution (to reclaim the approx. $50 if you need it) Both are 'pretax'.   You are young enough  that if it takes a few years to get the steady stream that builds a balance in your HSA it's OK.  It's one of those financial goals that takes awhile to achieve. 

I'm not suggesting that you save less - I think you should give saving the $118 a month a shot (even if you have to split it between accounts and even if you have to tap some of it later in next year). I think it's great that you are thinking ahead and seriously considering the path/goal that might be a bit challenging but that gets you what you want/where you want to go. You've come up with a Challenging Plan/Goal not an outright "heading for a Trainwreck" Plan/Goal. That's one of the qualities of "wealthy people" that doesn't always get much airplay. OK, maybe it is when they talk about people managing 'risk'.

if I choose the HDHP I have access to a HSA and also to two limited FSA, one exclusively for dental costs and another one for vision only. But I don't see the point in using them. The money is pretax but it's use it or lose it, and there's no investment options. It would be just a holding account. I feel I'll be better off saving in the HSA.

[Ava]

Nov 7, 2015 11:09:34 GMT -5 raeoflyte said:

I'm in a similar boat and we're going with the HSA.  For the family plan we put $5000 a year in the HSA and my employer kicks in another $1250.  The prescription info is interesting and I'll have to check into if that is the case for us.  But ds rx's aren't $331 a month which is the increased premium amount if I went with the PPO.  

We've done the HSA every year its available, and we've never been able to end the year with money in it, but I don't feel like we're worse off using that then the PPO.  And there is always the chance that we'll have a low medical bill year...

That's exactly my mindset. The HDHP with the HSA is way more attractive than the other, more expensive plan. The only people who can really benefit from the higher cost of the regular plan are those who need to fill a lot of prescriptions, because that is cheaper on that plan. For everything else, yes, you have a higher deductible of $500 but your premiums are way lower.

And with the HSA the money is there if you need it later.

It's a mess though. There are so many options, plans, accounts, deductibles, etc. So many risks and assumptions you have to make.

[quince]

You should be able to change HSA contributions whenever you want, unless your employer is difficult about it. 

Also, an HSA is YOUR money. You can take it out for a non-medical emergency, and pay the penalty, if you desperately need to. It is not like a FSA where you need to use it or it is gone, and only for qualified expenses.

Your take-home pay should also be reduced by less than your contributions to the HSA, as it should be taxed with state taxes at the most.

Alternatively, you could keep the money in your check (except what you KNOW you will spend.) , and at the end of the year, make your own deposit to the HSA if you have anything left. You will miss out on being exempt from FICA, but it could still be beneficial.

[simser]

Remember, it's pretax. If you're paid biweekly and that 118 is into the hsa, you're probably only down $75?

Plus it's a great retirement fund (they say health care costs now are about 250k out of a nice retirement account balance of 1 million so 1/4 of what you need) if you don't need all of it this year.

I'm very happy I switched to an hSA.

[Ava]

Nov 7, 2015 15:04:34 GMT -5 quince said:

You should be able to change HSA contributions whenever you want, unless your employer is difficult about it. 

Also, an HSA is YOUR money. You can take it out for a non-medical emergency, and pay the penalty, if you desperately need to. It is not like a FSA where you need to use it or it is gone, and only for qualified expenses.

Your take-home pay should also be reduced by less than your contributions to the HSA, as it should be taxed with state taxes at the most.

Alternatively, you could keep the money in your check (except what you KNOW you will spend.) , and at the end of the year, make your own deposit to the HSA if you have anything left. You will miss out on being exempt from FICA, but it could still be beneficial.

I should ask HR, but I read the information and it doesn't look like there's an opt-out option.

I could take the money out after it hits the HSA, but then I would have to pay taxes and a 20 percent penalty fee on top of that. Thank you but no thank you.

Yes, my take-home reduction wouldn't be the 118, that's true, because right now I am paying taxes on that money.

It looks like the only way to get money into the HSA is to decide right now how much per paycheck we want taken out through 2016. And that' what scares me. As far as I'm reading it, once you sign up for it, the money will be taken out of each paycheck for the whole year. It's also discouraging to think I'll be bringing less money after more than three years with the company, especially now that my commuting expenses have gone up and I have a new bill starting in January (the student loan payment).

[Ava]

Nov 7, 2015 16:34:14 GMT -5 simser said:

Remember, it's pretax. If you're paid biweekly and that 118 is into the hsa, you're probably only down $75?

Plus it's a great retirement fund (they say health care costs now are about 250k out of a nice retirement account balance of 1 million so 1/4 of what you need) if you don't need all of it this year.

I'm very happy I switched to an hSA.

Yes, I get paid biweekly but the 118 is also a biweekly maximum contribution. It's not 118 a month. It's 118 a pay period for 24 periods a year.

I agree with you that having that money in the HSA would be great for me in the future. Plus it will be invested and grow, instead of just sitting static.

My plan is to work until 70 if I can, but once I hit 65 I can get Medicare and use the HSA to cover my out of pockets. I won't be able to contribute to the HSA anymore after 65, but hopefully I'll have money in it that I can use.

I am 99 percent convinced. I see myself hitting "submit" Monday morning.

It's just that the amount of money implied and the commitment for a full year seem so overwhelming.

[quince]

You can also open your OWN HSA account in addition to your work sponsored one- there is no trouble having 2, and this one you can put money in however you like. As long as your total contributions don't exceed the allowable.

It IS hard to see a paycheck go down. My husband's employer has an HSA eligible plan available this year, and 401K for the first time, so his paycheck is likely to be ~2K smaller each month in 2016.  We're not actually out any money- it all remains ours, but there is a visceral reaction to the shrunken paycheck.

[yogiii]

Nov 7, 2015 17:07:19 GMT -5 Ava said:

Nov 7, 2015 15:04:34 GMT -5 quince said:

You should be able to change HSA contributions whenever you want, unless your employer is difficult about it. 

Also, an HSA is YOUR money. You can take it out for a non-medical emergency, and pay the penalty, if you desperately need to. It is not like a FSA where you need to use it or it is gone, and only for qualified expenses.

Your take-home pay should also be reduced by less than your contributions to the HSA, as it should be taxed with state taxes at the most.

Alternatively, you could keep the money in your check (except what you KNOW you will spend.) , and at the end of the year, make your own deposit to the HSA if you have anything left. You will miss out on being exempt from FICA, but it could still be beneficial.

I should ask HR, but I read the information and it doesn't look like there's an opt-out option.

I could take the money out after it hits the HSA, but then I would have to pay taxes and a 20 percent penalty fee on top of that. Thank you but no thank you.

Yes, my take-home reduction wouldn't be the 118, that's true, because right now I am paying taxes on that money.

It looks like the only way to get money into the HSA is to decide right now how much per paycheck we want taken out through 2016. And that' what scares me. As far as I'm reading it, once you sign up for it, the money will be taken out of each paycheck for the whole year. It's also discouraging to think I'll be bringing less money after more than three years with the company, especially now that my commuting expenses have gone up and I have a new bill starting in January (the student loan payment).

Can you ask again about this?  We also have to define up front, so let's say I said $2400 and they take out $100 per check for 24 pay periods.  I believe if I decided in May I wanted to suspend, I could call up HR and arrange for the deductions to stop.  So I'd have $800 or so from the first 4 months of the year in the HSA and then halt further contributions.   Not sure if all employers allow this.

[teen persuasion]

Have you already been paying $1400 out of pocket?  If you contribute that to the HSA, and then reimburse yourself for all new medical bills from the HSA, it will essentially be a wash (actually, you will save the tax on the HSA contributions).  Now you get the post tax money in your paycheck, and pay bills from that pot.  Next year contribute to the HSA and pay from the HSA, not from your take-home pay.  It's just a different path for the payments to take.

Now, if you were planning on fully funding that HSA and paying medical costs OOP to keep funds invested in the HSA until retirement (treating the HSA as an additional IRA), then it IS an additional drain on your income, albeit for the future.  You could always fund the HSA and TRY not to touch it, knowing that if necessary you can reimburse yourself for medical expenses ( you've paid OOP) at any time if you need the cash.  Just save all receipts for future reimbursement.

[Baby Fawkes]

Nov 7, 2015 15:04:34 GMT -5 quince said:

You should be able to change HSA contributions whenever you want, unless your employer is difficult about it. 

If it is like my employer it is set during open enrollment and you are stuck with that for the year. Perhaps I could petition HR directly, but there is no way currently set up to change it without a qualifying life event as it is through the benefits system.

[raeoflyte]

I hope Ava doesn't mind if I hijack...When does it make sense to go with the PPO instead of the HSA?  We can't fund our HSA and cover the medical costs out of pocket, so this isn't an investment tool as much as it is sinking funds to pay medical bills.  The PPO is $331 more in premiums each month.  Deductible is lower, but out of pocket max is the same as the hsa.  

Realized that the medical technology we are putting ds on WILL cost over $300 a month for just one piece until we hit his deductible.  Total monthly rx costs will be at least $350 a month but will average in the $400-$500 range.  Quarterly appointments for him are coming in around $500.  So we'd have met ds deductible on the HSA by June.  I guess after that we'd be at 20% of costs and if no one else has any issues we could still come out ahead using the  HSA. We've never had a year that we haven't hit the family deductible though, even before this dx.  The insurance company has been less than helpful in figuring out costs.  The reps from the providers are the most 'helpful' but they certainly have an agenda.  I guess its an agenda that they'll want us to stick with them hopefully but I'm always a little hesitant.  

[yogiii]

Nov 11, 2015 7:33:25 GMT -5 raeoflyte said:

I hope Ava doesn't mind if I hijack...When does it make sense to go with the PPO instead of the HSA?  We can't fund our HSA and cover the medical costs out of pocket, so this isn't an investment tool as much as it is sinking funds to pay medical bills.  The PPO is $331 more in premiums each month.  Deductible is lower, but out of pocket max is the same as the hsa.  

Realized that the medical technology we are putting ds on WILL cost over $300 a month for just one piece until we hit his deductible.  Total monthly rx costs will be at least $350 a month but will average in the $400-$500 range.  Quarterly appointments for him are coming in around $500.  So we'd have met ds deductible on the HSA by June.  I guess after that we'd be at 20% of costs and if no one else has any issues we could still come out ahead using the  HSA. We've never had a year that we haven't hit the family deductible though, even before this dx.  The insurance company has been less than helpful in figuring out costs.  The reps from the providers are the most 'helpful' but they certainly have an agenda.  I guess its an agenda that they'll want us to stick with them hopefully but I'm always a little hesitant.  

A little hard to tell without all the numbers but you're paying almost 4k extra out of pocket in premiums for the PPO.  So if you chose the HSA, you are up 4k automatically.  Do you think the costs of all the prescriptions and appointments with the PPO plan would be a total of 4k or more cheaper for the year?  If not, chose the HSA. 

ETA - It is also worthwhile to look at the worst case.  You say the max out of pocket is the same.   Let's say the max OOP is 8k.  So worst case for HSA is you pay 8k plus premiums.  Worst case for PPO is you pay 8k plus premiums (and you know those premiums are already 4k more than the HSA premiums).

[raeoflyte]

Nov 11, 2015 7:43:19 GMT -5 yogiii said:

Nov 11, 2015 7:33:25 GMT -5 raeoflyte said:

I hope Ava doesn't mind if I hijack...When does it make sense to go with the PPO instead of the HSA?  We can't fund our HSA and cover the medical costs out of pocket, so this isn't an investment tool as much as it is sinking funds to pay medical bills.  The PPO is $331 more in premiums each month.  Deductible is lower, but out of pocket max is the same as the hsa.  

Realized that the medical technology we are putting ds on WILL cost over $300 a month for just one piece until we hit his deductible.  Total monthly rx costs will be at least $350 a month but will average in the $400-$500 range.  Quarterly appointments for him are coming in around $500.  So we'd have met ds deductible on the HSA by June.  I guess after that we'd be at 20% of costs and if no one else has any issues we could still come out ahead using the  HSA. We've never had a year that we haven't hit the family deductible though, even before this dx.  The insurance company has been less than helpful in figuring out costs.  The reps from the providers are the most 'helpful' but they certainly have an agenda.  I guess its an agenda that they'll want us to stick with them hopefully but I'm always a little hesitant.  

A little hard to tell without all the numbers but you're paying almost 4k extra out of pocket in premiums for the PPO.  So if you chose the HSA, you are up 4k automatically.  Do you think the costs of all the prescriptions and appointments with the PPO plan would be a total of 4k or more cheaper for the year?  If not, chose the HSA. 

ETA - It is also worthwhile to look at the worst case.  You say the max out of pocket is the same.   Let's say the max OOP is 8k.  So worst case for HSA is you pay 8k plus premiums.  Worst case for PPO is you pay 8k plus premiums (and you know those premiums are already 4k more than the HSA premiums).

That's a good way of looking at total out of pocket costs screwing us more if we had to hit the oop max on the ppo.  The cost of the rx's on the ppo I need to try to nail down.  I'm thinking they'd be about $100 a month, so we'd really break even on that until we hit the deductible and then have the possibility of saving at least some of the contributions in the HSA the 2nd half of the year.  

[raeoflyte]

I've spent the last hour and a half on the phone without much to show for it.  The reps can only tell me costs based on current plan.  The insurance company doesn't have our plan information loaded for open enrollment so that was a complete waste.  HR has the day off.  

The worst part is that people don't understand what I'm asking.  I understand my current plan and where we're at on deductible and oop and I have price quotes for what stuff costs NOW based on that information.  But we're 6 weeks away from the deductible resetting with new equipment and medications and they act like I have 3 heads when I'm trying to figure out what everything is going to cost me in January and not just right now...  

Hoping HR has information for me tomorrow. 

[yogiii]

rae, I wish I could help you out. I'm not really sure of a good way to get costs other than just assuming with the HSA you will be paying full price and not getting any sort of insurance discount (it seems like you know the full price of some stuff, you mentioned $300/month for one piece).  As an example, when I took DD for an allergy test, the appointment claim came in at $275, it hasn't been fully processed yet but I'm expecting to pay the full price (I have an HSA).  The biggest kind of discount I've seen for a Dr. appt is maybe $25 off the bill as an insurance discount, so I'd have to pay $250 vs $275.  So I'm essentially going into the HSA assuming my preventative care is free but I'll be paying full price out of pocket for everything else.  I'm a worst case kind of person I guess.