HSA - Health Savings Account ?

[surfivor]

 My company offers an HSA as an alternative to a health care plan. I am a little confused. It is promoted as a good option if you don't go to the doctor often. I think the company puts $500 into it every month. If you end up with a $20k medical bill, it sounds like whatever is in the account can be used towards it but beyond that there's nothing. Does that sound right ? Trying to decide if that is a good option is not easy because I am not sure if a lot of health plans are that great to begin with

[Smurf Hunter]

You most likely will have an employer sponsored high deductible insurance plan in addition to the HSA.

When I joined a software startup last year, there were 2 options:

1) HSA+HDHP (high deduct. health plan)
2) buy-up plan (PPO w/ optional FSA)

HSA is not insurance, and to quote industry insiders it's a mechanism to force patients to "have skin in the game".

Most single people without dependents who are younger and healthy trend towards #1.
If you have a family to support, it's my opinion that you should consider #2.

[FreeLancer]

This^^^^^^

[NoStepOnSnek]

I'm not super knowledgeable so please double check all this before you decide, but here's my understanding of HSAs:

• I'm not sure that it's an alternative to insurance, my employer offers it in addition to insurance but only with high deductible plans.
• Annual deposit limits: $3500 for an individual, $7000 for spouse or family, if you're 55 or older add $1000 to these numbers.
• $500 a month from your employer seems high, mine does $500 annually as a lump sum deposit at the beginning of January.  This $500 (or whatever your employer does) will count towards the annual deposit limit.
• Deposits go in pre-tax, like a standard 401k.
• If you invest the money the returns compound tax-free, like a Roth IRA.
• If you spend the money on healthcare costs including insurance premiums, the money comes out tax-free, also like a Roth IRA.
• If you spend the money on non-healthcare costs then it comes out taxable, like a standard 401k.  The exception here is if you were to track healthcare costs that you did not pay using money from your HSA and you can prove what you spent, then a withdrawal up to that amount will come out tax-free.

What I've been doing with my HSA is maxing it out, investing the money, and paying for any healthcare costs using cash.  That way I can make tax-free withdrawals if needed up to a point, but I'm also getting the benefit of tax-free returns in the mean time.  If you plan to do the same then keep enough cash on hand to cover any deductible.

Maybe this is worth asking about for a future show?  It would be good to know that I don't have any of this wrong.

[fritz_monroe]

My employer offers health insurance, FSA and HSA.  If you go with the "regular" health insurance, you can also get a FSA that can be used on any medical stuff.

If you go with the high deductible inssurance, you can get the HSA and you can also get a limited FSA.  The FSA is only good for dental and vision.  I did this last year and it worked out great.  This year I dropped the FSA and I prefer to have the FSA as well.  I wear glasses, both kids wear glasses and the wife has readers.  Plus I have dental issues.  But since the money in an FSA goes away if you don't use it, you have to plan ahead.

Based on taxes, it sounds like if you put more into the HSA than you use, there could be tax consequences.  I went with the HSA so that as I age, I can slowly build that up so we have some additional medical moneys in case one of us has something major happen.