HR Peas - Question About HSA Accounts

To have an HSA, you must be covered with an qualified high deductible health plan (HDHP). For 2015 and 2016, the deductible has to be at least $1300 for an individual or $2600 for a family.

You can have an HSA that's not through your employer, but you will have to prove you are in a qualified plan. 

If the employer is not offering an HSA option with the PPO plan, it is probably not a qualified plan. It may be, but would be unusual for the employer not to offer the HSA with it if it is.

If she is young and healthy, I would strongly encourage her to reconsider. HSAs are an awesome secondary savings route. We aren't that young (40s), but are healthy. We have had an HSA for (I think) 7 years now. We have maxed out it each year and as a result, we now have a healthy balance that is invested and growing and essentially will be additional retirement assets for us. It is before tax income and grows tax free, and qualified distributions are tax-free. If there is one thing I've learned from my parents' retirement, it's that there are plenty of healthcare expenses in retirement - and our HSA will be there to help fund those.

Starting to build an HSA when young will have the same time-value of money benefits that beginning to save for retirement when young has.


ETA: Make sure she really calculates out how much the low deductible plan actually costs vs the HDHP. It's not at all uncommon for the premiums on low deductible health plans to be so much higher that they make up the difference between the low and high deductibles. 

I would urge her to look at the high deductible plan as well. In our case, if you look at total monthly expenses for both plans, the high deductible plan is cheaper by about the same amount the deductible differs, if that makes sense. By going that route, our employer contributes $500 to an HSA. In the years in which we've had high medical expenses, our deductible has been met in the 1st quarter and virtually all medical care was free after that.

She can contribute as long as she stays on the HDHP. And she can use the benefits as long as they are there, even is she switches back to a lower deductible with a different employer or in the next years. We had an HSA from previous employer and went onto a lower deductible PPO and had to stop contributing but could still use the money in the account.

For 2016, we are moving back to a HDHP and HSA contributions. The employer is putting a large amount in and we are funding the difference in premiums. Not the max by any means but enough to cover current and some future medical expenditures.

My company did the same thing the first year they offered the high deductible plan, although I think it was $1000. I only stayed on that for one year, but I kept my HSA and used the money for medical expenses for the next year or so. Oddly enough, my company has dropped the high deductible plan this year and now only offers three levels (Basic, Intermediate, Premium) of the PPO. I don't know why they dropped it, I thought that was the way every company was going.

We were on a high deductible plan this year, but DH's company isn't offering it next year and is going back to a traditional plan.

I second, third, at least look more closely at the HSA bandwagon. In the first few years that I had the HSA, I "made" money. That is, HSA plan premiums + what the company contributed - my expenses = less than what the other health plans from my company would have cost. I did max out my HSA contributions so I actually had less take home pay though. But my HSA money earns a small amount of interest and is available to me for the future. When I had an ambulance ride and emergency room visit, it gave me some peace of mind to know that I had that $ in my HSA savings account already.

BUT for my plan choices, if I were to have surgery or a hospital stay, I think it would have been more cost effective to go with the HMO plan, even with the higher premiums. Since I want to have my choice of doctors and don't want to have to get a referral to a specialist, I'm avoiding the HMO plan.

I'm a little confused - please forgive me and enlighten me.

I contribute to an account (maybe it's an FSA)that I can use to offset medical expenses like co-pays or prescriptions. My employer does not match anything. It's all my contribution. Also, I have to use it by the end of the year or I lose it.

All this talk about people contributing for years has me confused. Is that the difference between an HSA and an FSA?

Thanks for the information.

If you have to use it by the end of the year, it's not an HSA. I have never had an FSA, so I can't comment on those.

when I renew the registration page tells me the max I can contribute to my HSA. For me that $6,750 which includes employer contributions.

I work in benefits and I always encourage people to seriously consider a high deductible plan with an HSA. Especially if you are a low utilizer of healthcare services. Preventative care is covered 100% even with a high deductible plan. So the only thing she will have to pay out of pocket is if goes to the doctor for other things or prescriptions. She should add up how much in premium she would pay for the PPO. And then think to herself if she would really spend that much if she paid for services out of pocket. In most cases the premium amount is much higher than actual healthcare costs unless you have a chronic disease or really expensive prescriptions.

With the HDHP you only pay for what you actually use. With the standard low deductible plan you are paying high premiums just in case you have high healthcare costs. If she is healthy now, she should save that premium and put it into an HSA instead of giving it to an insurance carrier. It only takes a year to really build up a good amount. The HSA limit for individual is around $3000.

Most people focus only on what the insurance plan covers at time of service while ignoring how much they have to pay in premium to get that discounted price. Most of time you spend less overall with the HDHP. I'm a single mom with three kids and I have an HDHP. I've had one for over 5 years and have a very nice sized HSA built up that more than covers the deductible.

However, after retirement, while you *can* make withdrawals for purposes other than health expenses, those withdrawals will be regular income and subject to income tax. Withdrawals for qualified healthcare expenses - whether before or after retirement - are never taxable.

Thanks, busypea and cbet for the explanation. I sort of gathered that from the conversation but your explanation made it very clear!

I haven't had an FSA for several years, but when I had one, you could access your full annual contribution on January 1, so if you elected to contribute $2500 to your FSA for the year, you could pay that full bill at the beginning of the year without any extra cash out of your pocket. ETA: I think the FSA max contribution is $2500, so you couldn't cover both prescriptions with an FSA.

My HSA does not allow that and I *think* (but am not sure) it is against the rules for HSAs.

basketdiva For my high deductible health plan, if you have an HSA, then the FSA is a limited FSA that can be used only for vision and dental expenses. You might want to confirm what you can use your FSA monies for if you have a HDHP.