Health Savings Accounts / High-Deductible Healthcare Plans

[SayMyName]

Thought it might be useful to pull this topic out of the broader Retirement Planning thread and into its own - seemed to have a good discussion going over there.

I've had an HSA of one type or another for the better part of 10+ years with several different employers. Just by running some numbers and doing a simple what-if scenario / risk analysis, most people should be able to tell if it makes sense for their personal situation or not. For me, it has mostly come down to making sense if I could reasonably expect to have a healthy year (low expenses) or a catastrophic year (high expenses).

I'm a big fan of putting the money I would have otherwise spent on premiums for a "traditional" plan (PPO or HMO) into a savings account instead that can accumulate value and roll over year to year. Of course this helps if there is a significant premium savings by having an HDHP as an option. I still find some employers trying to entice more participation by keeping premiums really low and/or offsetting most of the cost with company contributions to your account. I will say that I have become much more of a cost-conscious healthcare consumer as a result of the high deductible, which can be both a good thing (not using services unnecessarily) or a bad thing (not going to the doctor when needed because I'm cheap)!

It will be interesting to see how this HSA / HDHP model plays out with any potential ACA revisions, but I'd like to keep this out of the cave so would rather discuss the personal finance aspects and first-hand experiences.

 

[Clonehomer]

I like ours. I makes sense to do this when you are young and healthy to start saving and building up the HSA. That way it is there and ready as you age.

If you are older, I could see why this isn't the best deal for you since you won't have as many years where you actually build up savings.

I think it'd be good for the country in the long run as it really makes you aware of the expense of healthcare. It's easy to go to the doctor for every sniffle if it only costs you a $15 copay. If you're paying $120 every time, you tend to wait it out to make sure it's worth the trip. For more serious issues, you go through the hospital bill and question charges a lot closer when it's "your money" paying it (it's always your money, it's just hidden in your premiums).

I think the general feeling amongst people I talk to depends on whether your company takes the savings of a HD plan and uses that to contribute to your HSA. If they do, it's generally positive. If you're funding the HSA yourself only, then it's not always positive.

 

[Cyclones_R_GR8]

When we were first offered the HSA with the high deductible plan I figured the cost for me was going to be about the same either way but I would rather give $100 to the insurance company and $200 to myself as opposed to $300 just to the insurance company. I currently have $25,000 in my HSA.

 

[jkclone]

I think it'd be good for the country in the long run as it really makes you aware of the expense of healthcare. It's easy to go to the doctor for every sniffle if it only costs you a $15 copay. If you're paying $120 every time, you tend to wait it out to make sure it's worth the trip. For more serious issues, you go through the hospital bill and question charges a lot closer when it's "your money" paying it (it's always your money, it's just hidden in your premiums).

This is interesting to me. Maybe it is just me but I'm this way even if it were free for me to go. I just don't like to go to the doctor. Do people really regularly go to the doctor just for a cold? Is that why it is so hard to get into the doctor?

Our doctor is like two weeks minimum wait.

 

[cowgirl836]

This is interesting to me. Maybe it is just me but I'm this way even if it were free for me to go. I just don't like to go to the doctor. Do people really regularly go to the doctor just for a cold? Is that why it is so hard to get into the doctor?

Our doctor is like two weeks minimum wait.

I don't end up going maybe more than once every 1-1.5 years outside of physicals. Like you, even if it were free, I wouldn't go more than I do now. The hassle of taking the time to leave work + waiting around near other sick people is plenty enough barrier to me to not go more than absolutely necessary. I have gone for a cold before, but it was after I was still good and sick after three weeks. Stuff like that I get in pretty quick or they send me to the urgent care. For routine physicals, I usually schedule those a good 3-4 months ahead of when I need it done. Our co-pay is up to $30 now and I'd be against it going higher. I think it's healthier for the country to risk having people going slightly more often than they need to because the copay is affordable vs. putting off going/not going at all and ending up with more serious - and more costly - medical treatment.

Just as an anecdote, several years ago my husband was having some vague abdominal pains that were slowly worsening but not debilitating. After about 2-3 days of this, I told him to go to urgent care since it was only like $20 for his copay if it turned out to be nothing. If it had been $120, quite honestly, we would have put it off, likely over the weekend. Turns out they sent him straight to the ER after tests came back because he had very high levels of lipase. He ended up being admitted for about 1.5 days for pancreatitis. Because it was still a very mild case, the treatment wasn't too invasive (fasting and IV fluids) and he's no worse for the wear now.

If we had waited over the weekend, he could have caused serious damage to his pancreas including infection and actually diabetes.

 

[brokenloginagain]

Its quite possible almost everyone will have an HSA in the future - if healthcare expenses are moving to more out of pocket, then everyone is going to know all about HSAs.

its a very tricky subject - if you earn a high income, they are a no brainer as they are a free tax shelter/gift from the gov't.

if you can afford it, leave your HSA alone, let it grow tax free, pay your medical out of pocket, and then retroactively use it 30 yrs from now.

but most people don't have a spare 5k-10k burning a hole in their pocket to put in an HSA to avoid the taxes.

 

[CycloneErik]

This is interesting to me. Maybe it is just me but I'm this way even if it were free for me to go. I just don't like to go to the doctor. Do people really regularly go to the doctor just for a cold? Is that why it is so hard to get into the doctor?

Our doctor is like two weeks minimum wait.

I went for something resembling a cold last year, but it had been ongoing for months. That led to our allergy discovery.

So, no, not for a real cold, but something lingering forever, sure.

 

[LutherBlue]

I think one of the primary HSA benefits is that overall, they motivate healthy lifestyles. I have never heard anyone argue that HSAs are good because they discourage overuse of the health care system.

 

[EnhancedFujita]

I guess I'm not sold on the HSA thing. Healthcare costs can be so high that I question that you'd be able to adequately save for something in the HSA account. My wife recently had a surgery on her septum to help with frequent sinus infections and the make some of her allergies better. The bill through insurance was $35,000, for something that wasn't a critical, life endangering need. It certainly increased her quality of life, but I question how well we could have afforded that under an HSA/HDHP scenario, especially with two kids that leave giant question marks on what their health expenses will be (never know when someone will break a bone being a kid). So we do traditional health insurance through our employers. She has hers through ISU and our only out of pocket costs for the $35,000 procedure were the copays. I'm sure under the HSA/HDHP scenario, we might have been able to negotiate the costs down some, but IMO not enough to make it worthwhile to not be on traditional insurance. I guess it probably comes down to the cost of the coverage from the employer. We both have good employers that cover a large share of the cost.

 

[Cyclonepride]

I've tried talking my wife into a catastrophic plan with the difference between what we're paying now and the cost of that plugged into an HSA, but she just doesn't like the risk. We would have been money ahead for about 9 of the last 10 years, and the 10th was probably a break even. We are getting up there in age, so I suppose it may be more of a gamble going forward now.

 

[Cyclonepride]

I guess I'm not sold on the HSA thing. Healthcare costs can be so high that I question that you'd be able to adequately save for something in the HSA account. My wife recently had a surgery on her septum to help with frequent sinus infections and the make some of her allergies better. The bill through insurance was $35,000, for something that wasn't a critical, life endangering need. It certainly increased her quality of life, but I question how well we could have afforded that under an HSA/HDHP scenario, especially with two kids that leave giant question marks on what their health expenses will be (never know when someone will break a bone being a kid). So we do traditional health insurance through our employers. She has hers through ISU and our only out of pocket costs for the $35,000 procedure were the copays. I'm sure under the HSA/HDHP scenario, we might have been able to negotiate the costs down some, but IMO not enough to make it worthwhile to not be on traditional insurance. I guess it probably comes down to the cost of the coverage from the employer. We both have good employers that cover a large share of the cost.

That's where the catastrophic plan comes in. If everyone was using HSA's, I think it would help bring costs down as people would tend to be a little more careful with their money, and analyze their bills more closely.

 

[Cybirdy]

I guess I'm not sold on the HSA thing. Healthcare costs can be so high that I question that you'd be able to adequately save for something in the HSA account. My wife recently had a surgery on her septum to help with frequent sinus infections and the make some of her allergies better. The bill through insurance was $35,000, for something that wasn't a critical, life endangering need. It certainly increased her quality of life, but I question how well we could have afforded that under an HSA/HDHP scenario, especially with two kids that leave giant question marks on what their health expenses will be (never know when someone will break a bone being a kid). So we do traditional health insurance through our employers. She has hers through ISU and our only out of pocket costs for the $35,000 procedure were the copays. I'm sure under the HSA/HDHP scenario, we might have been able to negotiate the costs down some, but IMO not enough to make it worthwhile to not be on traditional insurance. I guess it probably comes down to the cost of the coverage from the employer. We both have good employers that cover a large share of the cost.

If you have a HDHP/HSA you more than likely still have health coverage--just a higher deductible. Once that deductible is met, cost are covered at whatever % your plan is. Ideally you put enough in your account to cover that deductible should something catastrophic happen. If you don't meet your deductible, then you have saved that $ and it is there for the next year/years. We have been on a HDHP plan for at least 10 years. In that time we have had multiple hospital stays/ER visits for kids, three surgeries (all for the same child who has potential health issues), 2 new babies, and all that comes with that and still have built up a significant savings in our HSA. So in the year one kid had an ER visit, CT scan, ambulance ride, surgery, and a week long hospital stay in PICU we just had to pay our deductible then everything else was covered. And since we had our HSA, we had the $ to cover the deductible. There was no need to negotiate any prices down or anything.

 

[EnhancedFujita]

That's where the catastrophic plan comes in. If everyone was using HSA's, I think it would help bring costs down as people would tend to be a little more careful with their money, and analyze their bills more closely.

But the point is, I don't think her procedure would be considered catastrophic. One could certainly argue that it was an elective thing. It wasn't going to cause her any life threatening danger. So I question if it would have been covered under a catastrophic plan and I doubt we would have done the procedure knowing that it would have had that large amount of cost. However, she is certainly better for having done it.

Again, the decision point probably comes down to how much your premiums are each month for the coverage offered by the employer. We both work for employers that cover a lot of our premium cost, I'd be surprised if we paid more that $150 a month for coverage. Certainly HSA/HDHP might be more beneficial to someone with a higher monthly cost.

In the end, I think the real solution to solving healthcare costs would be looking at how hospitals and doctors bill insurance. There is such a vast difference on how different insurance plans are billed that it's almost impossible to know what the true cost of the service actually is.

 

[Cyclonepride]

But the point is, I don't think her procedure would be considered catastrophic. One could certainly argue that it was an elective thing. It wasn't going to cause her any life threatening danger. So I question if it would have been covered under a catastrophic plan and I doubt we would have done the procedure knowing that it would have had that large amount of cost. However, she is certainly better for having done it.

Again, the decision point probably comes down to how much your premiums are each month for the coverage offered by the employer. We both work for employers that cover a lot of our premium cost, I'd be surprised if we paid more that $150 a month for coverage. Certainly HSA/HDHP might be more beneficial to someone with a higher monthly cost.

In the end, I think the real solution to solving healthcare costs would be looking at how hospitals and doctors bill insurance. There is such a vast difference on how different insurance plans are billed that it's almost impossible to know what the true cost of the service actually is.

Ah, that does make a difference. I agree that the billing systems are a joke. There should be fair, publicly available price structures.

In my case, I think we would have saved about $8000-$10,000 a year in premiums that could be put into an HSA. As I mentioned, that would have put us money-ahead 9 of the last 10 years.

 

[Cyclophile1]

Yeah, I think it's a good option overall in a range of options. I guess my biggest beef with them is that it seems now the High Deductible Plan is Option #1 of a grand total of 1 plans offered by the employer. In my nearly 30 years of working now, I've seen the plan offerings from employers go from four different plans to three decent options, to now just the only coverage option. I spent over 25 years subsidizing the plans I've been in without anything more than an a cortizone shot in my elbow, and now that I'm entering the years where I may need to use some services in the next decade or so, there aren't any lower deductible plans and I don't have 25+ years worth of HSA accumulated savings. I suppose one could say I should have saved money along the way to pay for it, and they would have a point. I would loved to have seen the HSA HD plans be more widely available when I was young, because it would have really paid off for us. I'm glad they will be more mainstream now and I hope that the Millenials and Gen Zeds will learn from the mistakes of us from the previous generations, given there are so numerous and clear for anyone willing to examine them (that goes for a number of policies really).

 

[LarryISU]

I had my first HSA plan at age 50 until I retired last Fall at 62. I have $65,000 saved up in the HSA, all tax-free of course, which I will use for medical expenses as needed long into the future as well as to pay my Medicare premiums once I turn 65. In my 12 years on the plan we had a couple occasions where we reached our family deductible amount of $4,000. However, if I had been on regular insurance I would have paid roughly $4,000 more every year in extra premium costs based on what my employer offered. So for me it was a no-brainer.

And as others have stated, an HSA does make you more selective in when you go to the doctor, which is a good thing I believe. There are far too many people getting the taxpayers to fund their medical expenses while they choose to spend their own money on cigarettes, alcohol, drugs, cell phone, cable TV, jewelry, aka the bare necessities in America.

 

[cowgirl836]

Yeah, I think it's a good option overall in a range of options. I guess my biggest beef with them is that it seems now the High Deductible Plan is Option #1 of a grand total of 1 plans offered by the employer. In my nearly 30 years of working now, I've seen the plan offerings from employers go from four different plans to three decent options, to now just the only coverage option. I spent over 25 years subsidizing the plans I've been in without anything more than an a cortizone shot in my elbow, and now that I'm entering the years where I may need to use some services in the next decade or so, there aren't any lower deductible plans and I don't have 25+ years worth of HSA accumulated savings. I suppose one could say I should have saved money along the way to pay for it, and they would have a point. I would loved to have seen the HSA HD plans be more widely available when I was young, because it would have really paid off for us. I'm glad they will be more mainstream now and I hope that the Millenials and Gen Zeds will learn from the mistakes of us from the previous generations, given there are so numerous and clear for anyone willing to examine them (that goes for a number of policies really).

there were several changes to our benefits this year that were not beneficial to the individual. They started offering the HDHP plan and I am highly suspicious that it will shortly be the only plan offered. For those of us who are younger, it may not be too bad but we have plenty of employees who would be in a similar position to you.

 

[Cyclophile1]

Ah, that does make a difference. I agree that the billing systems are a joke. There should be fair, publicly available price structures.

In my case, I think we would have saved about $8000-$10,000 a year in premiums that could be put into an HSA. As I mentioned, that would have put us money-ahead 9 of the last 10 years.

Yeah, we all acknowledge it's a very complex system, but just a few reforms would go a long, long way to making the system function so much more efficiently and transparently. Not being able to charge Jones 5X what Smith is paying would help tremendously - all those offering services should have a publicly posted price structure is one of the most. We already have the list based on Medicare pricing, so it's just good old fashioned misbehavior to keep this under wraps. Karl Denninger has written extensively on this and a number of common sense policies that could save hundreds of billions. We'll have to face them sooner or later, so why not face them sooner.

https://market-ticker.org/akcs-www?post=232164

 

[Cyclophile1]

I guess I'm not sold on the HSA thing. Healthcare costs can be so high that I question that you'd be able to adequately save for something in the HSA account. My wife recently had a surgery on her septum to help with frequent sinus infections and the make some of her allergies better. The bill through insurance was $35,000, for something that wasn't a critical, life endangering need. It certainly increased her quality of life, but I question how well we could have afforded that under an HSA/HDHP scenario, especially with two kids that leave giant question marks on what their health expenses will be (never know when someone will break a bone being a kid). So we do traditional health insurance through our employers. She has hers through ISU and our only out of pocket costs for the $35,000 procedure were the copays. I'm sure under the HSA/HDHP scenario, we might have been able to negotiate the costs down some, but IMO not enough to make it worthwhile to not be on traditional insurance. I guess it probably comes down to the cost of the coverage from the employer. We both have good employers that cover a large share of the cost.

Here is the problem we're caught in now with the $35,000 "list price" on the surgery. We're all playing a kind of shell game with the providers and the carriers to see how much they are willing to pay. The true "cost" for the surgery is probably closer to 1/10th or 1/8th of that listed price, and they are just more or less negotiating for the most revenue. How much would that surgery have cost at a straight fee-based center like the Surgical Center of Oklahoma?

https://surgerycenterok.com/?procedure_category=nose#jump

The high end there is $6,000 to $7,000 on the various nasal surgeries.

It bugs me a bit that they can get away with the "AMAZON lightning deal" marketing subterfuge by slashing through the $35,000 price tag to mentally move the shells around and persuade you that the $9,500 final bill is a "good deal." And the truly damning thing is that some well-off, trusting and non-discerning folks could end up paying $20,000 (or god forbid the full $35,000) if no one is looking out for them.

I'd like to see a state like Oklahoma go in fully on the HSA with transparent pricing, and see what happens to costs. Subsidize the elderly and the poor with some public money with some $2,000 or $2,500 for their HSAs and make folks care about prices for their health services again. Denninger says that will bring costs way, way down. It only works with transparent pricing however, so it's probably a pipe dream.

 

[wxman1]

Overall I like the HDHP/HSA mostly due to it being pre-tax. That being said I don't see how it will have any affect on medical costs. I had appendicitis a couple of months ago and some of the costs have been crazy to see. $700 for pre-op where the only thing they did was shave my stomach is my favorite. The total bill for everything (have to add up several different billings) ended up at $33k for an ER visit, MRI, meds, one night stay, a quick surgery, and one follow up visit that lasted 2 minutes.