Are health savings accounts (HSA) a good idea?

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To be honest I don't even know where to start with questions because I don't know much about HSAs and I have been tasked with finding out whether it is a good idea to get insurance with a HSA or if I should just get regular health insurance.

Can anybody help?

Can you explain it in idiot understandable terminology?

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Is an HSA the same as an MSA (medical spending account)? If so, it allows you to set aside a certain number of dollars from each paycheck to pay for medical expenses with pre-tax dollars. If they're the same thing, I can go into more detail.

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Here's what the site says about them. I don't really understand it. If you have one in conjunction with your health insurance, is your deductible lower, your co-pay, what? What is the benefit, other than taxes?

Quote:

The Brand X HSA-Qualified plan provides comprehensive health care coverage and is eligible to be used with an HSA. HSAs are special tax-deductible accounts that work with HSA-qualified health plans. Much like an Individual Retirement Account (IRA), an HSA is established through annual contributions by you. In the case of the HSA you can contribute up to 100 percent of your plan's deductible amount - or up to the maximum contribution levels determined by the Internal Revenue Service each year. The primary purpose for opening an HSA is to save funds for future medical expenses. The second reason is to save funds for retirement in addition to other retirement vehicles.

Health savings accounts are managed by HSA trustees, usually a bank or other financial institution. You choose the bank that will administer your health savings accounts. For health savings account information, including investment options and the availability of an HSA debit card, you should consult the bank administering your HSA.

For your convenience, we have partnered with U.S. Bank, an FDIC-insured financial institution. U. S. Bank will establish and administer your Health Savings Account. U.S. Bank will provide:

Monthly statements, either paper or online, showing your account activity.
Online and toll-free access to account information.
Mutual fund investment options for a portion of your HSA funds
An HSA debit card and checks for quick, easy payment of qualified medical expenses (QME). Please see www.irs.gov for a list of QMEs.

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Here is the low down on HSAs. IMO, if you have fuilly funded your 401k/IRAs and have extra money you can stash away then it is a good way to do it - more so if you, your spouse or a child has some sort of chronic medical condition. They require that you have a "high deductible" insurance policy though so if you don't have that you don't qualify for one.

http://www.ustreas.gov/offices/public-affairs/hsa/

(Read the FAQ! Smile

)

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Thanks fishin'! I'm looking over the site right now and will probably have some NSFAQs (not so FAQs) coming....

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boomerang wrote:

Here's what the site says about them. I don't really understand it. If you have one in conjunction with your health insurance, is your deductible lower, your co-pay, what? What is the benefit, other than taxes?

The idea was that you could buy a high deductible insurance policy which, in theory, would have lower monthly premiums and save money in the HSA to cover any deductibles if you ran into a medical expense. If you don't have many medical expenses then the account continues to grow and you can maintain it for the rest of your life to cover medical expenses in retirement - all of it done tax free.

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So essentially -- if you spend less than $10,000 for your family's health care in the course of a year then an HSA is a good idea.

If something catastrophic or chronic happens you pay the high deductable every year and then the insurance kicks in.

Instead of paying $10,00 a year for regular insuarance (about what we paid on our old insurance premiums) we would pay maybe $4,000 and contribute $6,000 into the HSA (this is a wild guess).

The $6,000 contribution would not be taxed.

Does that sound right?

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boomerang wrote:

So essentially -- if you spend less than $10,000 for your family's health care in the course of a year then an HSA is a good idea.

If something catastrophic or chronic happens you pay the high deductable every year and then the insurance kicks in.

Instead of paying $10,00 a year for regular insuarance (about what we paid on our old insurance premiums) we would pay maybe $4,000 and contribute $6,000 into the HSA (this is a wild guess).

The $6,000 contribution would not be taxed.

Does that sound right?

That's the basic jist of it. I think the deductible limit is a minimum of $1,050 for a single person or $2,700 for a family this year to qualify as "high deductible".

If your current policy is being paid for pre-tax by your (or Mr. Boomer's) employer then there probably isn't any benefit in all of this for you. The whole thing is really geared toward retiree's that don't have health insurance from a former employer and that are paying for insurance themselves.

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Our old policy was held by the company I owned - recently dissolved.

That is why we're switching.

Mr. B is self employeed. The new insurance is not through his company but just simply a family policy.

We are in our mid - 40s and Mo is 6.

I think the reason that he wanted me to look into HSAs was because we are all pretty healthy - I doubt we spend anywhere near $10,000 a year on health care. But then again, I have no idea what a mamogram costs, or Mo's thumb x-ray, or Mr. B's cholestorol check costs on the open market. Maybe we do spend $10,000 a year and I just don't know it.

What is the going rate for a routine physical?

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Ok! I would check with whoever you currently have your insurance through and ask them if your existing policy qualifies as a high-deductible policy. If it doesn't ask them what the monthly premium would be on a high-deductible policy through them.

The differences should give you a good idea of how much you'd want to put away in a HSA. One other nice thing about the HSA - you can use it to buy things like over-the-counter meds too. Any money you spend on asprin or Nyquil could come from the tax free account.

I'd have to guess that the first few years would be strictly trial and error. If you use a program like Microsoft Money to track your household expenses you could probably keep pretty good track of things and know where you stand from year to year.

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Thanks! I think I'm starting to get a handle on this!

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Are health savings accounts (HSA) a good idea?

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