So, I read an article on HSAs this AM, and just spent a fair bit of time looking at both the Treasury’s info. on them as well as the info. at http://www.hsainsider.com .
The savings plan/rollover/qualified benefits/tax-free part I get (the HSA itself). What I don’t get is the “insurance plan” part of it.
Here’s my sitch. I have a small company that administrates its own small healthcare group (we’re in that “2-25 members” category). Let’s say premiums for myself and my spouse are $600 a month. We’re young and healthy, so all of that money is basically being thrown in the trash right now (but I come from a family of medical professionals, so I’m not foolish enough to go uninsured). If I switch to an HSA-compatible health insurance plan, I’m ASSUMING that (a) the deductible would be higher (I don’t recall what my current deductible is) (b) therefore the premiums would be lower and © I could bank the difference in an HSA.
Is this correct? Or am I misunderstanding the whole situation? What IS the difference in premiums between HSA and non-HSA plans?
The difference is that money set aside in the HSA can be invested tax-free until it is used to pay the deductible on your health care policy–if ever. It’s a tax break.
Not the question I asked.
Is there a difference between the premiums of the two types? Or do my health premiums cost me exactly the same each year, but if I happen to have another $5,150 sitting around uninvested, I can stick it an HSA tax-free?
Well, here’s how mine works, althought it’s an MSA, not an HSA:
I choose a plan with a high deductible … mine is 3,000 … thus my premium IS smaller than that of most medical insurance plans.
Then I am allowed to put up to 80% of my deductible (per year) in the Medical Savings Account. I write checks out of this to the doctor, pharmacy, etc. The nice part is, that’s MY money to spend as I wish on medical expenses. Plus, I can put that much money into it every year.
Hope that helps.
Taking the HSA/MSA completely out of the equation, yes, generally the higher deductible, the lower the premiums. The logic in your orignal post makes sense:
Just to clarify, it’s not the difference per se that you are allowed to put into the HSA; there are round-figure amounts per person per year allowable by the tax code. I’d be happy to look them up if you want.
A Health Care Spending account is an insurance type account because you technically tell the plan your coverage amount and then payroll deductions are made based on that, but at any time you can take out more than you’ve contributed up to your coverage amount.
In other words, let’s say you say you want to put $2,400 into your HCSA, and your plan year starts on January 1st. You’re paid bi-monthly so that comes out to be $200 every pay period. On January 2nd you incurred a claim for the entire amount. Your employer is obligated to pay out the $2,400 even though you haven’t yet contributed one penny.
Furthermore, here’s the dirtly little secret many employers don’t want you to know… because it’s an insurance type account, if you quit the company you are under no obligations to return the money. That’s one of the negotiated reasons the IRS allowed HCSA’s to fall under section 125 and be collected pre-tax.
On the other hand, it’s a use it or lose it account. If you don’t use all the money, you’re employer can use the amount you forfeited to pay for plan expenses (and offset the folks that collected payments and then quit).
I used to work with employee benefits, but IANAL.
:smack:
OK, ignore my post - My post is accurate for Health Care Spending Accounts, but I now realize your referring to a Health Savings Account which is an entirely different animal. My apologies.
My sister who is blind and has ongoing issues with depression basically went from a $350 to $80/month premium by using a HSA to cover the high-deductible of her new plan. Basically, it’s concept is to reintroduce the patient to health-care costs to make better, more informed, and more health-conscious and money-conscious decisions. Do you really need that hand-MRI because you’ve been feeling pain for a week after hitting it with a hammer?-sort of deal.