Pete the Planner: A Critical Look at Health Savings Accounts, a Financial Product I Like

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Pete the Planner: A Critical Look at Health Savings Accounts, A Financial Product I Like
Peter Dunn, Special for USA Today/ Money/ Personal Finance/ usatoday.com

"I thought they were playing a trick on me.

“That will be $225,” the nurse exclaimed as I was checking out of my doctor's office after a 10-minute consultation that determined that I didn’t have the flu.

I extended my neck toward her like a turtle listening to a secret, “Excuse me?” Yet, there was no mistake. This was my first visit to a doctor after my health coverage switched to a high-deductible health plan accompanied by a Health Savings Account (HSA). Where the same visit would have cost me $20 just a few months prior, it now cost me $225.

Health Savings Accounts (HSAs) are often identified as the solution to our health care cost problems. Yet for many Americans, HSAs can create a wake of financial destruction after the most benign trip to the doctor. This is because with HSAs, the patient is responsible for all health care costs until the deductible is met....."

(Photo: iStockphoto)


Richard

 

[Steve Fatula]

This is because with HSAs, the patient is responsible for all health care costs until the deductible is met....."

That's certainly true of course. But let's look at the other side.... The cheapest possible plan I can buy here is over $900 per month with an almost $5,000 deductible, that obviously does not avoid paying for the example visit. I can pay $1,300 a month and avoid the big deductible - great! Hardly, it's a terrible idea. BTW - I just had a doctor visit and claimed the cash rate for a physical. The cash rate for the physical with blood work was $79. Cheaper than if billed through insurance. While the "patient is responsible for all health care costs until the deductible is met.", it is also true that the patient only pays the negotiated plan rate for the service. The $225 quoted is ridiculous for an office visit. Either they incorrectly paid the billed amount (not the discounted insurance amount), or, their health plan is worthless since that indicates they would have paid the doctor $225.

HSAs are definitely not a solution to any crisis. They are very suitable for some, but not for others. Like most things in healthcare. Definitely you need to be able to fund them. The earlier one starts (when healthy ideally), the more money they have down the road and the more money they will save over their lifetime in premiums and out of pockets expenses.

My sister switched from a traditional work plan, to a HDHP with HSA. The company paid for her HSA, maximum donations each year, and, the plan. The cost of those 2 items combined was HALF of the previous plan. She pays all costs up to $5,000/year. She is pretty healthy. Therefore, each year, she gets all that money deposited into her HSA, kind of like a bonus you might say. Sure, she pays the first $5k, however, she's up to over $20k now in her account. So, since her HDHP pays 100% after the $5k, this means 4 years of real bad sickness (plus the money the company adds each year during those 4 years) at $0 out of pocket cost. This is supposed to be a bad deal!?

I find the article very misleading, biased, and distorted facts to say the least. I see too many articles that pick on paying a deductible like paying vastly more monthly is somehow always better.

 

[bbodb1]

This:

....
Health Savings Accounts (HSAs) are often identified as the solution to our health care cost problems. Yet for many Americans, HSAs can create a wake of financial destruction after the most benign trip to the doctor. This is because with HSAs, the patient is responsible for all health care costs until the deductible is met....."

is absolute crap.

HSA's are nothing more than a savings/investment account designated to pay medical expenses.
HSA's do NOT create financial destruction UNLESS the investments you choose with your HSA funds go in the tank. And then it is only the funds you placed in the HSA that you would lose.
Financial destruction from unexpected medical bills is a result of poor, inadequate or no insurance.
HSA's ≠ Insurance.

 

[Steve Fatula]

This:



is absolute crap.

HSA's are nothing more than a savings/investment account designated to pay medical expenses.
HSA's do NOT create financial destruction UNLESS the investments you choose with your HSA funds go in the tank. And then it is only the funds you placed in the HSA that you would lose.
Financial destruction from unexpected medical bills is a result of poor, inadequate or no insurance.
HSA's ≠ Insurance.

I was trying to be nice.

It's clear to me the author or the article really has no clue what an HSA is or how to use it. Which is not unusual.

 

[bbodb1]

I was trying to be nice.

It's clear to me the author or the article really has no clue what an HSA is or how to use it. Which is not unusual.

I certainly admit I am no expert when it comes to HSA's but even a cursory level of HSA knowledge would tell you the statements in the article were......well...wrong.

On a related note, we are getting closer to the point in life where we can consider retirement in the coming years. In preparation for those years, we have been depositing as much money as possible into our HSA (not at the expense of 401-K or IRA's). At some point soon, I am going to need to grapple with (in hopes of gaining a useful, working understanding) of Social Security and Medicare. If I understand correctly, we should be able to use our HSA to pay for medical bills outside of that covered my Medicare BUT the question we need to consider is do we need supplemental health insurance. We are about 11 years away from full retirement but we still have not made the decision on whether or not to wait that long. In the meantime, we will do everything we can to keep pumping up those retirement related accounts and our HSA.

If I understand correctly, when the day comes where we retire and no longer have a health plan from an employer, we CAN use HSA funds to pay the premiums for any supplemental health insurance we purchase. Whether or not we would want to do that is another story and will likely depend on our health status at that time.

In a roundabout way, I guess I'm trying to say the closer I get to retirement, the more complex it appears!

 

[Passepartout]

Been there, done that. Have the T-shirt for proof. If you go the 'drop traditional insurance, go the HSA/high-deductible route', instead of relying on your insurance carrier to negotiate a rate on your behalf- like in the writer's example, there is nothing to stop you from either asking your doc (or his back office person) for a discounted rate- equal to what they would get from (name an insurance plan)- and you'll pay them when service is rendered rather than waiting for (sometimes) months for the insurance to pay. You might have to change physicians, or even go to a 'Doc-In-a-Box' urgent care facility, but you don't have to just pay the full-bore retail walk-in price. And on prescriptions, get the slip from the doc and shop it around pharmacies in your area. (hint) Costco is usually the low-price 'script provider- except for mail-order.

Jim

 

[Steve Fatula]

You should either get supplemental insurance (gap) on top of Medicare, or, go for an Advantage plan. Both have advantages, and it can be complicated to figure it all out for sure! You can use your HSA to pay for any non paid by any insurance medical bills. Once you are 65, the money is yours, you can withdraw it, taxed of course, but no penalty. Paid from the account, they can not be used to pay for supplemental insurance policies, but they can pay for Part A, B, etc.

 

[Steve Fatula]

Been there, done that. Have the T-shirt for proof. If you go the 'drop traditional insurance, go the HSA/high-deductible route', instead of relying on your insurance carrier to negotiate a rate on your behalf- like in the writer's example, there is nothing to stop you from either asking your doc (or his back office person) for a discounted rate- equal to what they would get from (name an insurance plan)- and you'll pay them when service is rendered rather than waiting for (sometimes) months for the insurance to pay. You might have to change physicians, or even go to a 'Doc-In-a-Box' urgent care facility, but you don't have to just pay the full-bore retail walk-in price. And on prescriptions, get the slip from the doc and shop it around pharmacies in your area. (hint) Costco is usually the low-price 'script provider- except for mail-order.

Jim

HDHP with Blue Cross. Doctor bills Blue Cross $500, Blue Cross discounts it to $100 and applies this to the deductible. I pay $100 from the HSA. The HDHP plans discount still applies. The rate because it is a HDHP does not really have anything to do with HDHP. They still apply discounted rates. The authors plan was simply abysmal. But that is not a feature of HDHP. At the doctors office, they actually knew what BCBS would pay and therefore only took $100. There was no delay, no waiting, nothing different than any other insurance. A HDHP is just a health plan like any other, other than you can put funds into an HSA. They may have networks of doctors (like any other plan may have), or they may be PFFS (like any other plan may be). Again, not a feature of HDHP.

The idea here is instead of paying way more for insurance, you pay less. Yes, you have to pay more until you reach your deductible, if you ever do, but, so what, you've saved that in premiums.

I find goodrx much cheaper than Costco. YMMV.

 

[Passepartout]

If I understand correctly, when the day comes where we retire and no longer have a health plan from an employer, we CAN use HSA funds to pay the premiums for any supplemental health insurance we purchase. Whether or not we would want to do that is another story and will likely depend on our health status at that time.

In a roundabout way, I guess I'm trying to say the closer I get to retirement, the more complex it appears!

This is both true- and correct. I think you'll very likely choose a Part D prescription plan wrapped up in a Medicare supplement. They are not all that expensive. This year Medicare takes $155/mo from SS (it goes up every year) and iirc, our supplement is about $45/mo more. On a personal level, they make money on me. I only take one fairly cheap generic statin, but my wife is on front line oral chemo that's retail cost is $20,000 a month & she just pays 5% of that because she's beyond the 'donut hole' of coverage. And you do tend to think, 'I'm fairly healthy and won't get the supplemental coverage yet- until I need it', but the catch is you NEVER KNOW when you'll need it, and there is usually no warning. And you have to buy it during the annual enrollment period from Oct. to mid Dec. Miss the enrollment and you're stuck until the next period except under special circumstances.

Them's my $.02 worth.

Jim

 

[Steve Fatula]

This is both true- and correct. I think you'll very likely choose a Part D prescription plan wrapped up in a Medicare supplement. They are not all that expensive. This year Medicare takes $155/mo from SS (it goes up every year) and iirc, our supplement is about $45/mo more. On a personal level, they make money on me. I only take one fairly cheap generic statin, but my wife is on front line oral chemo that's retail cost is $20,000 a month & she just pays 5% of that because she's beyond the 'donut hole' of coverage. And you do tend to think, 'I'm fairly healthy and won't get the supplemental coverage yet- until I need it', but the catch is you NEVER KNOW when you'll need it, and there is usually no warning. And you have to buy it during the annual enrollment period from Oct. to mid Dec. Miss the enrollment and you're stuck until the next period except under special circumstances.

Them's my $.02 worth.

Jim

Not to mention, if you do not buy a Medigap policy at age 65, you could be in trouble as insurance companies do not need to sell you the policy if they don;t want to, think you are a high risk, etc.

See: https://www.caring.com/articles/medigap-insurance-eligibility

 

[mjm1]

I have health insurance under a retirement plan from my former employer. It was a regular plan through United Healthcare. The company is now switching everyone over to a low, mid or high deductible plan starting July 1. After looking at it, we decided to go with the mid deductible plan for the first year to see how it works for us. We will also have a HSA account for each of us and will make maximum contributions. We will also ask our doctors about paying directly and some have suggested. Our premiums are less than they use to be and if nothing unusual comes up health wise, I suspect we will come out ahead. It will be interesting to see how this all works out for us, both in the short term and long term.

Best regards.

Mike

 

[heathpack]

We got bought by a big corporation this year and the only health insurance option for us now are one of several high deductible plans, all of which are eligible for HSAs. At first I thought this was a bad thing but its turned out to be kind of ok.

First, even though my insurance was previously covered by my employer, I had to pay for my husband's insurance. Now we are both covered by a high deductible plan at a lower monthly cost to me than our old plans.

Second, the corporation put money (a one time thing) into our HSAs for us to get us started. The amount of money they gave us was based on years of service and number of people each of us was buying insurance for. I got $5000 to start my HSA.

Third, a HSA is currently the most tax-advantaged savings vehicle that exists. My hope is to spend minimally out of it, try to pay whatever I can out of pocket until I retire. Why? Because prior to retirement, its good- I put pre tax dollars in and I can use that money for medical expenses if I need to and never pay taxes on it. After retirement, it gets even better- then I can use the money for medical expenses and never pay taxes, just like before I retired. OR I can use the money like a 401K, spend it on whatever I want, I just have to pay whatever my tax rate is at the time I withdraw the money. Fingers crossed that I'll be able to sock money away in this account over the years... Right now the plan is HSA + 401K, both funded to the fullest extent.

 

[Steve Fatula]

We got bought by a big corporation this year and the only health insurance option for us now are one of several high deductible plans, all of which are eligible for HSAs. At first I thought this was a bad thing but its turned out to be kind of ok.

First, even though my insurance was previously covered by my employer, I had to pay for my husband's insurance. Now we are both covered by a high deductible plan at a lower monthly cost to me than our old plans.

Second, the corporation put money (a one time thing) into our HSAs for us to get us started. The amount of money they gave us was based on years of service and number of people each of us was buying insurance for. I got $5000 to start my HSA.

Third, a HSA is currently the most tax-advantaged savings vehicle that exists. My hope is to spend minimally out of it, try to pay whatever I can out of pocket until I retire. Why? Because prior to retirement, its good- I put pre tax dollars in and I can use that money for medical expenses if I need to and never pay taxes on it. After retirement, it gets even better- then I can use the money for medical expenses and never pay taxes, just like before I retired. OR I can use the money like a 401K, spend it on whatever I want, I just have to pay whatever my tax rate is at the time I withdraw the money. Fingers crossed that I'll be able to sock money away in this account over the years... Right now the plan is HSA + 401K, both funded to the fullest extent.

You have a great plan! I've had my HSA for around 12 years now. I wish they had been available when I was 30 years younger! I am still paying all medical expenses out of my HSA, even though I have not had a HDHP for 5 years now. Since I am retired, this is great as my monthly expenses are pretty much fixed. I think you are on the right page.

 

[WinniWoman]

We have had one for years through my husband's employer. Comes out of his paycheck before taxes. Only one high deductible plan is offered and no other choices for another type of insurance. We pay $200 per month for me for the health insurance and nothing for him. We contribute the max to the plan each month. The employer is cheap with it's contributions to it, however. They make employees go through all kinds of hoops under the guise of "wellness" programs that you have to complete just to get $200 per person. Really annoying. I always find ways around it- like I play the videos while I am doing other things elsewhere and when they are finished I come back and just answer the questions. Not to mention, outright fake some of the other activities- yeah I did 10,000 steps today. Yeah- I got 8 hours sleep today. Yeah- I ate 10 servings of fruits and veggies today. Tracked. Stupid. LOL!

I think how much money we would have had saved in an HSA if we had these from the very start of our working life.

Anyway, I think there are instances where patients paying cash when they have insurance is actually illegal for the health facility to accept due to contracts.

 

[elaine]

I see why HD is great for young and never going to the Dr. or those who have a big difference in premium or where employer pays the HSA part. But what about for a middle-aged family of somewhat relatively high medical consumers? We're 5 persons on family plan-brand name meds for me and DH, plus $500+/year of asthma brand name inhalers, monthly Dr. appt for one kid, maybe out-patient surgery about EOY year, plus some ultra sounds, labs, screenings for 55+, etc. I was under the impression that we were still better with regular PPO coverage because we are definitely out at least $3K a year just in copays, and would likely be over $5K with HD. Plus, the premiums are not much different and I don't think that employer contributes to our HSA. We have BCBS and I know the system--but if something else is better....

 

[PigsDad]

I see why HD is great for young and never going to the Dr. or those who have a big difference in premium or where employer pays the HSA part. But what about for a middle-aged family of somewhat relatively high medical consumers? We're 5 persons on family plan-brand name meds for me and DH, plus $500+/year of asthma brand name inhalers, monthly Dr. appt for one kid, maybe out-patient surgery about EOY year, plus some ultra sounds, labs, screenings for 55+, etc. I was under the impression that we were still better with regular PPO coverage because we are definitely out at least $3K a year just in copays, and would likely be over $5K with HD. Plus, the premiums are not much different and I don't think that employer contributes to our HSA. We have BCBS and I know the system--but if something else is better....

We are in the same situation as you, and the HD w/ HSA plans would not have saved us money the last couple of years that we have done our comparisons. My spouse and I work for the same company, and even though the company would contribute about $1500 into our HSA if we went to a HD plan, we would still be out more money under those plans vs. the PPO that we currently have. The premium difference is really not that much, and we have some very expensive meds (Humira is the big one). Combine that with the required "specialist" doctor visits and the HD w/ HSA plans don't make sense for us.

Kurt

 

[heathpack]

I see why HD is great for young and never going to the Dr. or those who have a big difference in premium or where employer pays the HSA part. But what about for a middle-aged family of somewhat relatively high medical consumers? We're 5 persons on family plan-brand name meds for me and DH, plus $500+/year of asthma brand name inhalers, monthly Dr. appt for one kid, maybe out-patient surgery about EOY year, plus some ultra sounds, labs, screenings for 55+, etc. I was under the impression that we were still better with regular PPO coverage because we are definitely out at least $3K a year just in copays, and would likely be over $5K with HD. Plus, the premiums are not much different and I don't think that employer contributes to our HSA. We have BCBS and I know the system--but if something else is better....

We haven’t really incurred many medical expenses since we moved to the high deductible plans.

But if I recall correctly, preventative screening type tests are covered (ie colonoscopy) even by high deductible plans. Although I think this is an Obamacare mandate, so definitely could be done away with by the current administration.

We are not young (52 and 57) and both are on prescription meds. One (a cholesterol med) is covered as I understand it by high ded plans (again I think an Obamacare mandate, could go away). Mine was going to go from a $15 copay per month to $135/month. I talked to our pharmacy (Rite Aid) and they said “no problem, fill out this form and we’ll put you into our discount drug program.” Ok so I did that and now my med is $10/month! I just pay that out of pocket, rather than use my HSA money.

Point being: there’s a big learning curve with these high deductible plans but it’s worth ferreting out some of the details, you might be surprised.

 

[WinniWoman]

Just know for colonoscopies, your first screening is covered 100%, but if the doc find polyps, your follow up ones in the subsequent years will never be considered screenings again, but follow ups and you will have to pay big bucks out of pocket. Happened to me already- thousands.

 

[SandyPGravel]

Just know for colonoscopies, your first screening is covered 100%, but if the doc find polyps, your follow up ones in the subsequent years will never be considered screenings again, but follow ups and you will have to pay big bucks out of pocket. Happened to me already- thousands.

I was going to mention the same thing, but you beat me to it. Same with cholesterol testing. Once you are put on a statin, it is considered treatment, not screening and you will be paying for those tests. I've been on a statin for over 20 years since I was 28 years old. I was 130 pounds, 5' 8" tall and had a test come back at 288, lucky genetics for me!!

 

[Steve Fatula]

Just know for colonoscopies, your first screening is covered 100%, but if the doc find polyps, your follow up ones in the subsequent years will never be considered screenings again, but follow ups and you will have to pay big bucks out of pocket. Happened to me already- thousands.

I think it depends on your insurance. With my health sharing plan, it's covered. However, no polyps so 10 years for me. Discounted price that it would have cost me would have been $1574.

During the time we had a HDHP, we saved around $15,000 in premiums over 5 years. At no additional expense (cost). So, that's money in the HSA, which I can use including with Medicare with no tax. So, that makes the actual savings more like $20,000 since no tax is ever paid.

 

[rapmarks]

I was put on a station last year and my blood tests have been covered.

 

[geekette]

Been there, done that. Have the T-shirt for proof. If you go the 'drop traditional insurance, go the HSA/high-deductible route', instead of relying on your insurance carrier to negotiate a rate on your behalf- like in the writer's example, there is nothing to stop you from either asking your doc (or his back office person) for a discounted rate- equal to what they would get from (name an insurance plan)- and you'll pay them when service is rendered rather than waiting for (sometimes) months for the insurance to pay. You might have to change physicians, or even go to a 'Doc-In-a-Box' urgent care facility, but you don't have to just pay the full-bore retail walk-in price. And on prescriptions, get the slip from the doc and shop it around pharmacies in your area. (hint) Costco is usually the low-price 'script provider- except for mail-order.

Jim

I have had high deductible plans for years now. Note that these ARE insurance, with negotiated rates. The difference is in the premiums -- higher for those using copays, lower for those of us paying "full freight" on negotiated rate. I get the same rate as my coworkers on the other "traditional" plan. Presumably the same adjustments and write-offs, too. I pay most expenses from pocket but the idea is to pay those from HSA. I don't understand the fear since HSA users get a lower premium which assists in shoving $ to HSA which then pays expenses. Simple. Go to doc, pay nothing until bill arrives, decide how you want to pay it, HSA or checking account. Large expenses can often be financed at 0%, which is what I am doing, paying all else from pocket. I can, at any time, reimburse myself for those 'pocket expenses' from my HSA.

A reminder that a person can visit any doctor that will set an appt for them, the only question is Who Pays? Nobody "has to" change doctors. Nobody.

Some doc offices will ask "who referred you?" and get confused when I say "Nobody". They seem to think that the only path to my medical records is a doctor referral. Nope, I go get em myself.

Agree completely on "shop around".

 

[geekette]

I see why HD is great for young and never going to the Dr. or those who have a big difference in premium or where employer pays the HSA part. But what about for a middle-aged family of somewhat relatively high medical consumers? We're 5 persons on family plan-brand name meds for me and DH, plus $500+/year of asthma brand name inhalers, monthly Dr. appt for one kid, maybe out-patient surgery about EOY year, plus some ultra sounds, labs, screenings for 55+, etc. I was under the impression that we were still better with regular PPO coverage because we are definitely out at least $3K a year just in copays, and would likely be over $5K with HD. Plus, the premiums are not much different and I don't think that employer contributes to our HSA. We have BCBS and I know the system--but if something else is better....

You'd have to run the numbers and take a close look at coinsurance %. My coinsurance is higher with HD plan vs the PPO offering so if I'm going to meet my deductible anyway, I'd like insurance picking up more of what's left.

 

[WinniWoman]

I have had high deductible plans for years now. Note that these ARE insurance, with negotiated rates. The difference is in the premiums -- higher for those using copays, lower for those of us paying "full freight" on negotiated rate. I get the same rate as my coworkers on the other "traditional" plan. Presumably the same adjustments and write-offs, too. I pay most expenses from pocket but the idea is to pay those from HSA. I don't understand the fear since HSA users get a lower premium which assists in shoving $ to HSA which then pays expenses. Simple. Go to doc, pay nothing until bill arrives, decide how you want to pay it, HSA or checking account. Large expenses can often be financed at 0%, which is what I am doing, paying all else from pocket. I can, at any time, reimburse myself for those 'pocket expenses' from my HSA.

A reminder that a person can visit any doctor that will set an appt for them, the only question is Who Pays? Nobody "has to" change doctors. Nobody.

Some doc offices will ask "who referred you?" and get confused when I say "Nobody". They seem to think that the only path to my medical records is a doctor referral. Nope, I go get em myself.

Agree completely on "shop around".

You can decide where to go, but with our plan for ex., they do have preferred providers which the negotiated rate is lower than if you go to a non-preferred provider.