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Topic Title: HSA for chronic illnesses?
Topic Summary: Can a Health Savings Account actually save you money if you have a chronic illness?
Created On: 10/12/2009 02:59 PM
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 10/12/2009 02:59 PM
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MyTMMO User
What's a Baby Step?

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I know in FPU, Dave says Health Savings Accounts (HSA) are best for healthy people and *not* for people with chronic illnesses.

But looking at the numbers, I think a HSA could actually save us money because we routinely rack up big medical bills due to chronic auto-immune and cardiac conditions.

Our combined medical spending last year was $8142.

The HSA would feature a $1500 deductible for us both, with a combined out of pocket maximum of $4500. The premiums for this plan are also $90 cheaper than the one we're currently using, saving another $1080.

This means we'd pay a maximum of $4500 for medical expenses, saving approximately $3102. Add the premium savings to that and we save $4188 if our medical expenses are comparable. (With chronic conditions, we expect the expenses to stay about the same, or more if there are complications.)

This doesn't count the savings we'll get from putting the pre-tax dollars into a HSA. I'm still unclear at how the HSA works at my husband's company, so I think that's the main thing keeping us from switching if my numbers are correct.

Am I on the right track? It would seem like an HSA would be great for something with routinely high medical bills, but I never see that advice anywhere.

Thanks!
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 10/12/2009 03:15 PM
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I also have a chronic condition with monthly high prescription copays. The HSA premium was lower than my previous plan and after covering the deductible with my first month's prescription I have just maxed out the out of pocket maximum and will have no more medical outlay for the rest of the year. Total cost savings on the year so far - $3000!
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 10/12/2009 03:18 PM
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Thank you for this post. I have been very interested in how people with chronic conditions feel about HSAs and how they compare. Obviously there are a ton of different plans out there but I am glad to see that for some with chronic conditions HSAs are not an impossibility.

Personally, I'm a fan. But I have no chronic conditions.
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 10/12/2009 03:28 PM
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I have a chronic condition, but it's pretty low cost and doesn't put me in the doctor's office much.

Like your plan, our maximum possible out of pocket for the entire family is $4500/year. And, if we look at only one family member with a chronic condition, it's only $1500/year. After we meet those deductibles, everything is covered 100%, including prescriptions.

From my pov, I think the plan is great for everyone with the exception of those who hit that "middle ground" of enough medical problems over the course of the year that they almost meet the deductible but "not enough" that they go well past the deductible into 100% coverage they'd have had to worry about co-pays with under other plans.

With our FFEF due to be complete by next summer, the risk/benefit is a good deal for us.
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 10/13/2009 12:12 AM
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MyTMMO User
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I haven't been to FPU so I can't say for that, but I listen to him as often as I can and over the summer, a caller had a question about HSAs, and he started with the, great if you're healthy etc etc then over the course of the answer, talked himself into realizing that it's good if you NEVER see the doctor, and good if you're ALWAYS at the doctor. Meaning, you can put $5000 or however much it is a year in your savings tax free and withdraw it immediately to pay a dr bill. So even if you spend only $5000 out of pocket a year, you still save the income tax on that income. And if your bills are over $5000 (most deductibles, but some are $10k), that's all you pay. It was interesting to hear how he talked through the whole thing, and changed his mind during the course of the conversation.

Personally, we have an HSA but aren't at the point yet where we take advantage of the savings. We spend (still) more on the insurance premiums than we do for doctor visits and prescriptions (our dr gives us a discount for cash, and yes we have prescriptions every month). So we are the never-go-to-the-doctor group, but we love our HSA.

Sidetrack and Hijack-

Personal opinion is that if more people took advantage of the HSA, and actually looked at doctor charges and determined themselves as patients what tests were needed and which were dr CYA, if more people were the "first dollar" instead of the insurance companies being "first dollar" - maybe we would have less need for health care/health insurance reform. We cut our premiums in half and still spend less out of pocket than we did with "traditional" health insurance! Of course, we have been lucky - only two emergencies in the 13 years we have had kids.

rant #2 -

caught a blip of a talk radio host (of the liberal shade) ranting about health care - she could NOT understand WHY on earth republicans/conservatives would "insist" that patients "haggle" with their doctors over health care. She thought it Beneath Her. My thought was, if I will haggle over a car, research the computer I want, wait until a sale to buy a pair of shoes, or use a coupon stacked on top of a sale for hot dogs, why WOULDN'T I research and discuss prices and payment with my doctor? Because it's (aghast) a PERSONAL confrontation? You have to actually talk to someone face to face? What few things in your life are more important than your health (family excluded)? On the one hand, doctors are ripping tonsils out unnecessarily from innocent children to pay for their Beemers, on the other, we should just trust them blindly when they want to do an MRI because I pulled the tiniest sliver of glass from DD's foot this morning? PICK ONE!

/hijack over/ Thanks for playin
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 10/13/2009 05:07 AM
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MyTMMO User
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not to hijack, b/c it's on the same topic, but with the HSA's, when you begin one (if I get this new job it's an option, I don't know details yet) say your max possible is 5k for the family, are you able to contribute just that much each year? Does it have to come out of your paycheck, or if you presently have it cash can you just move over the 5k to a HSA? My question really is, in the beginning what do you do if you have a medical emergency in the first month of coverage? How do you pay for that without having time for the auto-deductions to have come from your paycheck?
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 10/13/2009 06:23 AM
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Brad, these are some excellent questions to ask the benefits representative about your specific plan offerings. We asked the "Can we make direct contributions to the HSA rather than doing payroll deduction?" and are waiting on an answer. As for the second question, you will still need to ask cause HSAs are new to me and I know they are slightly different than FSAs but with FSAs, you are able to use the full amount you commit to the very first day of coverage. Then you would just spend the rest of the year paying for that coverage.
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 10/13/2009 01:28 PM
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One thing I don't understand about the HSA's is the "tax free savings", basically saving money tax free to cover the deductible. Is this a one time thing (only saving 5K and "topping it off" when you spend the money on meds, visits, etc), or do you have to do the 5k every year?
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 10/13/2009 01:30 PM
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MyTMMO User
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You can do UP TO 5k/yr in this scnenario I think...I'd imagine if you went into the year with a 5k HSA already that there'd be no need to add to it right? I'm a bit confused on all this. My main thing is getting them started, if I've got it to the cap already, and than spend it down all year that makes perfect sense. I just dont get the beginning.
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 10/13/2009 06:00 PM
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MyTMMO User
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Definitely good to hear some making it work for them - this is something we are definitely considering, as my meds alone need their own 401k - out of pocket would be inexcess of 68k/year - luckily our current insurance is a $50/month copay.... One refill would max out the deductible... and I'm only 30 something...
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 10/13/2009 06:37 PM
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we too are looking into this. I too have a chronic condition and i am in the doctor monthly for infusions and visits. I will let my hubby read this thread tonight.
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 10/14/2009 09:20 AM
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not to hijack, b/c it's on the same topic, but with the HSA's, when you begin one (if I get this new job it's an option, I don't know details yet) say your max possible is 5k for the family, are you able to contribute just that much each year? Does it have to come out of your paycheck, or if you presently have it cash can you just move over the 5k to a HSA? My question really is, in the beginning what do you do if you have a medical emergency in the first month of coverage? How do you pay for that without having time for the auto-deductions to have come from your paycheck?


The maximum contribution is an annual maximum. We've had an HSA for several years and it has grown tax free really well.

If your HSA is provided through a group plan with your employer, then the HSA funds come from payroll deductions (and employer match, if you have one.)

Typically, you can't just move existing savings that you have into an employer-provided HSA.

So if you have a medical emergency in the first month of coverage, you will have to cover that from your existing funds.
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 10/14/2009 09:32 AM
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So if you have a medical emergency in the first month of coverage, you will have to cover that from your existing funds.


Peacey, than my question is: If I use out of pocket or existing funds I have now to pay for a medical emergency may I deduct that from my taxes at the end of the year the same way i'll deduct the amount I put into my HSA all year, or are you basically saying that I just kinda have to bite the bullet until I get the ball rolling and the thing funded?

Edited to add that what Peacey is talking about is my exact situation, my new HSA will be coupled with an employer provided High deductible plan.

Edited: 10/14/2009 at 09:34 AM by MyTMMO User
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 10/14/2009 09:38 AM
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HSA contributions are pre-tax so your employer should be withholding them. You should not have to set up a separate line item on your taxes to reflect HSA contributions for an employer-provided plan. Similar to the 401k, your employer reports the withholding.

Something you COULD do with unexpected expenses is pay them out-of-pocket, and then reimburse yourself from the HSA once you have built up enough funds.

But if you don't reimburse yourself, then you should be able to deduct the out-of-pockets.

We typically cash-flow all our medical expenses and let the HSA grow. We've had it for several years and have just started investing a portion of it into mutual funds.

Our plan is to use it for health care costs in retirement, since we are pretty sure that Medicare will be heavily means-tested by then.

Edited: 10/14/2009 at 09:40 AM by MyTMMO User
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 10/14/2009 09:45 AM
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My understanding is the same as Peacey has outlined.

The maximum HSA contribution (under IRS guidelines) for 2010 will be $6100 - my husband's department is funding $1500 for the year (spread out over 12 months) and we are permitted to use pre-tax payroll deductions for some or all of the $4600 remaining if we choose to contribute as well - we'll max that out because of known upcoming expenses of braces, and because we want to have that buffer against future possible medical expense and the high deductible health plan that is required and goes along with the HSA.

For a few months in 2010, we will be at some risk of having out-of-pocket expense for up to $6000 in deductibles, after which we'd be covered 100% for the year, if at least two family members needed heavy-duty care. This is the maximum that could occur because at the beginning of the year we'd just be beginning our pre-tax contribution and the city would just be beginning their contribution, so our HSA would be pretty slim.

We are still comfortable doing it because we'll have a pretty big BS2 shovel in January/February as we finish off BS2, and will then of course move right into BS3 and again, our shovel doesn't even think about diminishing until May/June, at which point we'll be near done with BS3, and have built up a good amount in the HSA itself, between our contributions and the city's, besides.

If we take advantage of the pre-tax contribution we can make each year, anything left over year to year or when we leave that employment is still ours - it remains in the HSA until spent on medical, or if there's something left when my husband turns 65 he rolls it into an IRA.

Because the money is tax-free going in AND, if we spend it on medical/dental is tax-free going OUT, the HSA really is a great deal.

/side rant: sjquintana, I am SO glad you brought up the personal responsibility aspect -- I completely agree that if everyone had HSAs we'd solve a huge chunk of the health care issues in this country because people would PAY ATTENTION to their medical bills and get better deals. I know we'll be making those precious HSA dollars cry for mercy!
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