When is an HSA account no longer worth it?

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jkushne1
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When is an HSA account no longer worth it?

Post by jkushne1 » Thu Jan 21, 2016 7:30 am

I currently have been using an HSA account for the past few years and think they are a great idea and plan to use them throughout the rest of my career for its various benefits (my wife and I are completely healthy). However, my wife and I will likely be trying for our first child in the coming months and I was wondering, when is it not worth it to get the HSA account. If we're expecting a delivery in the next year or two, the hospital charges for the delivery alone could likely be outrageous and it might make sense to have a health plan that covers a lot more.

Along those lines, what about when you have young kids for the first few years and they are always sick. Does it make sense to keep the HSA, keep me on the HSA and the rest of my family on a higher plan (two separate employers) or put the whole family on a more comprehensive plan? When does everyone advocate making the switch from HSA coverage to more robust plan when discussing a full family.

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papiper
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Re: When is an HSA account no longer worth it?

Post by papiper » Thu Jan 21, 2016 9:31 am

My company had a calculator that could simulate different scenarios. The very big difference in lower monthly charges in most HSA's make it difficult for traditional plans to make a difference.

What I remember - if you have very low medical use the HSA is by far the best choice. For major medical use that hit the maximum deductibles, the two choices are about identical. In between you can save a little money by the traditional plan, but it really wasn't a compelling difference.

I stayed with HSA throughout. They count on you using less because it's that immediate out of pocket that keeps you from going to the doctor as often.

whitecliff
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Re: When is an HSA account no longer worth it?

Post by whitecliff » Thu Jan 21, 2016 9:33 am

We have one through blue cross and it is 3000 dollar deductible and then that is it. Once you hit the deductible unless it is a non-covered service it is no fee to us. So your max health care cost per year out of pocket is 3000 bucks excluding the monthly premium. We have had children the last two consecutive years and it has been good for us, but not sure about other plans. When I looked at a more comprehensive plans the monthly cost were almost double. Interested to hear what others think.

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Aptenodytes
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Re: When is an HSA account no longer worth it?

Post by Aptenodytes » Thu Jan 21, 2016 9:36 am

Your question is about the relative merits of your high-deductible health plan (HDHP) and its alternatives. If you switch to a conventional health plan you will keep your HSA (you just won't be able to add new money to it).

Every employer is different. In my case, the HDHP was offered as part of a very aggressive cost-cutting move regarding benefits, and although there is a range of conventional health plan alternatives and some people choose them, when I compared them it was almost impossible for the conventional plans to come out on top. That was what the officials in charge intended (and I'm OK with it).

So you have to play around with scenarios with the specifics of your own plan.

swl
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Re: When is an HSA account no longer worth it?

Post by swl » Thu Jan 21, 2016 9:41 am

It really depends on if the PPO would cover any extras at 100% that the HDHP doesn't. Otherwise you'll need to see if you'll hit max out-of-pocket anyways on either plan; if so, and you have the cash to front load medical expenses, it's just a question of max out-of-pocket + premium difference.

Typically I've seen HDHPs to be better if your costs are very low (less than premium difference + PPO deductible) or very high (at out of pocket max) and PPOs to be better somewhere in between.

KlangFool
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Re: When is an HSA account no longer worth it?

Post by KlangFool » Thu Jan 21, 2016 9:53 am

jkushne1 wrote:I currently have been using an HSA account for the past few years and think they are a great idea and plan to use them throughout the rest of my career for its various benefits (my wife and I are completely healthy). However, my wife and I will likely be trying for our first child in the coming months and I was wondering, when is it not worth it to get the HSA account. If we're expecting a delivery in the next year or two, the hospital charges for the delivery alone could likely be outrageous and it might make sense to have a health plan that covers a lot more.

Along those lines, what about when you have young kids for the first few years and they are always sick. Does it make sense to keep the HSA, keep me on the HSA and the rest of my family on a higher plan (two separate employers) or put the whole family on a more comprehensive plan? When does everyone advocate making the switch from HSA coverage to more robust plan when discussing a full family.


jkushne1,

The answer is it depends. You are basically comparing a HSA plan with a low deductible plan. The problem is normally you pay a lot more premium with a low deductible plan. And, a lot of times, the premium increase cover the difference in deductible and make it not worthwhile. You ended up with the situation whether you pay more via premium or deductible. They are approximately the same.

Let's take an example.

A) HSA plan -> 13K deductible with 6K annual premium.

B) Comprehensive plan -> 3K deductible with 16K annual premium.

(A) and (B) is about the same. But, in the case of (B), you pay the premium regardless of whether you need to spend that much. Hence, (A) is better with more flexibility.

KlangFool

dotnet
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Re: When is an HSA account no longer worth it?

Post by dotnet » Thu Jan 21, 2016 10:04 am

No one can really answer this question for you. You have to look at the plan options you are comparing and determine what scenarios are better for you and your family.

I have a HDHP and have helped other people with this same calculation of the scenarios, and the answer varies depending on the plan.

In my plan, the premium's are so low, as compared to the traditional, that it would take a very unique situation to make me pick the traditional plan.

But I have seen other plans where the premium difference is shockingly small, and I would definitely choose the traditional.

jane1
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Re: When is an HSA account no longer worth it?

Post by jane1 » Thu Jan 21, 2016 10:14 am

Don't forget the tax savings from contributing to HSA.
I have an Excel calculator (whose link I have posted previously on Bogleheads) where you can do a financial comparison. This takes input of account premiums, deductible, co-insurance, OOP Max, marginal tax bracket and I have graphs comparing the different insurance plans for various spend (expected medical costs) scenarios showing break-even points.
You can download and play with it for your situation.

whitecliff
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Re: When is an HSA account no longer worth it?

Post by whitecliff » Thu Jan 21, 2016 10:34 am

yeah even if it is a little more money it is triple tax advantaged and can use it as an additional IRA and then pay the health care costs out of pocket if you have the finances available.

michaeljc70
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Re: When is an HSA account no longer worth it?

Post by michaeljc70 » Thu Jan 21, 2016 10:38 am

I've had an HSA mostly over the last 15 years, but also had a regular PPO. I would say that if you know you are going to have big medical expenses, switch to a better plan those years. HSAs are great if you are healthy.

If your tax rate is high, the HSA deduction though along with the higher plan cost could offset a lot of any medical savings.

To really answer the question, you'd have to know your exact medical costs (which is obviously unknowable), and what the difference in deductible and out of pocket costs are between the HSA and PPO plans as well as the difference in premiums.

BuckyBadger
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Re: When is an HSA account no longer worth it?

Post by BuckyBadger » Thu Jan 21, 2016 10:41 am

We had almost exactly the same question - we were both on his high deductible plan, which was great because we were in our early 30s with no health problems. We've decided to start "trying" so I've gone onto my company's traditional plan but he's stayed with the high deductible offered through his work. This way we get to keep adding to the HSA, even thought it's less, but if we do have a kid it'll cost all of about $250 instead of four grand.

So that's what worked for us!

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knpstr
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Re: When is an HSA account no longer worth it?

Post by knpstr » Thu Jan 21, 2016 10:44 am

BuckyBadger wrote:We had almost exactly the same question - we were both on his high deductible plan, which was great because we were in our early 30s with no health problems. We've decided to start "trying" so I've gone onto my company's traditional plan but he's stayed with the high deductible offered through his work. This way we get to keep adding to the HSA, even thought it's less, but if we do have a kid it'll cost all of about $250 instead of four grand.

So that's what worked for us!


Yes, with Obamacare you can "game the system" this way. In a year of expected pregnancy it will likely be best to go with a more traditional type plan. You can switch back to HSA the following year.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

totalnoobie
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Re: When is an HSA account no longer worth it?

Post by totalnoobie » Thu Jan 21, 2016 11:05 am

michaeljc70 wrote:I've had an HSA mostly over the last 15 years, but also had a regular PPO. I would say that if you know you are going to have big medical expenses, switch to a better plan those years. HSAs are great if you are healthy.


I'm confused how this is allowed. I thought that in order to be eligible for an HSA, you have to be covered by a HDHP, and only a HDHP?

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Epsilon Delta
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Re: When is an HSA account no longer worth it?

Post by Epsilon Delta » Thu Jan 21, 2016 1:41 pm

BuckyBadger wrote:We had almost exactly the same question - we were both on his high deductible plan, which was great because we were in our early 30s with no health problems. We've decided to start "trying" so I've gone onto my company's traditional plan but he's stayed with the high deductible offered through his work. This way we get to keep adding to the HSA, even thought it's less, but if we do have a kid it'll cost all of about $250 instead of four grand.

So that's what worked for us!


You may have already done this, but check what happens after the baby arrives, and you need a family plan* to cover the baby. In many cases you can cover both parents and the baby for the same, or little extra, as covering one parent and the baby. So after the baby arrives it can make sense to switch to a family plan. You want to explore this pre-baby because the baby is a qualifying event giving you sixty sleep deprived days to make a switch.

* or sometimes 1+1 if your company offers that.

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Epsilon Delta
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Re: When is an HSA account no longer worth it?

Post by Epsilon Delta » Thu Jan 21, 2016 1:43 pm

totalnoobie wrote:
michaeljc70 wrote:I've had an HSA mostly over the last 15 years, but also had a regular PPO. I would say that if you know you are going to have big medical expenses, switch to a better plan those years. HSAs are great if you are healthy.


I'm confused how this is allowed. I thought that in order to be eligible for an HSA, you have to be covered by a HDHP, and only a HDHP?


I read this as most of the time I had a HSA, but for a few [year/months] I had a PPO. That is the two options are sequential rather than simultaneous.

dignan
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Re: When is an HSA account no longer worth it?

Post by dignan » Thu Jan 21, 2016 2:20 pm

I found this link to be helpful. http://www.dinkytown.net/java/HSAvsTraditional.html

Punch in the numbers and see what seems better for you. I put a high number (like 200) of doctor visits and prescriptions just to see a worst case scenario. My HDHP was a 5k deductible which ended up being the better option in my opinion vs the 2k deductible (plus monthly premium). I have a spouse and 2 children.

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knpstr
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Re: When is an HSA account no longer worth it?

Post by knpstr » Thu Jan 21, 2016 2:53 pm

totalnoobie wrote:I'm confused how this is allowed. I thought that in order to be eligible for an HSA, you have to be covered by a HDHP, and only a HDHP?


Whats confusing? My PPO plan that has a deductible of $6,300 isn't a high deductible health plan?
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

totalnoobie
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Re: When is an HSA account no longer worth it?

Post by totalnoobie » Thu Jan 21, 2016 5:15 pm

knpstr wrote:
totalnoobie wrote:I'm confused how this is allowed. I thought that in order to be eligible for an HSA, you have to be covered by a HDHP, and only a HDHP?


Whats confusing? My PPO plan that has a deductible of $6,300 isn't a high deductible health plan?


Oh I see. I interpreted "regular PPO" to mean "non HDHP PPO"

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Kosmo
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Re: When is an HSA account no longer worth it?

Post by Kosmo » Thu Jan 21, 2016 8:35 pm

The real answer depends on the health plans and your estimated medical expenses. When child #1 was born my wife was on an HMO. The birth and hospital stay cost $500 total. When child #2 was born we were all on an HDHP with an HSA. We hit the deductible just going to ultrasounds. The birth and hospital stay brought us nearly to the OOP max.

I run the numbers every year, and it always comes out in favor of the HDHP/HSA for me.

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Re: When is an HSA account no longer worth it?

Post by grabiner » Thu Jan 21, 2016 8:59 pm

jkushne1 wrote:I currently have been using an HSA account for the past few years and think they are a great idea and plan to use them throughout the rest of my career for its various benefits (my wife and I are completely healthy). However, my wife and I will likely be trying for our first child in the coming months and I was wondering, when is it not worth it to get the HSA account. If we're expecting a delivery in the next year or two, the hospital charges for the delivery alone could likely be outrageous and it might make sense to have a health plan that covers a lot more.


You have to compare the actual expenses. Add the costs of the plans and expected expenses under various scenarios, and subtract the tax savings on the HSA and any employer contributions. Usually, the worst situation for a high-deductible plan is when you hit the deductible exactly, as it usually provides better coverage than most conventional plans once you meet it.

If your employer offers good subsidies for the high-deductible plan (as the US government does), or you are in a high tax bracket and maxing out retirement plans (so you get more tax savings), the high-deductible plan may come out ahead even if you use the whole deductible.
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Artsdoctor
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Re: When is an HSA account no longer worth it?

Post by Artsdoctor » Fri Jan 22, 2016 5:44 pm

knpstr wrote:
totalnoobie wrote:I'm confused how this is allowed. I thought that in order to be eligible for an HSA, you have to be covered by a HDHP, and only a HDHP?


Whats confusing? My PPO plan that has a deductible of $6,300 isn't a high deductible health plan?


Just one word of caution. You'd think that a "high-deductible" plan would automatically qualify for an HSA, but that is not always the case. IRS Publication 969 gives you both minimum and maximum expenses that would qualify you, and a few of the newer plans have extremely high deductibles and OOP expenses which do not allow qualification for an HSA automatically. If the plan name doesn't have HSA in it, or if there is not an explicit recognition that it is an HSA-compatible plan, you'd want to read the IRA publication very carefully.

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knpstr
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Re: When is an HSA account no longer worth it?

Post by knpstr » Fri Jan 22, 2016 6:38 pm

Artsdoctor wrote:Just one word of caution. You'd think that a "high-deductible" plan would automatically qualify for an HSA, but that is not always the case. IRS Publication 969 gives you both minimum and maximum expenses that would qualify you, and a few of the newer plans have extremely high deductibles and OOP expenses which do not allow qualification for an HSA automatically. If the plan name doesn't have HSA in it, or if there is not an explicit recognition that it is an HSA-compatible plan, you'd want to read the IRA publication very carefully.


Absolutely. More to my point was that ppo/hmo doesn't really have anything to do with HSA eligibility, itself.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

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