Using HSA funds "immediately"

[bUU]

If you are going to use the funds "immediately", you may want to verify that your out-of-pocket medical costs are "best" covered by a HDHP & HSA, or if they'd be lower if on a non-HDHP plan. (As the "benefit" of the Triple Tax Advantaged HSA is vastly reduced.)

I'm really not sure what I don't know, so hopefully y'all can help me understand this a bit better.

I'm currently considering two different health insurance plans for 2025; the plan I have now and a new plan, which happens to be HSA-eligible. Same insurer. Same network (BlueSelect, fwiw). There are very marginal differences between the two plans: The premiums differ by $20/month. The deductibles differ by about 10%; the out-of-pocket maximums differ by 20% in the other direction. For most other things, the HSA-eligible plan is better, or it's not clear which is better (i.e., 10% co-ins versus $35 co-pay for something that typically costs about $350).

This has me thinking that switching to the HSA-eligible plan would let me put $5,300 into the account, effectively get a $700-$1200 reduction in our 2025 tax liability (depending on our marginal tax bracket). In the spirit of "using the funds immediately", I'm already expecting $2,800 in out-of-pocket dental expenses early in 2025. I suspect I'll be able to use up the whole $5,300 that year, and if not, then certainly within a few years.

The only downside I can think of is that it makes it "harder" to get to 7.5% of AGI, to deduct other medical expenses. (Is it allowed to.../Might it make sense to ... delay the distribution from the HSA until later in the year, even if the expenses are paid earlier in the year, to see if it would be better to keep the expenses on Schedule A one year, planning to spend the money the year after?)

Beyond that: What is the best argument against HSAs, given my situation where the HSA-eligible and non-HSA-eligible plans I'm considering are so similar to each other?

PS: What most of the arguments against HSA seem to be grounded in is that you pay more for the same insurance for HSA-eligible plans. As I indicated above, I don't see these two plans as very different from each other. Maybe that's what needs to be pointed out to me... What would I be losing by going with the HSA-eligible plan, between:
https://www.bcbsfl.com/DocumentLibrary/ ... 5/1442.pdf
and
https://www.bcbsfl.com/DocumentLibrary/ ... 5/1836.pdf

[neurosphere]

The non-HSA plan has a higher deductible and higher out of pocket maximum. That's likely why the HSA plan has higher premiums. I'll bet the cost to you though is quite similar?

But it certainly not true that HSA plans are "more expensive". It doesn't cost anything to the insurer to make a plan HSA eligible. It's not like a feature you have to "buy".

In general, HSA plans are cheaper precisely because the deductibles are higher than other similar options. E.g. for a particular employer that only offers two plans, the HSA plan could be (for example) half the cost of the non-HSA plan, and that's almost entirely because the non-HSA plan has much lower deductible and out of pocket max.

[bUU]

The non-HSA plan has a higher deductible BUT a LOWER out of pocket maximum. And the HSA plan has LOWER premiums.

[SnowBog]

Yep. Which is why the comparison is different for everyone, as everyone uses different amounts of Healthcare.

However, I'll offer that trying to compare only looking at "this year" is - IMHO - a bit flawed. On the one side, you can't predict in advance getting sick/injured/etc. So while an HSA might by less, it could be a lot more... Non-HSA versions have less variability...

But even that - IMHO - is still a bit flawed. For many, the real benefit has nothing to do with one being slightly better/worse than the other "year-to-year", but has a lot to do with the potential benefits of 10-30+ years of additional tax-advantaged savings.

And the "value" of that will differ based on how much some one is able to save and/or their tax-rate. Personally, my income puts me into some of the top tax brackets and our expenses let me maximize all our tax-advantaged space - including HSA. The "value" of an HSA to me is high. My niece is just starting out, and no where close to being able to fill up their tax-advantaged space, her "value" of an HSA is lower - and she'd probably be better by looking at the "year-by-year" view of which "costs less" so that she can maximize her cash flow (ideally having more left to save).

[SnowBog]

In the spirit of "using the funds immediately", I'm already expecting $2,800 in out-of-pocket dental expenses early in 2025.

Just to point it out... You may also have access to a Flexible Spending Account (FSA) through your employer. If used with an HSA, the FSA is more limited - specifically to Dental and Vision expenses.

FSAs are "use it or loss it", so you'd want to align annual elections with planned expenses.

Back to my "value" comment, personally, I'd not use my HSA funds - leaving them to grow tax-free for years. Instead, especially for dental, and assuming your company offers it, I'd get an extra tax-free contribution towards the FSA, and use those funds for the dental work (as there is no long term benefits to an FSA - again use it or lose it).

If the value of an HSA is less to you, and you aren't as concerned with long term benefits, then "the cheaper" of your options along with an FSA gives you a better comparison.

[bUU]

Non-HSA versions have less variability...

I don't understand what you're saying here. Specifically, I don't see how the non-HSA plan on considering has less variability than the HSA plan.

[bUU]

Incidentally, I am retired, pre-Medicare.

[Lyrrad]

Non-HSA versions have less variability...

I don't understand what you're saying here. Specifically, I don't see how the non-HSA plan on considering has less variability than the HSA plan.

With a HSA-eligible High Deductible Health Plan (HDHP), there is a minimum deductible of $1650 or $3300 (personal or family). The plan is very limited in what can be covered before the deductible is met, such as preventive care. So you may need to pay for 100% of the cost of certain care before the deductible is met.

Non-HSA eligible plans can cover care before a deductible is met. For example, some plans may let you see a doctor for a small co-pay around $20 or so.

For example, if I wanted to see a doctor on January 1, I might have to pay $500 for the visit on my HDHP, but only $20 on non-HDHP plan from my employer. Since my employer provides a significant HSA contribution each year, and has significantly higher premiums for the non-HDHP plan, I'm almost always better off on the HDHP plan. However, since it has a higher out of pocket maximum, there's less certainty about exactly how much I'll spend on care each year.

Different employers offer different health plans with different premiums, networks, deductibles, and out-of-pocket maximums, so it hard to provide general advice about what kind of plan is best.

[SnowBog]

Great point above about the timing/sequence of the costs...

My thoughts below were only looking at the "end-of-year" results...

But one of the big adjustments when we moved to an HSA eligible plan (through my employer) is that we paid much more much earlier in the year.
As noted, what might have been covered with a smaller copay previously was now an "out-of-pocket" cost under the HSA plan. In our case - it was basically a wash by year end, but the "cash flow" was much higher earlier in the year (before we hit our maxes).

Non-HSA versions have less variability...

I don't understand what you're saying here. Specifically, I don't see how the non-HSA plan on considering has less variability than the HSA plan.

The requirement of an HSA eligible plan is a "high deductible" plan. Meaning HSA plans typically have a higher potential out of pocket expenses.

See the post following. I mistakenly assumed 1836 was the HSA plan - it isn't...

Using just the first page from the links you sent, and sticking with "in-network" for simplicity:

• 1442 plan
  • Max deducible: $5,000 person / $10,000 family
  • Max "out-of-pocket" (not including premiums/non-covered expenses): $7,000 person / $14,000 family
• 1836 plan
  • Max deducible: $5,850 person / $11,700 family
  • Max "out-of-pocket" (not including premiums/non-covered expenses): $8,350 person / $16,700 family

Assuming the 1836 plan is the HSA plan (and other than premiums/deductibles/OOP has equivalent coverage), you could spend up-to $1,350 person / $2,700 family extra in out-of-pocket costs each year. (Much more if you look at "out-of-network" versions.)

Assuming the 1836 plan has the lower premiums, which sounded like was a difference of approximately $20/month ($240/year) - that would adjust the above to $1,150 person / $2,450 family in potentially extra out-of-pocket expenses each year after premiums.

Again, "high deductible" = "higher potential out of pocket costs." Higher potential costs = higher variability.

The non-HSA plan has lower out-of-pocket costs.

Now, the delta (assuming you keep everything in-plan) is only $2,450 / family / year - so maybe not overly meaningful... But it is a difference...

For myself, I'd rather have the tax savings and expanded tax-advantaged savings - even if it might cost me more

[AnEngineer]

If you are going to use the funds "immediately", you may want to verify that your out-of-pocket medical costs are "best" covered by a HDHP & HSA, or if they'd be lower if on a non-HDHP plan. (As the "benefit" of the Triple Tax Advantaged HSA is vastly reduced.)

I'm really not sure what I don't know, so hopefully y'all can help me understand this a bit better.

I disagree that the advantage of an HSA is vastly reduced if you reimburse yourself. It's a nice feature, but how much it helps depends too much on the future for me to include when I compare plans. I like to compare min spending and max spending. It's not about whether HSAs are good or bad in general, but which plan that's available to you is the best, including the benefits of an HSA if that's an option. It's not clear to me whether you're looking at individual or family coverage, as you use an individual HSA contribution limit $4300+$1000 catch-up but refer to "our" taxes.

HDHP (1442) min spending is relative -$20*12 in premiums - tax savings on HSA contributions. Max spending is that plus the $7000 OOP max for individual.

non-HDHP (1836) min spending is $0$. Max spending is the $8350 OOP max.

At both extremes the HDHP is better, even if you ignore tax savings of the HSA. In the middle, the non-HDHP may be better due to paying copays instead of the full allowed amount. But with the head start of the HSA tax savings that's less likely.

[SnowBog]

If you are going to use the funds "immediately", you may want to verify that your out-of-pocket medical costs are "best" covered by a HDHP & HSA, or if they'd be lower if on a non-HDHP plan. (As the "benefit" of the Triple Tax Advantaged HSA is vastly reduced.)

I'm really not sure what I don't know, so hopefully y'all can help me understand this a bit better.

I disagree that the advantage of an HSA is vastly reduced if you reimburse yourself. It's a nice feature, but how much it helps depends too much on the future for me to include when I compare plans. I like to compare min spending and max spending. It's not about whether HSAs are good or bad in general, but which plan that's available to you is the best, including the benefits of an HSA if that's an option. It's not clear to me whether you're looking at individual or family coverage, as you use an individual HSA contribution limit $4300+$1000 catch-up but refer to "our" taxes.

HDHP (1442) min spending is relative -$20*12 in premiums - tax savings on HSA contributions. Max spending is that plus the $7000 OOP max for individual.

non-HDHP (1836) min spending is $0$. Max spending is the $8350 OOP max.

At both extremes the HDHP is better, even if you ignore tax savings of the HSA. In the middle, the non-HDHP may be better due to paying copays instead of the full allowed amount. But with the head start of the HSA tax savings that's less likely.

Great catch! I had incorrectly assumed that 1836 was the HSA plan, given its higher OOP costs. I've stricken my prior post.

[bUU]

Non-HSA eligible plans can cover care before a deductible is met. For example, some plans may let you see a doctor for a small co-pay around $20 or so.

Got it. The non-HSA plan does allow two doctor visits, and does includes some but not all diagnostic tests. I see what you're saying there.

It is a tough comparison though. I didn't mean this to necessarily be a post about comparing health plans, but maybe that was my first mistake.

BlueSelect Silver (HSA) 1442
Monthly Premium $1,510.43
Deductible in-network $5,000.00
Deductible out-of-network $10,000.00
Out-of-pocket limit in-network $7,000.00
Out-of-pocket limit out-of-network $14,000.00
Referral to specialist needed No
Primary care in-network 10% co-ins after ded
Primary care in-network
Specialist care in-network 10% co-ins after ded
Preventive Care $0
Diagnostic Test 10% co-ins after ded
Imaging 10% co-ins after ded
Generic drugs "Condition Care" $4 co-pay
Generic drugs other 10% co-ins after ded
Preferred drugs $30 or 12% co-ins after ded
Non-preferred drugs 15% co-ins
Specialty drugs 17% co-ins
Outpatient 10% co-ins after ded
ER 10% co-ins after ded
ER transport 10% co-ins after ded
Urgent Care 10% co-ins after ded
Hospital 10% co-ins after ded

VERSUS

BlueSelect Silver 1836
Monthly Premium $1,530.83
Deductible in-network $5,850.00
Deductible out-of-network $11,700.00
Out-of-pocket limit in-network $8,350.00
Out-of-pocket limit out-of-network $16,700.00
Referral to specialist needed No
Primary care in-network No charge; ded doesn't apply
Primary care in-network After 3 visits, $35 co-pay
Specialist care in-network $65
Preventive Care $0
Diagnostic Test $0 or $60
Imaging 50% co-ins after ded
Generic drugs "Condition Care" $4 co-pay
Generic drugs other $12 co-pay
Preferred drugs $30 co-pay or 45% co-ins after ded
Non-preferred drugs 47% co-ins
Specialty drugs 50% co-ins
Outpatient 50% co-ins after ded
ER 50% co-ins after ded
ER transport 50% co-ins after ded
Urgent Care $65 after 2 visits
Hospital 50% co-ins after ded

Look at some of those co-ins percentages in the non-HSA plan... 45% for some generic drugs; 47% for non-preferred drugs; 50% for outpatient and ER visits (after ded); 50% co-ins after ded for hospital stays. Compare that to 10%, 15%, 17%... Yes, these are all after deductible, and some things with the non-HSA plan are free or have a co-pay before the deductible is met, but, well, again, look at those co-ins percentages in the non-HSA plan!

Different employers offer different health plans with different premiums, networks, deductibles, and out-of-pocket maximums, so it hard to provide general advice about what kind of plan is best.

I appreciate that, and the fact that y'all have to take on faith that the two plans I'm comparing to each other are legitimately the two plans worth considering given my circumstances and priorities.

[bUU]

It's not clear to me whether you're looking at individual or family coverage

My wife is on Medicare.

HDHP (1442) min spending is relative -$20*12 in premiums - tax savings on HSA contributions. Max spending is that plus the $7000 OOP max for individual.
non-HDHP (1836) min spending is $0$. Max spending is the $8350 OOP max.

At both extremes the HDHP is better, even if you ignore tax savings of the HSA. In the middle, the non-HDHP may be better due to paying copays instead of the full allowed amount. But with the head start of the HSA tax savings that's less likely.

With regard to "the middle", did you factor in the different in co-ins percentages, that I mentioned in the comment above. If not, I would think that would put the HSA plan way over the top, in your estimation.

[AnEngineer]

With regard to "the middle", did you factor in the different in co-ins percentages, that I mentioned in the comment above. If not, I would think that would put the HSA plan way over the top, in your estimation.

I usually don't bother trying to evaluate any cases in the middle quantitatively because of the difference in the nature of the plans (copay vs not). I didn't notice the higher coinsurance on the non HDHP, which is certainly a negative.