HDHP / HSA experiment 2011

[mavjop]

This year, for various reasons, I opted for the HDHP (High Deductible Health Plan) health insurance, which is to say a plan which pays nothing until you've satisfied a hefty deductible but (1) I pay no employee contribution for, (2) makes me eligible to have and make contributions to an HSA (Health Savings Account) and (3) in addition to my being

Comments

[mavjop]

They are *completely* different animals.

I assume by health care spending account you mean flexible spending account aka cafeteria plan aka section 125 plan aka .....?

An HSA (Health Savings Account) is literally what it says. It is a tax-advantaged account. It is a *savings* account. You can keep it year-to-year. It is *your* money. You *can* take money out for non-medical reasons, but then you have to pay income taxes and an additional 10% penalty tax on it. It can earn interest, be invested in the stock market, etc., etc. much like a 401(k) but for healthcare expenses rather than for retirement.

The limiting factor is you can only *contribute* to one while on a HDHP. I'm not sure how this benefits the government, but the idea is seemingly not to make it too easy, or something.

You can *use* funds from an HSA if you go back to regular (non-HDHP) health insurance. You just can't contribute any more while you're covered by a plan that is not an HDHP.

So, if I do the HDHP thing for a year, I can still use stuff next year, if I have funds left in my account. There's an annual contribution limit, but that's it. The problem seems to be when you first sign up for an HDHP the earliest date of service for which you can use funds in a qualifying (read: not taxed/penalised) way may, by my reading, be out of your control (i.e. subject to delays by your employer/the bank).

It *looks* to me like if I have a big unexpected bill I could quickly (after the date of service) contribute extra to my HSA (subject to the annual limit) and then pay off the bill using those tax-advantaged funds, so it has that going for it.

[anemone]

I assume by health care spending account you mean flexible spending account aka cafeteria plan aka section 125 plan aka .....?

Yeah. IBM calls it a "Health Care Spending Account." I always figured the HSA was strictly better, but apparently not so.

I thought about trying the high deductible plan too. so I'm interested in how it turns out.

[mavjop]

It's strictly different, for certain, but is a a dog better than a motorcycle? :)

Ok, so they're more similar than that, in that one can use both to pay for medical expenses using tax-advantaged funds, but that's more or less where the similarity ends.