Is HSA right for me.

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mortalsonofmortal
Posts: 96
Joined: Mon Sep 01, 2014 12:31 am

Is HSA right for me.

Post by mortalsonofmortal »

Please correct my thought process if I am thinking it wrong.

I know there are some huge fans of HSA here and rightly so. But after doing some calculations, i am beginning to doubt if HSA is the right choice for our family.
We have recurring medical expense of about $110 per week for speech therapy for our child and and is expected to carry on for the whole year or several years. The high deductible plan that comes with the HSA won't pay a single penny until the deductible is met. Deductible is around $6000. Our top tax bracket is 24% for 2018. So if I contribute max $6850, after paying approximately $5720(110*52 weeks) towards ded, i will get about $1644 in tax savings.
But on the plus side, employer contributes 1400 towards HSA and we have to contribute only 5410($6850 - $1400) as payroll deductions.
Alternative to HSA is a normal plan in which the monthly premium is $100 more but we only have to pay $17 for each speech therapy visit. It has a low individual ded of $250.
So all in all, just with the known med expenses, i think it's not worth paying the ded to save tax on it. What do you guys think?
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archbish99
Posts: 1646
Joined: Fri Jun 10, 2011 6:02 pm

Re: Is HSA right for me.

Post by archbish99 »

It all depends on the details of your plan. $6k is a surprisingly high deductible; that's the OOP max on my HDHP. Does it pay 100% past that deductible, or does it have an even higher OOP max?

From what you've said, the difference would be:
  • $1,200 less in premiums
  • $1,298 in tax savings on the HSA (no "savings" on the employer contribution, because you otherwise wouldn't have gotten that money at all)
  • $1,400 in employer contributions
...minus $4,637 in expected additional expenses. That means -- if those are your only expenses -- you come out $739 worse with the HDHP. If you have other expenses, the numbers change. But I'd agree with you that this plan probably doesn't make sense for your family, assuming all the numbers given here are correct.

HDHPs generally work out in your favor when you either have few-to-no expenses (and therefore can reap the savings) or (depending on the plan) when you have so many expenses that meeting the deductible is a given.
I'm not a financial advisor, I just play one on the Internet.
motorcyclesarecool
Posts: 938
Joined: Sun Dec 14, 2014 7:39 am

Re: Is HSA right for me.

Post by motorcyclesarecool »

I find that often the employer contribution is the clincher. Paying $100 per month extra in tax deductible premiums to save $93 per speech therapy visit (assuming one per week, hard to tell from your OP) seems like a slam-dunk. And I’m an HSA fanboy.

Are there other expected medical expenses?
What would speech therapy coverage look like after the deductible with the HDHP?

It sounds like you’re doing the right analysis... estimate your total expected outlay for the year for each plan. If it’s close, try the HSA. So far, this doesn’t appear to be close. I’d go with the normal plan.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.
Topic Author
mortalsonofmortal
Posts: 96
Joined: Mon Sep 01, 2014 12:31 am

Re: Is HSA right for me.

Post by mortalsonofmortal »

Thank you for your replies. I will keep an eye out to see if employer offers better HDHP plans next year.
inbox788
Posts: 7901
Joined: Thu Mar 15, 2012 5:24 pm

Re: Is HSA right for me.

Post by inbox788 »

What's the max OOP for the plans? Is that individual or family? Also consider how other family member fees might change costs if there are a couple of doctor visits a year vs. a major hospitalization.
deltaneutral83
Posts: 1810
Joined: Tue Mar 07, 2017 4:25 pm

Re: Is HSA right for me.

Post by deltaneutral83 »

All the plans I've seen with PPO vs. HSA are likely to work out in the HSA's favor all things equal, particularly over a multi year period. If you have known expenses and can pin point that middle ground where the PPO pays off (ER visit, regular primary care visits/prescriptions with no hospital admissions) better than the HSA, then it could work. Of course by default, the ER wouldn't be considered regular and you can't predict when you need to be admitted to hospital. If you have minimal expenses or blow through the OOP max, you're much more likely to be better off with the HSA all things equal (meaning you don't have some crazy pricing structure where the PPO premium is cheaper than the HSA). Most comparisons I've seen have the OOP max higher for the PPO than the HSA, meaning admission into the hospital is a slam dunk for the HSA.
columbia
Posts: 3023
Joined: Tue Aug 27, 2013 5:30 am

Re: Is HSA right for me.

Post by columbia »

I set up an account this week with the company, which Vanguard links to. Their website is pretty clunky, but it only took about 10 minutes. The companion debit card appears to only work with the cash portion of your holdings. You’d think that it would at least default to Vanguard federal money market account (which is one of 30 or so options, should you choose Vanguard investments). Either way, I wish I had done this previously, as 2017 presented me with some unpleasant medical bills (but not enough to warrant a tax deduction).
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