Monday, July 15, 2013

Health Savings Accounts: No, That Won't Work

I was thinking that I should start saving up money for the aortic valve replacement that will be needed in a few years.  It is apparently more than $50,000 -- which even with health insurance, is going to be $10,000 out of pocket.  (Nope: out of pocket maximum on my current insurance is $3250 per plan year.)  I was thinking that I could open a Health Savings Account, and put $100 a month into it, where interest would accumulate tax-free, and the amounts put in are deductible.  In five years, that would be close to $6500 -- a big chunk of that cost.

But to get the tax-free accrual and tax deductible contribution advantages, you have to have a High Deductible Health Plan.  As long as I work for an employer, I can't get the HSA advantage.

I had hoped at some point to retire and work on stuff that really matters, but I don't think that's going to happen in the next ten years.  Unfortunately, the kind of stuff that I do that I consider important (like this study of state background check laws, or this analysis of Violence Policy Center's "Concealed Carry Killers") are not the sort of things that anyone pays you to do.  I won't be able to retire, nor will I be able to find an employer who would hire me to work on stuff that matters.  I am not happy about this.

UPDATE: An additional frustration is that Obamacare includes a new maximum amount that can be taken out pre-tax for a flexible spending account plan to $2500 per year.  I sure wish that I could meet the people that think Obamacare was such a smart idea -- I mean, besides the big health insurers who are now guaranteed more customers.

UPDATE 2: One of the results of Obamacare (if not an actual goal) will likely be lots of people who have some assets quitting their jobs.  In reading this discussion of the way that health insurance exchanges will work, it turns out that there will be tax credits for those who make 100% to 400% of the federal poverty line to help them buy health insurance.  That means that a couple with an annual income of $62,000 a year will be eligible for this help -- and the plan will have an out-of-pocket maximum (deductibles and copayments) of about $12,700 per year.  No one is saying yet what the premiums are going to be, but my guess from reading this June 28, 2013 Spokesman-Review article is that for a couple, it is going to be less than 600 a month.  (It appears to be $410 a month for a 40-year-old with a family of four.)  This argues that for an older couple with significant job skills, it makes more sense to not work, or only work part-time, so that they can get the tax credit and health insurance.  (You aren't eligible for the health insurance exchange if your employer provides coverage.)  Even worse: it makes sense to sell income-producing assets and pay off a house mortgage, since a lower income gets you tax credits and ability to join these insurance pools.

But who said that there was any value to having anyone working, anyway?

8 comments:

Richard Clark said...

I guess it depends on your employer - my employer offers a high deductible plan, and subsidizes my HSA as well. Surprise, surprise, if I exactly hit my deductible, my out of pocket expenses are about the same as if I took the low deductible plan with the higher premiums. If I don't hit the deductible, I come out ahead.

If I understand Obamacare correctly, this plan and my HSA will be phased out. Bother.

Rick C said...

I am convinced the spending cap was put in place to discourage individual responsibility, because what other reason could there be for reducing the cap? I have already been bitten by this because I used to put $3500-4000 annually in an FSA, and that was capped just like HSAs are.

Rob K said...

I don't think you're correct in that first update. Flex spending accounts and health savings accounts are different things. It notes "Nor does it apply to salary reduction or any other contributions to a health savings account (HSA)"

This one says the contribution limits are going up for HSAs: http://www.shrm.org/hrdisciplines/benefits/articles/pages/2013hsalimits.aspx

Matt said...

Have you checked out http://www.surgerycenterok.com/pricing/ and asked them the cash price for your procedure?

Clayton said...

Rob: FSAs and HSAs have different limits, but I still can't do an HSA unless I have an HDHP, and that option isn't offered by my employer.

Matt: The cash price would be so high that it still makes sense to be insured. And there are things that I will let the lowest bidder do. Heart surgery? I don't think so.

Birdwell said...

I think they capped the FSA so Americans wouldn't get the tax benefit. I also wonder what happens to the unspent money in FSA accounts. (If you don't use up all the money in the account by each April 1, the money is gone)

Clayton said...

The money goes to the FSA administrator. Not a bad deal for them.

Robin said...

Its amazing, one might even think that the people who drafted PPACA had no knowledge of basic economics ...

Shocking, I know.