This is where the HSA could be a boon. Assuming that you are a family (2
or more), you get to put away an amount up to you deductible or $5000
(round figure, its a few dollars more for 3 or more). The maximum
allowable out of pocket costs, by law, on an HSA plan is $10,000. That
means $5k you put into your HSA, plus $5000 out of your savings
account. Now, this is an annual cost, so don't have a heart attack the
beginning of December. ;-)
The downside is that you can't receive any benefit except an annual
preventative care visit until you reach your deductible - its all money
out of your pocket - including prescriptions. I happen to have a BCBS
plan which has a $5000 deductible, and is 100% coverage for in-netwok
(practically everybody in Virginia) beyond that ($5000 deductible and
out of pocket). The premiums for me and my young daughter are ~$200/mo.
(plus the $5000/yr). We happen to be pretty darned healthy. The $5000
rolls over into next year if I don't use it, and I can add an additional
$5000 (if my deductible is that high). The plan I have actually doens't
exist as a true "HSA plan" - its one of the "standard" plans. It just
so happens to meet the requriements for 2005 ( it provides prescription
coverage, so I will have to change plans next year - there is an
exeption for 2005 only). Sadly, the BCBS HSA plans are (1) more
expensive and (2) have higher out of pockets for identical coverage.
Nice, huh? I'm hoping for a better selection next year as they figure
out all the details of the HSA legislation. Adoption of all the
provisions by the industry has been extremely slow.
The money you put into HSA is pre-tax (like a 401k). If you take out
the money for medical purposes, you pay no taxes then either. HSAs can
be set up as investment accounts, and more providers are offering
options like mutual funds - mine offers a selection of Vanguard no-load
funds. Any IRS acceptable medical or dental expense is allowed, and YOU
are the gatekeeper. You just withdraw the money and state whether it is
for medical purposes or not, and you keep the "proof", just in case the
IRS needs convincing. Insurance premiums cannot be paid out of the
HSA, except for long term care insurance. Money taken out which is not
used for medical purposes is subject to income taxes, plus a 10% penalty.
Of course, the downside is that you need to have the cash available to
fund the HSA - either through regular deductions or as a lump sum each
year - plus your premiums. The advantage is that the premiums will
likely be lower than for a traditional plan, because you are covering
the most common expenses out of your pocket (HSA). I guess I saved
about 30-40% over a traditional fee-for-service (PPO) plan, if you count
the premuims and deductible, and figure that I don't get very sick.
There's a narrow range of serious ailment/PPO plans which would result
in a better financial outcome for me in a given year, but the difference
is in the $1000 range, which is an acceptable trade off for the
possibility (likelihood) that I will be able to roll over $4000+ in a
tax free account each year.
Christopher Wright wrote:
On Jun 4, 2005, at 12:10 AM, Randy Vogelgesang S.E. wrote:
Consider either a MSA or the new HSA.
Consider: Our last two big ailments were a gall bladder problem with
complications and a cardiac arrest with stent emplacement, Both were
pretty much complete recovery without a lot of additional nasty stuff
and cost about $20 grand and $60 grand respectively. The cardiac
involved no by-pass or other serious surgery, but a lot of tests and a
4 day hospital stay. Both of these are fairly serious events, but
nothing like the financial catastrophe you get from cancer or major
If you've got an 80/20 policy 20% of the total is $16 grand. If you
can afford to sit on $16000 in a MSA while you're waiting for
disaster, maybe it's for you. For a society that, on average, saves
nothing for anything, the notion of MSA's being the magic bullet seems
strange. OTOH, before we qualified for Medicare, our last yearly HMO
premiums were around $15 grand, and we haven't had dependents since
1994. Staying healthy costs the big bucks.
Christopher Wright P.E. |"They couldn't hit an elephant at
chrisw(--nospam--at)skypoint.com | this distance" (last words of Gen.
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