Are HSAS good for healthcare?

Health Savings Accounts is a relatively new type of investmnet/tax shelter vehicle however it seems to be a hot-button issue.

It attracts younger/healthier/wealthy Americans out of the general pool and leaves the unhealthy to fend for themselves.

On the other hand, they provide triple tax deductions and a way to possibly grow your money allocated to health insurance, something that doesn't happen with other insurance plans.

I personally believe they should increase the max contribution to $18,000 and eliminate the requirement of getting a high deductible plan.

Bucky said:

Health Savings Accounts is a relatively new type of investmnet/tax shelter vehicle however it seems to be a hot-button issue.

It attracts younger/healthier/wealthy Americans out of the general pool and leaves the unhealthy to fend for themselves.

On the other hand, they provide triple tax deductions and a way to possibly grow your money allocated to health insurance, something that doesn't happen with other insurance plans.

I personally believe they should increase the max contribution to $18,000 and eliminate the requirement of getting a high deductible plan.

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Triple deductions? I don't think so, but what are you considering? As far as I know, you can deduct the amount you put in one, but that's it.

They can be. I know lots of businessmen who use them to lower the cost of overall insurance. The use a grant + employee contribution to cover basically the 20 in the 80/20 formula, so you can get what amounts to a catastrophic police at a reasonable price.

At one time, unused HSA funds had to be forfeited. I never understood that. I just seemed like an incentive to blow money on glasses and tooth polishing.

I don't know where Obamacare fits into this scheme, and I don't know the status of HSA's today.

I have an HSA through work. I love it. You are only allowed an HSA if you have high deductible insurance. The company switched to a high deductible plan, but my premiums are a good bit lower than they used to be. So my insurance isn't crazy expensive, and I stash the money that used to go to premiums in my HSA every paycheck (company does it for me). I don't pay any taxes on the money they put in there, plus my company puts some in there as a benefit. Then when one of us gets sick or goes in hospital I use the money in the HSA to pay bills. So far since they've started the HSA I haven't had to spend a dime out of pocket. I've only used the money that I would have previously spent on premiums. I have to pay a 2500 deductable before the insurance covers everything though. But I have well over that saved up in the HSA thanks to the lower premiums. And if I don't use the money it stays with me forever. The only deal is that if I pull money out or spend on non-medical stuff I have to declare it on taxes.

They're completely pointless if you don't reduce the costs of healthcare in the first place. What happens to the 19 year old who gets cancer and is stuck with a $300,000 medical bill? It doesn't matter how old you are or how much you saved up in your HSA, you're totally bankrupt at that point. Why don't we incorporate the parts we like from other successful systems throughout the world instead of trying to reinvent the wheel in new ways? I pay about 300 euro a month on an engineer's salary for health insurance in Germany, it'll never go up based on my age and it covers all of my dependents. Costs are the problem in the US and HSA's don't do anything to address that.

MaggieD said:

Triple deductions? I don't think so, but what are you considering? As far as I know, you can deduct the amount you put in one, but that's it.

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It is tax deductible when you put it in, take it out, and grows tax deferred.

It wold be a perfect investment vehicle if you could convert it to an IRA.

Bucky said:

It is tax deductible when you put it in, take it out, and grows tax deferred.

It wold be a perfect investment vehicle if you could convert it to an IRA.

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It is not tax deductible when you take it out. It is tax-FREE when you take it out (not tax deductible) and then only if offset by eligible medical expenses.

Bucky said:

Health Savings Accounts is a relatively new type of investmnet/tax shelter vehicle however it seems to be a hot-button issue.

It attracts younger/healthier/wealthy Americans out of the general pool and leaves the unhealthy to fend for themselves.

On the other hand, they provide triple tax deductions and a way to possibly grow your money allocated to health insurance, something that doesn't happen with other insurance plans.

I personally believe they should increase the max contribution to $18,000 and eliminate the requirement of getting a high deductible plan.

Click to expand...

HSA's are nothing new. They just have never been utilized to their full potential

Everyone should be eligible for an HSA.. in fact.. employers should be incentivized to help employees set up an HSA and that a portion of raises should be allocated to the HSA unless the employee specifically states that the portion of the raise should not to into the HSA.

There should be no limits on what can be put into an HSA It should go in pre tax for employers and employees.

Any money taken out of the HSA must either be used for qualified medical expenses.. or insurance premiums or be transferred into anothers (like Spouse or childrens HSA).

the HSA is a great way to keep employees helping with health insurance.. even paying for it... but giving the employee portability of insurance.. because the insurance follows the employee..not the employer.

Bucky said:

Health Savings Accounts is a relatively new type of investmnet/tax shelter vehicle however it seems to be a hot-button issue.

It attracts younger/healthier/wealthy Americans out of the general pool and leaves the unhealthy to fend for themselves.

On the other hand, they provide triple tax deductions and a way to possibly grow your money allocated to health insurance, something that doesn't happen with other insurance plans.

I personally believe they should increase the max contribution to $18,000 and eliminate the requirement of getting a high deductible plan.

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I LOVE the idea of HSAs and would prefer that contribution limits be raised as part of a health care overhaul. There is no good reason I can think of to limit contributions to less than plan max out of pocket.

Allowing younger people to contribute to what amounts to a tax free medical savings plan is a GREAT idea. Put money away when you don't generally use the medical care, let it grow and take a TON of the sting out of medical expenses in later years.

Lutherf said:

I LOVE the idea of HSAs and would prefer that contribution limits be raised as part of a health care overhaul. There is no good reason I can think of to limit contributions to less than plan max out of pocket.

Allowing younger people to contribute to what amounts to a tax free medical savings plan is a GREAT idea. Put money away when you don't generally use the medical care, let it grow and take a TON of the sting out of medical expenses in later years.

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Absolutely.. it could be used to help shore up gaps in medicare that will be occurring.

Bucky said:

Health Savings Accounts is a relatively new type of investmnet/tax shelter vehicle however it seems to be a hot-button issue.

It attracts younger/healthier/wealthy Americans out of the general pool and leaves the unhealthy to fend for themselves.

On the other hand, they provide triple tax deductions and a way to possibly grow your money allocated to health insurance, something that doesn't happen with other insurance plans.

I personally believe they should increase the max contribution to $18,000 and eliminate the requirement of getting a high deductible plan.

Click to expand...

They have a role to play. But 5% of the population accounts for half of all health spending. Add on the next costliest 5% of the population and you get to two-thirds of it. What is the value of HSAs to those whose costs vastly exceed any reasonable cost-sharing obligations?

If you are living paycheck to paycheck, a HSA has no benefit to you really.

Bucky said:

If you are living paycheck to paycheck, a HSA has no benefit to you really.

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If you defer $25/week into your HSA you'll quickly find you don't miss it.

Bucky said:

If you are living paycheck to paycheck, a HSA has no benefit to you really.

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If they're not useful for the poor or sick then they would seem to have a fairly limited window of usefulness.

Greenbeard said:

They have a role to play. But 5% of the population accounts for half of all health spending. Add on the next costliest 5% of the population and you get to two-thirds of it. What is the value of HSAs to those whose costs vastly exceed any reasonable cost-sharing obligations?

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Just to point out Greenbeard.. that your graph appears to be again.. HEALTHCARE SPENDING.. and NOT.. HEALTHCARE INSURANCE.

So while a small portion of the population accounts for more healthcare SPENDING/... that's mitigated when the rest of the population that's healthy is paying for healthcare insurance. Its how insurance works.

SO if HSA's help people pay for healthcare INSURANCE and move us more toward a universal healthcare insurance system.. this will be a help.

in addition if the HSA's make people who have insurance.. less underinsured because they can now pay their bills rather then the hospital having a right off.. this again.. will help.

Bucky said:

If you are living paycheck to paycheck, a HSA has no benefit to you really.

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Not if your employer is kicking in and you and he are getting the tax benefit from it. Especially if what goes in is a portion of raises.

Lutherf said:

If you defer $25/week into your HSA you'll quickly find you don't miss it.

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You have to remember you are paying premiums for your high deductible plan - $100-500 a month, on top of the $25 deferral.

It is a good idea but if you are living paycheck to paycheck I am assuming you have debt. Paying off your debt is a higher priority than investing

jaeger19 said:

Just to point out Greenbeard.. that your graph appears to be again.. HEALTHCARE SPENDING.. and NOT.. HEALTHCARE INSURANCE.

So while a small portion of the population accounts for more healthcare SPENDING/... that's mitigated when the rest of the population that's healthy is paying for healthcare insurance. Its how insurance works.

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This is true. But HSAs have two goals: 1) discourage unnecessary use of services, and 2) encourage price sensitivity by exposing people to the prices of their care.

If the vast majority of health spending is concentrated on a relatively small segment of the population that exceeds (perhaps vastly exceeds) any reasonable limit on their out-of-pocket spending, an HSA will be useless for either goal. Because those folks aren't hypochondriacs--they're going to consume the services--and higher priced vs lower priced makes no difference to their behavior if they're exceeding their out-of-pocket limit either way.

Which means the real impact of HSAs will be on those who don't hit their out-of-pocket limit. A large majority of the population, sure, but a minority of health spending. Meaning the impact is inherently limited.

Greenbeard said:

This is true. But HSAs have two goals: 1) discourage unnecessary use of services, and 2) encourage price sensitivity by exposing people to the prices of their care.

If the vast majority of health spending is concentrated on a relatively small segment of the population that exceeds (perhaps vastly exceeds) any reasonable limit on their out-of-pocket spending, an HSA will be useless for either goal. Because those folks aren't hypochondriacs--they're going to consume the services--and higher priced vs lower priced makes no difference to their behavior if they're exceeding their out-of-pocket limit either way.

Which means the real impact of HSAs will be on those who don't hit their out-of-pocket limit. A large majority of the population, sure, but a minority of health spending. Meaning the impact is inherently limited.

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I would submit that the argument that HSA's have a positive impact of discouraging unnecessary use of services and encourage price sensitivity by exposing people to the price of healthcare are only advanced by people that don't know anything about healthcare insurance or healthcare in general...

The idea that we are going to get substantial savings by "preventing soccer moms from taking their kids in for sniffles".. is well pretty ignorant of where the majority of healthcare costs come from.

The same with the idea that we are going to get substantial savings if "people can negotiate their own healthcare bills".. is also pretty ignorant of how providers get paid and the necessity of insurance.


WHAT HSA's REALLY have a benefit is

1. They can encourage price sensitivity by exposing people to the price of healthcare insurance. There is a wealth of literature that indicates that healthcare INSURANCE PREMIUMS are less sensitive and are essentially higher because in the US.. the employer is on the hook. Studies show that as an industry does better financially.. their insurance premiums also increase... even if their utilization is the same or goes down. ITs why there have been several proposals over the year to discourage employer provided healthcare. From taxing healtlhcare benefits as income.. to companies paying penalties when they provide "Cadillac plans (the irony of obamacare... on one hand it mandates employer coverage.. on the other end it penalizes good employer coverage (Cadillac plan tax).

HSA's can be used to introduce more price sensitivity in to the market.. more competition .. and yet still be a vehicle so that employers can help pay for their employees health insurance.

2. Another problem with employer based health insurance is portability. And the use of an HSA from which an individual purchases a plan.. can solve that portability problem as it follows the employee.. not the employer. the next employer can simply start paying into the has without any break in coverage or change in coverage.

Greenbeard said:

If they're not useful for the poor or sick then they would seem to have a fairly limited window of usefulness.

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I would agree however if you do have an extra income I see no valid reason why the government puts a cap on your contribution.