3 ms·

I'm in the US. I just recently switched to a high-deductible plan last year with an HSA account. My deductible is $5000 and my monthly premium is $98 (for an

by tdfx 15y ago

I'm in the US. I just recently switched to a high-deductible plan last year with an HSA account. My deductible is $5000 and my monthly premium is $98 (for an individual plan -- self employed here). I have and plan to always contribute the maximum amount to my HSA each year. My plan covers 2 checkup visits a year, and everything else I pay out of pocket up until I hit my deductible. I really think this is the way insurance should be. I have a strong incentive not to needlessly get every possible test done or seek medical care that I don't need. I check my bills very carefully. I already located urgent care clinics that I can go to when I don't really need to visit the ER. I won't go to the doctor for a runny nose. It makes consumers care about costs. I'm far from an expert on US healthcare and I'd love to get other peoples' more informed views on this. Could we put everyone on high deductible plans? If people can't afford their premiums or deductibles then perhaps there could be government assistance to pay those things based on their income. What would the pitfalls be in such a system?

drumdance 15y ago
Just curious, what's the maximum you can contribute? If it's $5k, that works out to about $416/month, so you're total monthly cost is $514.
- bzbarsky 15y ago
  The maximum you can contribute is somewhat inflation-pegged. As of this year, it's $3050 for an individual plan and $6150 for a family plan (plus an extra $1000 per person involved over the age of 55). Note that the contribution is pre-tax, so if you're at the 25% marginal federal rate and contribute $3000 you have to compare that to getting at most ~$2020 in after-tax money: HSA contributions are not subject to FICA (7.65%) or federal income tax (25% on the margin per above assumption). They're not subject to state income taxes either; those can range from 0% to 12% depending on state and income level. Another important thing to keep in mind is that this is a health _savings_ account. Your contribution stays in the account if you're not spending it on actual medical care; it doesn't disappear at year end. Money in the HSA can be invested if desired (though it's probably a good idea to leave at least the deductible amount in liquid funds). Interest, dividends, and capital gains on the money are not taxed. When you reach retirement age, you can withdraw the money for any reason, not just medical care. So basically an HSA is just like a traditional IRA in terms of tax treatment, but with the added ability to make early withdrawals to pay for medical care. The only drawback is that you can only open one if you have a high-deductible plan (defined as at least $1200 for an individual and $2400 for a family, as of this year). So you're basically gambling that the tax savings and possible future growth of the money, plus what you save on premiums, will be higher than the deductible. Going back to our case of a single individual at the 25% marginal rate, with $100 premiums for the high-deductible plan and $300 premiums for the low-deductible plan, the difference in premiums is $2400. If you're depositing those $3000, your tax savings are about $1000. So you'd have to spend more than $3600/year on average on medical care to lose out. For most young-and-healthy folks, spending on medical care is likely to be less than this. Note that the 25% bracket starts at a taxable income of about $34,500, so figure a salary of at most $50,000. If you're earning more than that and are single, chances are an HSA is a good deal for you.

by tdfx 15y ago

drumdance 15y ago

Just curious, what's the maximum you can contribute? If it's $5k, that works out to about $416/month, so you're total monthly cost is $514.

bzbarsky 15y ago
The maximum you can contribute is somewhat inflation-pegged. As of this year, it's $3050 for an individual plan and $6150 for a family plan (plus an extra $1000 per person involved over the age of 55). Note that the contribution is pre-tax, so if you're at the 25% marginal federal rate and contribute $3000 you have to compare that to getting at most ~$2020 in after-tax money: HSA contributions are not subject to FICA (7.65%) or federal income tax (25% on the margin per above assumption). They're not subject to state income taxes either; those can range from 0% to 12% depending on state and income level. Another important thing to keep in mind is that this is a health _savings_ account. Your contribution stays in the account if you're not spending it on actual medical care; it doesn't disappear at year end. Money in the HSA can be invested if desired (though it's probably a good idea to leave at least the deductible amount in liquid funds). Interest, dividends, and capital gains on the money are not taxed. When you reach retirement age, you can withdraw the money for any reason, not just medical care. So basically an HSA is just like a traditional IRA in terms of tax treatment, but with the added ability to make early withdrawals to pay for medical care. The only drawback is that you can only open one if you have a high-deductible plan (defined as at least $1200 for an individual and $2400 for a family, as of this year). So you're basically gambling that the tax savings and possible future growth of the money, plus what you save on premiums, will be higher than the deductible. Going back to our case of a single individual at the 25% marginal rate, with $100 premiums for the high-deductible plan and $300 premiums for the low-deductible plan, the difference in premiums is $2400. If you're depositing those $3000, your tax savings are about $1000. So you'd have to spend more than $3600/year on average on medical care to lose out. For most young-and-healthy folks, spending on medical care is likely to be less than this. Note that the 25% bracket starts at a taxable income of about $34,500, so figure a salary of at most $50,000. If you're earning more than that and are single, chances are an HSA is a good deal for you.