HELP!!!! Can someone explain to me how a Health Savings Account works???

[Krischaser]

We may be offered a new job and my insurance is going to change. They offer a Health Savings Account and I have tried to understand it but I can't. Can someone here please explain it to me and how it works?? Thanks

 

[Tnkrbelle565]

Mine works by having a certain amount deducted out of your paycheck throughout the year to go into the account PRE TAX. Then I get a debit mastercard that I use throughout the year to pay copays, prescriptions, OTC meds, etc. The money is put onto the account at the beginning of the year so you have it right away.

 

[Handbag Lady]

Mine works by having a certain amount deducted out of your paycheck throughout the year to go into the account PRE TAX. Then I get a debit mastercard that I use throughout the year to pay copays, prescriptions, OTC meds, etc. The money is put onto the account at the beginning of the year so you have it right away.

And, it reduces the amount of tax you owe because it is pre-tax, like the PP said.

I try to total my costs for a whole year and use that amount to put down each year. It covers my glasses, contacts, Rx charges, anything medical. They do give you a list so that you know what is and isn't allowed.

Plus, if say you get laid off in June and you've used up your amount..ha, ha! You don't have to repay it, the compnay covers the rest for you.


The downside is that you HAVE to spent that amount each year or you lose the money. I always spend all of mine so I don't have a problem.

 

[Tnkrbelle565]

I only put the minimum ($500) into our account. Now that means I'll be stuck with some bills if we every needed an emergency hospitalization it wouldn't completely cover it but this was we won't get stuck with extra money at the end of the year that I'm spending on lots of Tylenol

 

[jofo]

I think OP is talking about a Healthcare Spending Account (HSA) as opposed to what the replies have been about: a Flexible Spending Account (FSA). I tried to understand how HSAs work (I'm familiar with FSAs) when my husband changed jobs, but I never found a really good explanation.

 

[Tnkrbelle565]

I think OP is talking about a Healthcare Spending Account (HSA) as opposed to what the replies have been about: a Flexible Spending Account (FSA). I tried to understand how HSAs work (I'm familiar with FSAs) when my husband changed jobs, but I never found a really good explanation.

Mine is both. But there are different styles. There are also ones where you somehow get to use your savings account to pay costs and your employer contributes to your savings account and there is a 3rd style that you are just reinbursed by your employer.

 

[wheatenwalker]

My understanding is that the company puts a certain amount into an account every month-
When you go to the MD or pick up prescriptions you have to pay for those, out of pocket ( so it isnt a matter of a co pay- you pay for it)
Once you have enough $$ in your HSA, you can take it out to reimburse yourself.
The $$ rolls over year to year and if you quit, you still own the money, if you die and theres $$ , you can leave it to someone ( but they must also use it for health care expenses)
You can ( and probaly will need to) contribute your own $$ every paychcek, I am pretty sure thats pre tax-
Its a good plan if you are young and healthy and can make contributions so that when you need the $$ its there, not so great if you are middle aged or have any chronic medical conditions ( in my opinion)
Many policies pay for preventative stuff ( like mamograms, colonoscopies etc)

Make sense?

 

[meriface11]

HSAs are typically tied to high deductible plans. your employer may contribute money to an HSA to use towards your deductible, but as the PP stated, it needs to be used by the end of the year (or may evaporate if you leave the company, since it is employer funded). if you have the option to open and HSA or an HRA, those are funded with your own pre-tax dollars. FSA needs to be used by year end, HRA (typically tied to a true high deductible plan), rolls over year after year per IRS guidelines. the whole point is to get you to be more of a consumer when it comes to your healthcare. people aren't very frugal on co-pay type plans because of the fixed dollar amount.

 

[Donaldswife]

Mine is both. But there are different styles. There are also ones where you somehow get to use your savings account to pay costs and your employer contributes to your savings account and there is a 3rd style that you are just reinbursed by your employer.

Actually the kind where you are reimbursed by your employer is an HRA (health reimbursement account)

A typical HSA works like this, you will have a HDHP (high deductible health plan) which means your insurance will not cover ANYTHING until you hit your deductible. Our family's deductible is currently $5000. Before our insurance will cover anything we have to incur and pay $5000 of covered medical expenses. The HSA is a savings account that you open. Your employer can choose to contribute some or nothing to the account. The total amount deposited in the calendar year cannot exceed the deductible amount (in my case $5000). My husband employer has chosen to contribute $2500 a year to our account while we contribute another $2500 pre tax. After you reach your deductible amount your insurance will be in the "copay" phase where you insurance will cover your medical expenses and you will pay the copays out of pocket, or out of your HSA, the choice is yours. Then as you incur additional expenses you may reach your maximum out of pocket (ours is $8000). If we incur more than $8000 at that point we no longer have to pay ANYTHING, no copays, nothing, insurance will cover it all. The nice thing about an HSA is you CAN roll over the money from year to year, you DO NOT have to use all the money as you do with an FSA (flex spending account). You can keep it until you retire, but the money can ONLY be used towards approved medical expenses, and you must keep records to prove this in case of an audit. The account stays with you for life.

Hope this helps!

 

[katied]

Actually the kind where you are reimbursed by your employer is an HRA (health reimbursement account)

A typical HSA works like this, you will have a HDHP (high deductible health plan) which means your insurance will not cover ANYTHING until you hit your deductible. Our family's deductible is currently $5000. Before our insurance will cover anything we have to incur and pay $5000 of covered medical expenses. The HSA is a savings account that you open. Your employer can choose to contribute some or nothing to the account. The total amount deposited in the calendar year cannot exceed the deductible amount (in my case $5000). My husband employer has chosen to contribute $2500 a year to our account while we contribute another $2500 pre tax. After you reach your deductible amount your insurance will be in the "copay" phase where you insurance will cover your medical expenses and you will pay the copays out of pocket, or out of your HSA, the choice is yours. Then as you incur additional expenses you may reach your maximum out of pocket (ours is $8000). If we incur more than $8000 at that point we no longer have to pay ANYTHING, no copays, nothing, insurance will cover it all. The nice thing about an HSA is you CAN roll over the money from year to year, you DO NOT have to use all the money as you do with an FSA (flex spending account). You can keep it until you retire, but the money can ONLY be used towards approved medical expenses, and you must keep records to prove this in case of an audit. The account stays with you for life.

Hope this helps!

This is right. For us, we have an insurance plan with a $10K deductible, so the first $10K is entirely out of pocket. We then have a HSA (health savings acccount) which we fund with $6150 (the max for the current year). We get a tax deduction for the $6150 we use to fund the HSA, and we are not taxed on any investment income earned on the HSA (so it can grow tax-free, and be used to pay health expenses over time), so this is pre-tax money I'm using to meet my deductible. Again, if I don't spend it all (the $6150) to rolls over year - to - year. There are certain account fees depending on who you go with to set up your HSA. Our provider charges an annual account fee, and then fees for certain types of transactions.

 

[Krischaser]

I have three kids that do get sick and this sounds like it stinks for someone like me. So you have to meet your high deductible first? Our new employer is going to give me 200.00 a month. So this stinks if I'm reading this correctly. Can you have other health insurance that you pay for?

 

[Mom2Ben02]

Plus, if say you get laid off in June and you've used up your amount..ha, ha! You don't have to repay it, the compnay covers the rest for you.

The bank I worked for was bought out by another a few years back. I called HR to figure out how this would work for my HSA. I was not-so-subtly told that I would not have to repay it. So I did the max ($5000), had $416 taken out of my paychecks before the merger went through, and got LASIK.

 

[sameyeyam]

All HSA's are different. I would ask your HR department to help explain it to you. Here's how our's works:

We have a $6,000 per family deductible. Our employer puts a $6,000 credit into our HSA account. It is tied directly into our medical insurance account.

For instance when we have a doctor appointment, our co-pay is $35. We pay that to the doctor, our insurance company pays the rest and then they submit it to the HSA account. It then sends us a check for $35. Our end cost $0 for the doctor visit.

We pay a $10 copay for prescriptions. We send our receipts to the HSA and they reimburse us the $10.

They also reimburse us for miscellaneous items such as: cough drops, pull ups, contact lens solution, etc. Once again, we just fill out a form and send the receipts in for reimbursement.

If we don't use our $6,000 by year end, it disappears. However, every year they "refill" the account with $6,000.

 

[MTW]

Concentrate on that post. There are bits of other posts that are correct but she has the best comprehensive answer. There are some things posted here that are downright incorrect. I am a CPA that prepares tax returns for people who have FSAs, HSAs, and HRAs and I also decifer benefits for several companies.

• HSAs must be tied to a high deductible plan.
• HSA employee contributions made through a section 125 plan (cafeteria plan) are pre-tax - including medicare and social security. If your company does not have a section 125 plan they are NOT pre-tax through your employer but you may be entitled to a deduction on the face of your 1040 - ask your tax professional.
• HSAs belong to the employee and follow that employee even if they leave their job. You DO NOT "use it or lose it" like a Flexible Spending Account (Medical FSA)

Just a little soapbox moment. These options are getting ridiculous. Every time I turn around it seems like there's a new health care plan option! I can't imagine how lay people keep everything straight. You have to be a benefits specialist in addition to whatever else you do!

 

[katied]

I have three kids that do get sick and this sounds like it stinks for someone like me. So you have to meet your high deductible first? Our new employer is going to give me 200.00 a month. So this stinks if I'm reading this correctly. Can you have other health insurance that you pay for?

No, you can't have other insurance. The point of HSA's is to help pay for that high deductible amount. For us, it's the best option we have. I could get regular health insurance (80% covered until reach out of pocket max, out of pocket max of $2K per family member, or $8K per family as a whole) for a cost of $25K/year. Or, I could get the $10K deductible, then everything covered at 100% for a cost of $13K/year. So - worst case I spend then $10K deductible - my total spend for the year is $23K vs. $25K plus some out of pocket which could go as high as $33K.

It depends on what your choices are, and what your employer is covering. In my position, the employer offers the heath insurance, but I pay 100% of cost, there is no employer subsidy for it. It is interesting to know what health insurance really costs.

 

[PinballFamily]

Concentrate on that post. There are bits of other posts that are correct but she has the best comprehensive answer. There are some things posted here that are downright incorrect.

Thanks, MTW and Donaldswife! Your posts are truly helpful! Also to katied and sameyeam for info...

DH just started a great new job on Monday and we've been plowing the paperwork in the past few days/nights to choose a new health insurance plan. (In fact, making calls today for info/answers is on my "to do" list!)

It is truly overwhelming - we like to think we're highly educated folks (he really is like a rocket scientist!), but this is incredibly confusing AND we had done a lot of research and homework already! He had been with the same company before for 25 years - and we had terrific health coverage that we didn't even have to think about and would like to keep the coverage seamless. The new plan choices all seem like good ones, but the cost varies tremendously and we're not exactly sure why the cost swings are so large.

Ok - back to work on my phone calls! Thanks to the DIS and its savvy and helpful folks!

 

[Donaldswife]

Concentrate on that post. There are bits of other posts that are correct but she has the best comprehensive answer. There are some things posted here that are downright incorrect. I am a CPA that prepares tax returns for people who have FSAs, HSAs, and HRAs and I also decifer benefits for several companies.

• HSAs must be tied to a high deductible plan.
• HSA employee contributions made through a section 125 plan (cafeteria plan) are pre-tax - including medicare and social security. If your company does not have a section 125 plan they are NOT pre-tax through your employer but you may be entitled to a deduction on the face of your 1040 - ask your tax professional.
• HSAs belong to the employee and follow that employee even if they leave their job. You DO NOT "use it or lose it" like a Flexible Spending Account (Medical FSA)

Just a little soapbox moment. These options are getting ridiculous. Every time I turn around it seems like there's a new health care plan option! I can't imagine how lay people keep everything straight. You have to be a benefits specialist in addition to whatever else you do!

I agree, the options are ridiculous....but you won't be seeing as many options in the future. All insurance companies are pushing towards the HDHP/HSA option. That is what happened to us. You will see the traditional PPO's disappearing in the coming years. My husband used to work for a large insurance carrier, and I used to work for a Human Resources outsourcing company, so I understand the options pretty well. Most of the posts on here are referencing FSA (flex speding accounts) and are incorrect to what the OP is asking. People get the terminology mixed up all the time, it is no wonder the average person cannot figure out their options!

 

[Donaldswife]

Thanks, MTW and Donaldswife! Your posts are truly helpful! Also to katied and sameyeam for info...

DH just started a great new job on Monday and we've been plowing the paperwork in the past few days/nights to choose a new health insurance plan. (In fact, making calls today for info/answers is on my "to do" list!)

It is truly overwhelming - we like to think we're highly educated folks (he really is like a rocket scientist!), but this is incredibly confusing AND we had done a lot of research and homework already! He had been with the same company before for 25 years - and we had terrific health coverage that we didn't even have to think about and would like to keep the coverage seamless. The new plan choices all seem like good ones, but the cost varies tremendously and we're not exactly sure why the cost swings are so large.

Ok - back to work on my phone calls! Thanks to the DIS and its savvy and helpful folks!

Good luck! Glad I could help on something! Making those phone and truly understanding your options is the best thing you can do.

 

[Donaldswife]

I have three kids that do get sick and this sounds like it stinks for someone like me. So you have to meet your high deductible first? Our new employer is going to give me 200.00 a month. So this stinks if I'm reading this correctly. Can you have other health insurance that you pay for?

Yes, you have to meet your deductible first, but your employer will contribute some (and in some cases ALL) to your HSA, so you can pay from that money. Also, there will probably also be different deductible options with different costs. We pay nothing for our insurance but have a higher deductible ($5000) and we only contribute $2500 to the HSA. Our employer covers the rest. You will need to look at their options to see what is best for your family.

 

[PinballFamily]

Good luck! Glad I could help on something! Making those phone and truly understanding your options is the best thing you can do.

I've got four pages of handwritten questions I'll be chasing down answers to - I'll get back to you (!) if there's info I think you could help with.

We had a HMO and when we step back from the mind-numbing details of the various new plans, and look at the macro view, it seems that the company (companies) are REALLY trying to move people into the HSA/HRA plans. We're just the dinosaurs from the "old days!"