HSA verses HRA health accounts
 

I just started a new job and although I am not eligible to enroll in the company's health insurance program just yet, I am trying to learn more about what my options will be.

Apparently new for 2012, there will be no more traditional PPO and HMO insurance and it is being switched to account-based. Does anyone have any experience with these, good or bad?

From the limited information that is available about the HSA and HRA from my company it looks like that the HSA account takes less from your pay-check but the deductible is incredibly high while the the HRA takes more from your paycheck but has a lower deductible. The company also contributes $50 more to the HSA than the HRA.

I was leaning towards taking the HRA option since it has the more affordable deductible should something happen but on the other hand, I don't go to the doctor all that often-- in fact I have only been once in the past 12 years and that was for my immigration medical-- so perhaps more in the paycheck would be beneficial, but then I am not sure if I could afford the additional out-of-pocket expenses :confused:

Are there any insurance guides out there for people that are completely new that give a little more information? Would also like to hear any experience from others who have these savings-based health plans.

Re: HSA verses HRA health accounts
 

HSA's are the way to go, if you're a healthier individual. I have one through my company, and have nothing bad to say about it.

Re: HSA verses HRA health accounts
 

:eek:

Sounds really bad to me.

Re: HSA verses HRA health accounts
 

This is what I have heard and it does appear to be the consensus amongst those who I have spoken too and that is why I am struggling to decide.

I am healthy-- 28 y/o, non-smoker, marathon runner, regular gym user, climber and pretty much partake in any other out-door sports available in Colorado and so the likely-hood of actually needing anything major is slim and so the HSA seems the way to go, but the deductible is high and is likely out of my immediate price range--- what happens when you cannot pay the deductible in full immediately? Billed, interest?


Well those who are currently enrolled in PPO and HMO plans from 2011 are eligible to continue on such plans through 2012. New employees and those who did not enroll in 2011 have only the option to enroll in the HSA or HRA plans.

The PPO and HMO will be scraped in 2013 for our company, so in 2013 the only options for our employees will be either an HSA or HRA.

On an aside, I am currently un-insured have been for the last two years due to my status-- so any insurance is surely better than no insurance? So it doesn't "sound really bad to me"-- unless I am missing something.

Re: HSA verses HRA health accounts
 

What kind of deductible are we talking?

With my High Deductible Health Plan, I'm responsible for the first $1500, then the plan covers 50% of the next $1500 in my out of pocket expenses. My max out of pocket is $3,000/year.

I work for a smaller silicon valley company, and they pay $250 into my Health Savings Account each month, to cover any potential deductible I may need to pay.

Re: HSA verses HRA health accounts
 

- HSA deductible (Single): $2,700
- HRA deductible (Single): $950

Max out of pocket:
- HSA (Single): $5,000
- HRA: (Single) $3,500

I am not sure my pay-in or my employer's pay-in.

Re: HSA verses HRA health accounts
 

I'd go with an HSA. The money never expires - and you can put up to $3,000/year into the account tax free. The only issue is that if you need to take that money back out - not only do you pay your standard income taxes - but thanks to Obamacare - you also pay a 20% penalty... Nothing like being fined for using your own money. Additionally - whereas you used to be able to purchase most over the counter medicines using the funds in your HSA - that has also been banned with that horrible piece of legislation.

Re: HSA verses HRA health accounts
 

You're being fined because you got a tax break on contributions (and earnings on contributions) to use them for healthcare. By withdrawing money, you are not using it for the purposes the tax break was given for. I don't see what's wrong with this. The same principle is also used for contributions to 401(k) retirement savings that are withdrawn pre-retirement (bar some hardship situations).

Again, I think this is correct. When over the counter medicines were purchasable using an HSA account, there was no guarantee that those medications would be used by the person who had the HSA account. Apparently, many people were buying for others and then sharing the savings. At least twith the tightened rules, there is a higher probability that the usage will be for the individual holding the account or their dependents.

Re: HSA verses HRA health accounts
 

There is no "tax break" for contributing to an HSA, besides the fact that the contributions are "pre tax". To pay an additional 20% to take out your own money (for instance - if you leave a job, and switch from a HDHP) is nothing more than state-sanctioned theft.

The argument for imposing the no-OTC purchasing is laughable. If you're the head of the household, then anyone in your household could legally use the OTC medications, since they'd be on your HDHP. Unless you're making the argument that people were running illicit Nyquil-rings, by saving the % they would have paid in income tax - your argument is only valid in a minute number of cases.

Re: HSA verses HRA health accounts
 

Er...exactly.

Re: HSA verses HRA health accounts
 

By virtue of the fact that you are contributing pre-tax, you are not paying tax on that money. Ergo, you are getting a tax break on that money. As you are on earnings. If there were no additional penalty on withdrawals, then people would be able to use them simply as a tax-deferral vehicle without using a cent of the account on healthcare.

Which is why I said " individual holding the account or their dependents".

From what I've read, not so. Apparently many used their accounts to buy over the counter medications for other non-dependent family members.

Re: HSA verses HRA health accounts
 

I think the "no PPO or HMO" thing is specific to your company by the way (or if it's not, so far I haven't heard anything about it, and there would have been a stink if it were true for everyone!).

I haven't used an HRA so can't comment on that, but the HSA worked very well for us.

Just an idea of costs (at least in California, I don't know how much they vary nationwide):

Visit to a regular doctor is about $100-$120
Visit to a specialist (e.g. gynae (don't know if you're male or female!)) is about $170-$240
Prescription costs very widely, some are only about $5, most we had were about $30 a prescription, but I know for some expensive drugs it's $100s
If you fall over and break your leg it's going to be $10,000s so you usually max out your plan limits anyway, regardless of deductible.

By law an annual physical exam is now free, even with an HSA plan.

Also, assuming your HSA plan is provided under an insurance provider as administrator (I don't know one that isn't, but it might be new that they're not) then although you pay the entire cost of the visit, you still pay the negotiated cost that the insurer sets. I.e. if you go "in-network" (basically to an approved list of physicians, should be quite a long list and nothing to worry about) then the physician can't just charge anything they want, they can only charge a maximum of what the insurer allows.

Yes, you put PRE-tax money into an HSA, so if you don't use it for approved purposes (medical stuff) then clearly the tax you would have paid on that money is due and you have to pay it. The fine is to stop people using it as a tax free savings account, as all interest that your HSA account receives also grow tax free. Same principle as with a pre-tax retirement account.

Oh, and you can use HSA funds for medical and dental costs, so if you wear glasses/contact lenses or go to the dentist regularly, that can help too (and can be an easy way to use up a chunk of your HSA funds!)

Also the money your employer puts into your HSA account is essentially free money, so say they put in $100 a month, and you go see a doctor once that year at $120, which results in $30 prescription, then all your employers contribution ($1200 for the year) minus what you spent ($150) = $1050 is yours to keep for medical expenses in later years. It soon adds up if you're healthy.

Re: HSA verses HRA health accounts
 

Also you can definitely keep your HSA account and DO NOT have to withdraw funds (so you won't be fined) if you leave your job. The company that administers the HSA will keep on administering it (you may have to pay a small monthly fee, ours was $3) and you can still withdraw money for medical needs until the money in the account is gone, even if you are not covered by a HDHP.

What you cannot do if you're not currently covered by an HDHP is contribute to an HSA.

Re: HSA verses HRA health accounts
 

I stopped reading here.

Re: HSA verses HRA health accounts
 

Obviously because you don't understand basic tax terminology.

A tax break/writeoff is generally non-recoverable (for instance, writing off dependents, qualifying expenses, etc). With a HSA (I'm assuming you have one, because your'e obviously familiar?) - any withdrawal is taxed at the standard rate & with a 20% penalty.

Unlike 401k contributions, HSA contributions do not grow with time (besides the minimal interest you earn). Therefore, there is no reason to penalize withdrawal, beyond standard taxes on the balance + interest.

Re: HSA verses HRA health accounts
 

But the likely hood of having a accident is also higher...cost of a helicopter call out $10-60K straight off the bat if you fell and broke a leg in the mountains...

Just something to consider :)

Re: HSA verses HRA health accounts
 

Why do you assume that interest rates will always remain at their current low levels? Additionally you can invest HSA funds in other types of investments. And, as has been pointed out, you don't have to close an HSA if you move to an employer that doesn't have a high-deductible plan. There is absolutely a reason to penalize withdrawals from these accounts that aren't used for medical expenses.

Re: HSA verses HRA health accounts
 

If you switch from a HDHP to a standard HMO, it should be up to you whether you reclaim the money that you (in good faith) placed in a HSA to fund your previous plan. To pay a penalty to recover these funds makes absolutely no sense. The fact that a HSA can only be opened if you have a HDHP should inversely allow you to withdraw funds (without penalty) if you leave such a plan.

Seeing as most people don't have HDHP/HSA's, but everyone has an opinion - perhaps you'd feel differently if it was your own money.

Re: HSA verses HRA health accounts
 

You can use the funds for medical expenses for the rest of your life. Heck, there are even special rules that allow you to use the funds for insurance premiums and for what Medicare eligible people can use them for. Plus you get tax free growth on the funds. I really don't see an issue with the withdrawal penalty at all, and in fact strongly advised my daughter to sign up for one.

Re: HSA verses HRA health accounts
 

Surely there is no tax or penalty on HSA withdrawals to pay medical expenses. I believe that it is appropriate for the Government to penalize withdrawals for anything other than medical expenses so that people are encouraged to keep the money for medical expenses, just as there is a penalty of IRA withdrawals before 59.5.

For the OP if they are young and healthy and feel comfortable with the higher deductible then the HSA is probably the way to go.

Re: HSA verses HRA health accounts
 

You don't have to put any of your own funds into an HSA account if you don't want to, so "reclaim" isn't really the appropriate word. Take the employer contribution and don't add your own, then you have nothing to grumble about when THEIR money is left in YOUR HSA for YOU to use, even after you leave their company!!

It really is pretty much win-win if you're young and healthy, both you and your employer pay less on premiums, and you have your employer's HSA contributions to use if you do have minor issues, and if not you keep the funds to use when something medical is needed later on.

Re: HSA verses HRA health accounts
 

My company just did similar, we had a choice of a HDHP (HSA) or the old EPO with an increased deductable. The EPO (FSA) is use it or loose it, the HSA roll's over year on year and can travel with you if you change employer. Push come to shove if you are healthy then the HSA is the way forward.

Re: HSA verses HRA health accounts
 

HSA or HRA with deductibles and out of pocket expenses are both pretty bad deals if you compare them to the benefits that companies once offered. It's amazing what US workers will stand for.

Re: HSA verses HRA health accounts
 

I think that I am leaning towards the HSA.

One more question, if I enroll my spouse into the HSA plan-- does that mean that the deductible & max-out-of-pocket expenses double or is there usually just a small increase in both amounts?

The current $2,700 deductible & $5K out-of-pocket is do-able, but if the max out of pocket jumps to $10K for us both then we may have to re-think some options.

In Colorado, the helicopter in the mountains is funded by Search & Rescue and provided you have a CORSAR card, $12 per year, then the rescue team is re-inbursed by the State for the entire operation and is of no additional cost to you. :)

Re: HSA verses HRA health accounts
 

It will most likely double the max out of pocket - but it also increases your max yearly contribution to the HSA to $6,000.

Re: HSA verses HRA health accounts
 

It will depend on the policies of the employer. Some employers only contribute into the HSA for the employee, some will double it for a family or spouse. Some pay 100% of the premiums for the employee, and 70% for the extra for the family, some pay 70% (or 80% or whatever) of the total. It also depends on the plan whether the deductible is per person or for the family.

You should be able to ask your HR person (or HR-to-be if you haven't started yet) for an estimate for your premiums and they should also know exactly how your plan works. If you already have the policy options sheet you could copy the sections on deductibles and maximums here word for word (the relevant bit is usually in the form of a table), and we might be able to decipher exactly what it means!

Re: HSA verses HRA health accounts
 

Contribution limits can be found here:
http://en.wikipedia.org/wiki/Health_savings_account

Re: HSA verses HRA health accounts
 

Those are the maximum limits by law, but each HSA plan will have its own limits, determined by the insurance plan it is attached to. No plan can have a limit higher than the maximum set by law, but they can, and often do, have a lower limit. You'd need to look at your own plan to see your own limits.

Re: HSA verses HRA health accounts
 

Just as 401(k)s are terrible compared to most defined-benefit pension plans. But what in reality can "US workers" do about it?

Re: HSA verses HRA health accounts
 

And that's exactly the problem with these HSAs attached to high-deductible insurance. Good if you are young and healthy (and thus have a relatively low probability of having major health expenditures. Not so good if either of those things aren't true.

Re: HSA verses HRA health accounts
 

I think it's more an issue of perception than reality, that the high deductible plans are worse for people with medical issues (by that I mean people who will often use their medical plan). I know it certainly feels more expensive to be paying significant sums when you use your healthcare, but you have to balance that with the savings you have made in the cost of your own premiums, and the fact that most employers put around 50% of the deductible into your HSA account for you to use (or keep for later, if you don't use).

Back in 2007 when these plans were quite new I administered the HSA plan for the small company I was working for, as well as being covered under the plan. My husband and I are relatively healthy and used very little healthcare at the time, and we saved a significant amount of money, I think it was around $2000, when you compared how much we'd have paid with the previous PPO plan. But I also worked out the figures for another employee whose wife had to have expensive eye care meds (plus they had the regular medical stuff of a family of four). For them it worked out about even, they could use that money the employer had put in the HSA first, and then the extra they spent was actually about the same as they would have paid in premiums with the regular PPO.

Most people don't have the info on the premium costs, so don't realise how much they save each month on those compared to the old style plans, but I think in most cases people come out even or ahead.

Re: HSA verses HRA health accounts
 

Given that employers are requiring employees to pick up more and more or the costs of non-catastrophic health insurance (through premiums, deductibles, and/or copayments) that wouldn't be too surprising, even though your example is unconvincing (none of the people you mention had a medical problem that required significant expenses on tests, surgery or doctors). But this really isn't the right comparison. What many employees are essentially doing is eroding the "value" of existing health benefits and then saying, "oh, there's this other option that you may be better off in". An option that not coincidentally does more to sheild employers from future premium rises, and which clearly moves more risk to individuals who are less healthy or have more risk of becoming so.

Re: HSA verses HRA health accounts
 

My husband this year chose to try his company's HSA rather than stay on my PPO. There were very few scenarios we could work out that would involve the HSA costing us more overall, once you took into account the lower premiums and the money his company put in.