Health Savings Account question

    My wife's employer recently switched to what they call a "High
Deductible" insurance.  Previously, we were pretty well covered, with no
out of pocket expenses other than copays.  Now, the insurance pays the
first $1,000 each year, then we are socked for the next $2,000.  Then
they switch back to paying everything after that.  We were told that
under this plan, we would never have to pay more than $2,000 in a
calendar year out of pocket.  Of course, they switched over to this new
plan in the middle of the year, and my wife got pregnant.  It resets
Jan. 1, though, so it looks like we'll get hit with $4,000 out of pocket
in less than 8 months.

   Anyway, here is my question.  Her employer markets something as a
health savings account, which in reality is a health spending account,
or cafeteria plan.  You can put money into it which is tax free, then
use it for health related expenses.  Trouble with that plan is that if
you haven't spent it at the end of the year, the money in it goes to the
EMPLOYER.  It does not grow or get saved up over time.  It is also not
portable in any way, so it doesn't help save up for medical expenses
over the long haul.

   Does anyone know if the new high deductible health insurance we are
under would let us qualify for a true Health Savings Account at a credit
union or something like that?  Thanks!

  OhioGuy wrote:


I've never heard of a credit union offering a "true health savings
account" because these are managed benefits from your own employer. The
contributions will come directly from your paycheck.

 
AFIK Goomba is correct.  The only way you can enroll in a pretax
health savings plan (AKA cafeteria plan) is through your employer.  As
to the unused deposits, it's much more likely they go the plan
administrator, not back to your employer.  They are used to offset the
administrator's expenses, and most employers choose them because they
are cheaper for the employer.  If the unused deposits go back to the
employer they should but I don't know if they're required to be
refunded to the employee, with appropriate taxes deducted and reported
as income on the W2 in the year they're refunded.

It's not an ideal situation, but if you're sure you'll be accruing
$2,000.00 worth of expenses in the coming year, you should contribute
that much to the cafeteria plan.  At least you'll be paying them with
pretax dollars.  Of course since they were paid with pretax dollars
they're then not eligible as tax deductible medical expenses, so it's
a balancing act.

My wife an I have been using a cafeteria plan to supplement our
medical plan for years.  We've learned to pretty accurately estimate
our annual out of pocket medical expenses and contribute 90% of that
estimate.  We've under estimated a couple of times, but haven't
forfeited any contributions.  We use it cover copays, and things not
covered by our plan like OTC drugs prescribed by our doctor and eye
glasses.  Our plan requires a minimum claim of $50.00, so we have keep
track of those receipts; and they'll pay the claim even if it exceeds
what's currently on deposit, so long as the scheduled contributions
will repay it by the end of the year.

The thing to be careful of when you get ahead of your deposits is that
if you lose your job, the excess will be deducted from your final pay
check, and if there's still a balance you'll be expected to repay it.

 wrote:


Call your wife's HR department and/or the medical insurance company to
ask. They're in a much better position to answer your questions then
anyone in this newsgroup is.

I can tell you thought that my employer offers an optional health
savings plan. I have been participating in it for the past two years.
Last year when I set up my annual contributions into my health savings
account, I overestimated by several hundred dollars because I expected
to get some dental work done, but the dentist decided it wouldn't be
good for me to undergo the work. He decided that in November, which left
me a little over a month to spend the money I had been saving in order
to pay him.

I ended up buying an expensive new pair of prescription glasses, which
are the best pair of glasses I have ever worn. I also used some of the
excess funds to buy my parents and my sister a few over the counter
items that qualify as HSA purchases such as Tylenol, antacid tablets,
bandages, etc. I also bought myself enough lactaid tablets to last me
for a year! This past year, I didn't have much in the way of excess HSA
funds. I ended up using all but a few cents worth of my contributions.

You have to estimate what you and your wife will need during the year.
If your HSA plan is like mine though, you missed the enrollment period
for 2009, so you may have to wait until 2010 before you can participate
in an HSA.