I know this post is like a decade late and very boring, but I gotta post it anyway
Basically, with employer-sponsored health insurance the employer pays half and the employee (you) pays half. The cost of your insurance goes way down if you have a high deductible, and a deductible is basically what you’d have to pay before the insurance actually pays anything. So ‘high-deductible’ means you have to pay a lot before insurance pays anything, and it’s a lot cheaper to buy that insurance cause the insurers often just don’t pay anything ever. If it’s $5,000 before insurance pays a dime, often times you have to just pay as though you had no insurance. This is obviously bad, but it’s also cheap so like maybe you just luck out an never get sick or injured, right…?
Anyway, HSAs. Yeah, it’s called “Health Savings Account”. It’s marketed as a tax-advantaged, investor-y, bougie-“we’re comfortable” lifestyle way to really feel like a keen insider. Picture this: what if health insurance was individualized in the same way 401k and retirement stuff was, and you could “call your broker” at your “health savings account” to tell them to invest your tax-free “medical dollars” in the latest gizmo or whatever. Just deeply bad for solidarity and also very weird. And this is how basically everyone thinks about HSAs. A “tax-loophole” for the rich that I can also use because “I’m actually very financially savvy, just like the rich, who got where they are because of a weird hyper-individualized investment thing rather than any underlying systemic basis of societal organization”.
And you’re probably thinking: “But I already hate the suburban petite-bourgeois and their annoying mannerisms for reasons that are way less boring and meaningless.” Well you’re right, but also: high deductible plans are a requirement of HSAs so the employer’s half decreases significantly. Your employer doesn’t contribute to the HSA (they technically could, but if you’re reading this post they don’t [incredibly silly losing battle available there for libs]), so hopefully you do at least up to your deductible, but it’s pretty likely that’s not possible even if you had the money (no one does) because you literally aren’t allowed to due to contribution limits. (if people did have the money it would probably be better to get different / better / additional health insurance anyway.) But importantly and I guess obviously: nobody contributes to their HSA. It’s basically the chance for each person to individually manage an insurance fund for only themselves, which is almost exactly the same as paying out of pocket, the main difference being the additional bank account and a make-work program for MBAs. I’ve talked to almost a dozen office workers about this and they mostly have no idea what I am saying at all or say “yeah, I added money in onboarding, but I canceled it once I realized it came out of my pay.”
There’s no non-scam option btw if that wasn’t clear. And, yeah, obviously all health insurance is a scam, but this is a different scam run by a slightly different set of people (there’s def overlap though don’t get me wrong). The office job benefits world is basically a choice between varying levels of high-deductible plans + HSA (ie. $1.5k, $3k, $5k…) with maybe one ridiculously expensive low-deductible plan.
Anyway, thoughts? I needed to get this rant out, I guess. Maybe I just missed the discourse on this because I was a child at the time lol.
HSAs + HDHPs can make sense in some circumstances, especially if your employer contributes to it and you are a high earner.
So in all health insurance plans, you’re working with pre-tax money. In all cases, your monthly premium is paid for in pre-tax money. With HSAs, additionally, any contributions you make are also pre-tax, and can be invested.
Whenever you’re dealing with pre-tax money, the more money you make, the more of an advantage this is. If you make very little money, you generally pay very little tax on it, so the discount from using pre-tax money is small. The reverse is true if you earn a lot of money.
The advantage of using the HSA is that you own the money and can keep it forever. You can always use it to pay for medical expenses without incurring taxes, and you can also start to draw from it after 65 as though it were a regular retirement account and pay the income taxes then. Because they roll over forever, you can amortize medical costs over a longer period of time. And because the money is invested, in theory it can increase without you doing anything.
The disadvantage of using an HSA is that it is invested. It’s entirely possible that the value of what you buy with your HSA money goes down, and then you have less money for medical expenses. Or if the arcane math of medical costs work out so that you’d have ended up paying less with a lower-deductible PPO or HMO.
tl;dr: If you make a lot of money, your company contributes to it, and you don’t get sick, an HSA is basically a free extra retirement account that can both always be used to purchase medical services and can lower your current year tax burden.
I’ll note that I’m super risk averse and so I have a traditional PPO, but one of my friends is a big money guy and he does an HSA (despite having lots of medical bills, he still swears by it).
