Monday, November 13, 2006

HSA update

Well, I opted for the HSA, though I almost didn't at the last minute thanks to a loophole that makes it problematic if you have my precise, fairly unusual situation.

In my earlier post I mentioned that an HSA (health savings account) is logistically similar to an FSA (flexible spending account), with the big difference that money in your HSA doesn't disappear at the end of the year. If it's unspent, you keep it. Because of that distinction, the government doesn't want people double-dipping with an HSA/FSA combo: you can't set up an HSA, also fund an FSA, and then use the FSA money to cover your expenses, leaving your HSA savings untouched. That's a sensible restriction. If you have an HSA, you can only use an FSA for things the HSA isn't allowed to cover (which seems to be dental and vision expenses, primarily).

However, here is my particular weirdness, which only becomes an issue if you are a) married, b) don't share a health insurance plan with your spouse, and c) also have relatively separate finances. (See why I said this is a loophole that may only be a problem for me?) David and I each have separate, individual insurance through our separate employers. That's always been more cost-effective for us than sharing a plan. However, when you set up an FSA, you can use your FSA to pay for medical expenses for family members, even if those family members aren't sharing your health-insurance plan. So, this past year, I put a chunk of money in my FSA and used it to pay some of his medical expenses.

Opting for the HSA means the restrictions on what I can use my FSA for (vision and dental only) apply to everyone I would spend my FSA money on (at least, so saith my HR department). But my HSA, of course, can only be spent on me. Hence: no way for me to set up tax-free savings to pay for David's medical expenses in 2007.

The sensible thing, of course, is for him to set up an FSA and put into it however much I would have put into mine. It works out exactly the same to our overall income and spending as a couple. It's just a pain in the ass. Me having the FSA was an easy way for me to contribute an agreed-on amount to the medical costs, and meant I could do all the paperwork for reimbursements and such (which I have more tolerance for than David does). Having the FSA in David's name means we need to rebalance our finances in other areas to offset the whack that will take out of his paychecks, and means he's probably going to have to deal with more of the paperwork.

For that reason, I almost ditched the HSA and stuck with my old HMO + FSA system. However, it was making me unduly cranky to face down the prospect of once again spending a fair chunk each month for insurance that didn't actually pay for almost any of the services I actually consume. (With the HSA, the insurance still won't be paying. I will, unless something unlikely happens and I go past my deductible. But I pay less for the insurance, and I go in knowing what I'll be paying for.)

This is all more about psychology than actual dollars-and-cents calculations of what will save us money. I suspect that the HMO + FSA option would in the end have only cost me a few hundred more than my current HSA scheme, which isn't really enough money to justify the hours and angst I've devoted to thinking through all this. But part of the allure of the HSA is simply that I want to experiment with it. I still have a bad feeling it's the thin end of a nasty wedge, and I don't like the way it's portrayed as an option for insuring the uninsured but is actually a big savings/tax-sheltering opportunity for the well-off. But I figure a year of seeing what the HSA plan is like will give me a firmer foundation for spouting off about them.