Do you have any thoughts/advice on choosing an HSA provider?
I already have the ACA plan figured out. I first check whether my doctors are in-network. Next, I come up with a detailed list of what I expect to need based primarily on my expenses for the current year. I then calculate what I would pay for the entire year under each plan I’m considering, taking into account both premiums and OOP expenses (including before/after deductibles and copays). This can get very complicated. I also calculate the worst-case scenario (total premiums plus OOP max). This year, for the plans I was considering, the answer was the same for both the expected and maximum scenarios. Plus the HDHP + HSA will have further tax advantages.
What I’m concerned about now is the Health Savings Account, which is not offered via the ACA, but separately through financial institutions if you have a compatible health plan. So far, the most useful information I’ve found is from Consumer Reports: https://www.consumerreports.org/health-savings-accounts/how-to-choose-a-health-savings-account/
People who have high deductible health care plans (HDHP) are allowed to put money into a Health Savings Account (HSA) which functions basically as a super-charged IRA that can only be spent for medical purchases. By supercharged, we mean the money isn’t taxed going in and the earnings aren’t taxed going out. It’s pretty amazing. (Note that these are different than Flexible Savings Plans, which are sometimes called Health Spending Accounts just to be really confusing– these have to be used up each year or the money goes back to the employer, just like a dependent daycare account.) By IRA, we mean an individual retirement account that functions as a tax-advantaged bucket for retirement savings. (FF already knows all this.)
Back when I last looked at HSA, there weren’t a whole lot of options– you basically went with what your employer offered you because that was what was available, and most employers offering HDHP also put money into the HSA themselves because that money came with tax benefits for them. Having outside HSA didn’t make a lot of sense because there was no market for them.
Today there’s a market for HSA outside of individual employers, which means that there are a lot more options for HSA. Many places that you can stash an IRA will also let you do an HSA. What you should be looking for in an HSA is similar to what you should be looking for in an IRA provider, with a few additional wrinkles.
First off: If your employer offers an HSA contribution, chances are that’s going to have to go into the HSA account that they have chosen. According to that consumer reports article FF linked to, you can keep that HSA account open, let the employer money go into it, but then transfer to an outside HSA account if you want. I have never found it easy to move money from work accounts to outside accounts, but depending on fees, this may eventually be worth it.
Second: As the consumer reports article notes, you need to know if you’re going to need the money long-term or short term. If you’re credit-constrained or have high medical expenses, then you will need to use the money right away. That means you need an HSA account that has things like savings accounts or certificates of deposit for safe money. If you’re not credit constrained, then it makes sense to just think about this as another retirement account, which means you want something that has access to low cost index funds in the stock market and maybe in the bond market too, depending on what’s available in your other retirement accounts for diversification purposes. So, if you need short term then make sure the HSA has short term options. If you need long term, make sure there are long term options.
Third: Compare fees. This part is just like with an IRA. You want the lowest fee funds. Watch for hidden fees.
So… that’s pretty much all of my thoughts on the topic. The consumer reports article you linked to looks really good to me. It’s not saying anything stupid AFAIK and covers everything I thought of.
Grumpeteers who have purchased HDHP for use with your HSA, what do you recommend?